UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number_811-00537
_Franklin Custodian Funds
(Exact name of registrant as specified in charter)
_One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
(Address of principal executive offices) (Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant's telephone number, including area code:_650 312-2000
Date of fiscal year end: 9/30
Date of reporting period: 9/30/20
Item 1. Reports to Stockholders.
ANNUAL
REPORT
AND
SHAREHOLDER
LETTER
Franklin
Custodian
Funds
September
30,
2020
Sign
up
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Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
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:
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January
1,
2021,
as
permitted
by
the
SEC,
paper
copies
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the
Fund’s
shareholder
reports
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unless
you
specifically
request
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the
Fund
or
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Not
part
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the
annual
report
1
Shareholder
Letter
Dear
Shareholder:
During
the
12
months
ended
September
30,
2020,
the
U.S.
economy
grew
moderately
through
the
end
of
2019
amid
concerns
about
trade,
but
it
contracted
in
2020’s
first
and
second
quarters
in
response
to
the
novel
coronavirus
(COVID-19)
pandemic.
The
U.S.
Federal
Reserve,
having
lowered
the
federal
funds
rate
twice
earlier
in
2019
amid
global
trade
tensions,
lowered
the
rate
by
0.25%
at
its
October
2019
meeting
and
then
held
it
unchanged
through
February
2020.
However,
given
larger
economic
risks
posed
by
COVID-19,
the
Federal
Reserve
lowered
its
key
rate
by
0.50%
on
March
3
and
further
by
1.00%
on
March
15,
decreasing
the
rate
during
the
period
from
2.00%
to
0.25%.
The
Federal
Reserve
also
announced
broad
quantitative
easing
measures
to
support
credit
markets
and
adjusted
its
policy
in
August
2020
to
allow
more
flexibility
to
keep
interest
rates
low,
while
maintaining
a
2%
average
inflation
target.
The
10-year
U.S.
Treasury
yield
was
1.68%
on
September
30,
2019,
and
it
decreased
to
0.69%
by
the
end
of
September
2020.
In
this
environment,
the
prices
of
U.S.
stocks,
as
measured
by
the
Standard
&
Poor’s
®
500
Index
(S&P
500
®
),
rose
12.98%,
(the
index
increasing
from
2,976.74
to
3,363.00).
1
,2
Investment-grade
bonds,
as
measured
by
the
Bloomberg
Barclays
U.S.
Aggregate
Bond
Index
(Bloomberg
Index),
posted
a
+6.98%
total
return
(an
index
increase
from
2,221.00
to
2,376.13),
which
includes
reinvestment
of
income
and
distributions.
3
We
are
committed
to
our
long-term
perspective
and
disciplined
investment
approach
as
we
conduct
a
rigorous,
fundamental
analysis
of
securities
with
a
regular
emphasis
on
investment
risk
management.
We
believe
active,
professional
investment
management
serves
investors
well.
We
also
recognize
the
important
role
of
financial
advisors
in
today’s
markets
and
encourage
investors
to
continue
to
seek
their
advice.
Amid
changing
markets
and
economic
conditions,
we
are
confident
investors
with
a
well-diversified
portfolio
and
a
patient,
long-term
outlook
should
be
well-positioned
for
the
years
ahead.
Franklin
Custodian
Funds’
annual
report,
covering
Franklin
DynaTech
Fund,
Franklin
Focused
Growth
Fund,
Franklin
Growth
Fund,
Franklin
Income
Fund,
Franklin
U.S.
Government
Securities
Fund
and
Franklin
Utilities
Fund,
includes
more
detail
about
prevailing
conditions
and
a
discussion
about
investment
decisions
during
the
period.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
We
thank
you
for
investing
with
Franklin,
welcome
your
questions
and
comments,
and
look
forward
to
serving
your
future
investment
needs.
Sincerely,
Rupert
H.
Johnson,
Jr.
Chairman
Franklin
Custodian
Funds
This
letter
reflects
our
analysis
and
opinions
as
of
September
30,
2020
,
unless
otherwise
indicated.
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:
Copyright
©
2020,
S&P
Dow
Jones
Indices
LLC.
All
rights
reserved.
2.
Source:
Morningstar.
The
changes
in
index
prices
shown
for
the
S&P
500
do
not
include
reinvestments
of
income
and
distributions,
which
are
included
in
its
total
return,
which
was:
S&P
500
+15.15%
(index
total
return
resulting
in
a
increase
from
6,008.59
to
6,918.83).
3.
Sources:
Morningstar
and
Bloomberg
Barclays
indexes.
For
the
Bloomberg
Index,
only
total
return
as
shown
is
available,
not
price
change
without
the
inclusion
of
reinvested
income
and
distributions.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Annual
Report
2
Contents
Annual
Report
Economic
and
Market
Overview
....................
3
Franklin
DynaTech
Fund
..........................
4
Franklin
Focused
Growth
Fund
.....................
10
Franklin
Growth
Fund
.............................
16
Franklin
Income
Fund
............................
22
Franklin
U.S.
Government
Securities
Fund
...........
31
Franklin
Utilities
Fund
.............................
37
Financial
Highlights
and
Statements
of
Investments
...
43
Financial
Statements
.............................
107
Notes
to
Financial
Statements
.....................
117
Report
of
Independent
Registered
Public
Accounting
Firm
............................
147
Tax
Information
..................................
148
Board
Members
and
Officers
.......................
149
Shareholder
Information
..........................
154
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
3
franklintempleton.com
Annual
Report
ANNUAL
REPORT
Economic
and
Market
Overview
U.S.
equities,
as
measured
by
the
Standard
&
Poor’s
®
500
Index
(S&P
500
®
),
posted
solid
gains
during
the
12-month
period.
Equities
advanced
at
the
end
of
2019,
aided
by
steady
economic
growth,
easing
trade
tensions
and
the
U.S.
Federal
Reserve’s
(Fed’s)
supportive
monetary
policy.
However,
a
sharp
selloff
began
in
late
February
2020
amid
investor
fears
of
a
global
economic
slowdown
due
to
the
novel
coronavirus
(COVID-19)
pandemic.
Such
fears
drove
many
investors
to
sell
equity
holdings
in
favor
of
investments
perceived
as
safe,
such
as
government
bonds
and
cash.
Nevertheless,
a
steady
equity
market
recovery
amid
monetary
and
fiscal
support
led
stocks,
as
measured
by
the
S&P
500,
to
reach
all-time
price
highs
in
early
September
2020.
Nonetheless,
several
risks
tempered
investors’
enthusiasm
in
the
period’s
final
month,
including
persistent
COVID-19
infection
rates,
fading
hopes
for
additional
stimulus,
and
uncertainties
surrounding
the
upcoming
presidential
election.
Government-issued
restrictions
for
mitigating
the
pandemic
severely
curtailed
economic
activity
beginning
in
March
2020.
As
a
result,
the
unemployment
rate
surged
to
14.7%
in
April
as
many
businesses
announced
mass
layoffs.
1
The
longest
U.S.
economic
expansion
in
history
ended
in
February, according
to
the
National
Bureau
of
Economic
Research,
and
the
country
slipped
into
a
deep
recession
with
second-quarter
2020
gross
domestic
product
(GDP)
declining
at
a
record
pace.
Economic
growth
resumed
in
the
third
quarter
at
the
fastest
annualized
rate
on
record
as
many
businesses
reopened,
but
the
GDP
remained
below
its
pre-pandemic
level.
The
Fed
supported
the
U.S.
economy
both
before
and
during
the
pandemic,
lowering
the
federal
funds
target
rate
twice
in
late
2019
to
a
range
of
1.50%–1.75%
and
implementing
two
emergency
rate
cuts
in
March
2020,
decreasing
the
rate
to
a
range
of
0.00%–0.25%.
Additionally,
the
Fed
enacted
sweeping
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
unlimited
amounts
of
bond
purchasing.
The
U.S.
federal
government
also
passed
several
rounds
of
fiscal
stimulus,
providing
aid
to
businesses,
state
and
local
governments
and
individuals.
Benefiting
from
U.S.
monetary
and
fiscal
stimulus
measures,
equities
began
to
rebound
at
the
end
of
March
2020.
As
states
gradually
reopened,
economic
activity
resumed,
leading
to
declining
jobless
claims,
a
decreasing
unemployment
rate
and
record-high
increases
in
job
additions
and
existing
home
sales.
Investor
optimism
about
potential
COVID-19
vaccines,
rising
retail
sales
and
an
economic
rebound
further
supported
equities.
Despite
surging
summer
infection
rates,
a
steady
equity
market
recovery
amid
monetary
and
fiscal
support
led
stocks,
as
measured
by
the
S&P
500,
to
reverse
earlier
losses
and
reach
all-time
price
highs
in
early
September
2020.
Late
in
the
period,
however,
some
signs
emerged
that
the
economic
recovery
was
stalling,
including
persistently
high
unemployment
claims
and
low
consumer
confidence,
leading
stocks
to
reverse
some
of
their
earlier
gains.
The
foregoing
information
reflects
our
analysis
and
opinions
as
of
September
30,
2020
.
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.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
4
franklintempleton.com
Annual
Report
Franklin
DynaTech
Fund
This
annual
report
for
Franklin
DynaTech
Fund
covers
the
fiscal
year
ended
September
30,
2020
.
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,
have
superior
management
and
that
benefit
from
new
industry
conditions
in
the
dynamically
changing
global
economy.
Performance
Overview
The
Fund’s
Class
A
shares
posted
a
+47.47%
cumulative
total
return
for
the
12
months
under
review.
In
comparison,
the
Russell
1000
®
Growth
Index,
which
is
market
capitalization
weighted
and
measures
performance
of
those
Russell
1000
®
Index
companies
with
relatively
higher
price-
to-book
ratios
and
higher
forecasted
growth
rates,
posted
a
total
return
of
+37.53%.
1
Also
for
comparison,
the
broad
U.S.
stock
market
as
measured
by
the
Standard
&
Poor’s
500
Index
(S&P
500),
posted
a
+15.15%
return.
1
You
can
find
the
Fund’s
long-term
performance
data
in
the
Performance
Summary
beginning
on
page
6
.
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
.
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.
Manager’s
Discussion
During
the
reporting
period,
the
information
technology
(IT)
sector
contributed
most
to
the
Fund’s
absolute
performance.
Many
IT
companies
enjoyed
strong
earnings
over
the
period,
including
ecommerce
platform
Shopify,
information
software
and
services
firm
Microsoft
and
semiconductor
company
NVIDIA,
as
COVID-19
accelerated
the
digital
transformation
of
companies.
Within
communication
services,
online
gaming
company
SEA
also
contributed
to
results.
In
the
consumer
discretionary
sector,
online
marketplace
Amazon.com
contributed
to
absolute
results
as
people
increasingly
turned
to
the
online
retailer
for
basic
goods
as
they
spent
more
time
at
home,
boosting
sales.
The
company
also
benefited
from
the
increase
in
remote
working,
which
has
made
more
companies
reliant
on
technology
infrastructure
provided
by
Amazon
Web
Services.
Portfolio
Composition
9/30/20
%
of
Total
Net
Assets
Software
21.5%
IT
Services
15.2%
Internet
&
Direct
Marketing
Retail
13.6%
Health
Care
Equipment
&
Supplies
7.3%
Interactive
Media
&
Services
6.4%
Semiconductors
&
Semiconductor
Equipment
5.8%
Life
Sciences
Tools
&
Services
4.2%
Equity
Real
Estate
Investment
Trusts
(REITs)
3.2%
Entertainment
3.1%
Health
Care
Technology
3.1%
Capital
Markets
2.3%
Biotechnology
2.2%
Pharmaceuticals
1.8%
Professional
Services
1.6%
Other
7.2%
Short-Term
Investments
&
Other
Net
Assets
1.5%
1.
Source:
Morningstar.
Frank
Russell
Company
is
the
source
and
owner
of
the
trademarks,
service
marks
and
copyrights
related
to
the
Russell
Indexes.
Russell
®
is
a
trademark
of
Frank
Russell
Company.
The
indexes
are
unmanaged
and
include
reinvestment
of
any
income
or
distributions.
They
do
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
48
.
Franklin
DynaTech
Fund
5
franklintempleton.com
Annual
Report
Conversely,
an
investment
in
childcare
and
educational
services
provider
Bright
Horizons
Family
Solutions
detracted
from
performance
as
the
early
education
provider
faced
COVID-19
headwinds
due
to
center
closures.
In
contrast,
the
industrials
sector
was
a
key
detractor
from
absolute
performance.
The
aerospace
firm
Boeing
(not
held
at
period-end)
was
pressured
and
hard
hit
by
both
the
COVID-19
outbreak,
which
has
drastically
cut
international
travel,
and
continued
safety
concerns
about
Boeing’s
flagship
737
MAX
passenger
airliner.
Both
of
these
factors
have
led
to
significant
order
cancellations
for
the
737
MAX.
The
shares
of
aerospace
and
electronics
supplier
HEICO
(not
held
at
period-end)
were
also
hit
hard
by
the
steep
decline
in
commercial
air
travel
caused
by
COVID-19,
which
impacts
the
demand
for
plane
parts.
Defense
contractor
Raytheon
(not
held
at
period-end)
hurt
results
as
well.
Elsewhere,
clinical
trial
disruptions
brought
on
by
COVID-19
pressured
clinical
trial
analytics
provider
IQVIA
Holdings
(not
held
at
period-end)
in
the
health
care
sector.
Thank
you
for
your
continued
participation
in
Franklin
Dynatech
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Matthew
J.
Moberg,
CPA
Rupert
H.
Johnson,
Jr.
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
September
30,
2020,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
Top
10
Holdings
9/30/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Amazon.com,
Inc.
7.7%
Internet
&
Direct
Marketing
Retail,
United
States
Microsoft
Corp.
3.4%
Software,
United
States
Shopify,
Inc.
2.8%
IT
Services,
Canada
ServiceNow
,
Inc.
2.6%
Software,
United
States
PayPal
Holdings,
Inc.
2.1%
IT
Services,
United
States
Facebook,
Inc.
2.1%
Interactive
Media
&
Services,
United
States
Sea
Ltd.
2.1%
Entertainment,
Taiwan
Alphabet,
Inc.
2.1%
Interactive
Media
&
Services,
United
States
Adyen
NV
2.0%
IT
Services,
Netherlands
NVIDIA
Corp.
1.9%
Semiconductors
&
Semiconductor
Equipment,
United
States
Performance
Summary
as
of
September
30,
2020
Franklin
DynaTech
Fund
6
franklintempleton.com
Annual
Report
The
performance
table
and
graphs
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
9/30/20
1
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
The
maximum
is
5.50%
and
the
minimum
is
0%.
Class
A
:
5.50%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
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
.
Share
Class
Cumulative
Total
Return
2
Average
Annual
Total
Return
3
–
A
4
1-Year
+47.47%
+39.36%
5-Year
+194.07%
+22.68%
10-Year
+449.25%
+17.90%
Advisor
1-Year
+47.83%
+47.83%
5-Year
+197.82%
+24.39%
10-Year
+463.07%
+18.87%
See
page
8
for
Performance
Summary
footnotes.
Franklin
DynaTech
Fund
Performance
Summary
7
franklintempleton.com
Annual
Report
See
page
8
for
Performance
Summary
footnotes.
Total
Return
Index
Comparison
for
a
Hypothetical
$10,000
Investment
1
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
indexes
include
reinvestment
of
any
income
or
distributions.
They
differ
from
the
Fund
in
composition
and
do
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
Class
A
(10/1/10–9/30/20)
Advisor
Class
(10/1/10–9/30/20)
Franklin
DynaTech
Fund
Performance
Summary
8
franklintempleton.com
Annual
Report
Each
class
of
shares
is
available
to
certain
eligible
investors
and
has
different
annual
fees
and
expenses,
as
described
in
the
prospectus.
All
investments
involve
risks,
including
possible
loss
of
principal.
Stocks
historically
have
outperformed
other
asset
classes
over
the
long
term,
but
tend
to
fluctuate
more
dramatically
over
the
short
term.
Investments
in
fast-growing
industries,
like
the
technology
and
health
care
sectors
(which
have
historically
been
volatile)
could
result
in
increased
price
fluctuation,
especially
over
the
short
term,
due
to
the
rapid
pace
of
product
change
and
development
and
changes
in
gov-
ernment
regulation
of
companies
emphasizing
scientific
or
technological
advancement
or
regulatory
approval
for
new
drugs
and
medical
instruments.
The
Fund
may
also
invest
in
small-
and
mid-capitalization
companies,
which
can
be
particularly
sensitive
to
changing
economic
conditions,
and
their
prospects
for
growth
are
less
certain
than
those
of
larger,
more
established
companies.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen. The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
The
Fund
has
a
fee
waiver
associated
with
any
investment
it
makes
in
a
Franklin
Templeton
money
fund
and/or
other
Franklin
Templeton
fund,
contractually
guaranteed
through
1/31/21.
Fund
investment
results
reflect
the
fee
waiver;
without
this
waiver,
the
results
would
have
been
lower.
2.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
3.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
4.
Prior
to
9/10/18,
these
shares
were
offered
at
a
higher
initial
sales
charge
of
5.75%,
thus
actual
returns
(with
sales
charges)
would
have
differed.
Average
annual
total
returns
(with
sales
charges)
have
been
restated
to
reflect
the
current
maximum
initial
sales
charge
of
5.50%.
5.
Source:
Morningstar.
The
Russell
1000
Growth
Index
is
market
capitalization-weighted
and
measures
performance
of
those
Russell
1000
Index
companies
with
higher
price-to-book
ratios
and
higher
forecasted
growth
values.
The
S&P
500
is
a
market
capitalization-weighted
index
of
500
stocks
designed
to
measure
total
U.S.
equity
market
performance.
6.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(10/1/19–9/30/20)
Share
Class
Long-Term
Capital
Gain
A
$0.6598
C
$0.6598
R
$0.6598
R6
$0.6598
Advisor
$0.6598
Total
Annual
Operating
Expenses
6
Share
Class
With
Fee
Waiver
Without
Fee
Waiver
A
0.86%
0.87%
Advisor
0.61%
0.62%
Your
Fund’s
Expenses
Franklin
DynaTech
Fund
9
franklintempleton.com
Annual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value”
for
each
class
of
shares.
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
for
your
class
of
shares
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
for
the
class
of
shares
you
hold
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
183/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
4/1/20
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$1,518.03
$5.36
$1,020.74
$4.30
0.85%
C
$1,000
$1,512.32
$10.05
$1,017.00
$8.07
1.60%
R
$1,000
$1,516.12
$6.93
$1,019.49
$5.56
1.10%
R6
$1,000
$1,520.60
$3.18
$1,022.48
$2.55
0.50%
Advisor
$1,000
$1,519.97
$3.79
$1,022.00
$3.04
0.60%
10
franklintempleton.com
Annual
Report
Franklin
Focused
Growth
Fund
This
annual
report
for
Franklin
Focused
Growth
Fund
covers
the
fiscal
year
ended
September
30,
2020.
The
Fund
commenced
operations
on
April
12,
2016,
and
began
offering
Class
A,
Class
C,
Class
R
and
Class
R6
shares
on
February
14,
2020.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
capital
appreciation
by
investing
in
an
equity
securities
portfolio
of
approximately
20–50
companies
that
we
believe
offers
a
compelling
trade-off
between
growth
opportunity,
business
and
financial
risk
and
valuation.
Performance
Overview
The
Fund’s
Class
A
shares
posted
a
+50.77%
cumulative
total
return
for
the
12
months
under
review.
1
In
comparison,
the
Russell
1000
®
Growth
Index,
which
is
market
capitalization
weighted
and
measures
performance
of
those
Russell
1000
®
Index
companies
with
relatively
higher
price-
to-book
ratios
and
higher
forecasted
growth
rates,
posted
a
total
return
of
+37.53%.
2
You
can
find
the
Fund’s
long-term
performance
data
in
the
Performance
Summary
beginning
on
page
12
.
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
.
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.
Manager’s
Discussion
During
the
period
under
review,
the
information
technology
(IT)
sector
contributed
most
to
the
Fund’s
absolute
performance.
Many
IT
companies
enjoyed
strong
earnings
over
the
period,
including
information
software
and
services
firm
Microsoft,
ecommerce
platform
Shopify,
semiconductor
Portfolio
Composition
9/30/20
%
of
Total
Net
Assets
Software
18.8%
IT
Services
15.2%
Internet
&
Direct
Marketing
Retail
14.2%
Health
Care
Equipment
&
Supplies
9.1%
Interactive
Media
&
Services
6.8%
Semiconductors
&
Semiconductor
Equipment
5.8%
Entertainment
4.0%
Health
Care
Technology
2.5%
Professional
Services
2.5%
Media
2.2%
Electric
Utilities
2.2%
Food
&
Staples
Retailing
1.9%
Equity
Real
Estate
Investment
Trusts
(REITs)
1.9%
Life
Sciences
Tools
&
Services
1.9%
Industrial
Conglomerates
1.7%
Capital
Markets
1.3%
Automobiles
1.3%
Other
0.9%
Short-Term
Investments
&
Other
Net
Assets
5.8%
1.
Effective
2/14/20,
the
Fund
began
offering
Class
A
shares.
Class
A
performance
shown
has
been
calculated
as
follows:
(a)
for
periods
prior
to
2/14/20,
a
restated
figure
is
used
based
on
the
Fund’s
Advisor
Class
performance
that
includes
any
Rule
12b-1
rate
differential
that
exists
between
Class
A
and
Advisor
Class;
and
(b)
for
periods
after
2/14/20,
actual
Class
A
performance
is
used,
reflecting
all
charges
and
fees
applicable
to
that
class.
2.
Source:
Morningstar.
Frank
Russell
Company
is
the
source
and
owner
of
the
trademarks,
service
marks
and
copyrights
related
to
the
Russell
Indexes.
Russell®
is
a
trademark
of
Frank
Russell
Company.
The
index
is
unmanaged
and
includes
reinvestment
of
any
income
or
distributions.
It
does
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
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
58
.
Franklin
Focused
Growth
Fund
11
franklintempleton.com
Annual
Report
company
NVIDIA
and
cloud-based
IT
service
management
company
ServiceNow,
as
COVID-19
accelerated
the
digital
transformation
of
companies.
In
the
consumer
discretionary
sector,
online
marketplace
Amazon.com
contributed
to
absolute
results
as
people
increasingly
turned
to
the
online
retailer
for
basic
goods
as
they
spent
more
time
at
home,
boosting
sales.
The
company
also
benefited
from
the
increase
in
remote
working,
which
has
made
more
companies
reliant
on
technology
infrastructure
provided
by
Amazon
Web
Services.
In
contrast,
the
industrials
sector
was
a
key
detractor
from
absolute
performance.
The
aerospace
firm
Boeing
(not
held
at
period-end)
was
pressured
and
hard
hit
by
both
the
COVID-19
outbreak,
which
has
drastically
cut
international
travel,
and
continued
safety
concerns
about
Boeing’s
flagship
737
MAX
passenger
airliner.
Both
of
these
factors
have
led
to
significant
order
cancellations
for
the
737
MAX.
Defense
contractor
Raytheon
(not
held
at
period-end)
and
industrial
conglomerate
Fortive
(not
held
at
period-end)
hurt
results
as
well.
Additionally,
lackluster
performance
was
evident
in
derivatives
exchange
operator
CME
Group
(not
held
at
period-end)
in
the
financials
sector
and
wireless
tower
operator
American
Tower
(not
held
at
period-end)
in
the
real
estate
sector.
Thank
you
for
your
participation
in
Franklin
Focused
Growth
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Matthew
J.
Moberg,
CPA
Portfolio
Manager
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
September
30,
2020,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
Top
10
Holdings
9/30/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Amazon.com,
Inc.
9.5%
Internet
&
Direct
Marketing
Retail,
United
States
Microsoft
Corp.
8.4%
Software,
United
States
Shopify,
Inc.
4.9%
IT
Services,
Canada
Facebook,
Inc.
4.6%
Interactive
Media
&
Services,
United
States
ServiceNow
,
Inc.
4.4%
Software,
United
States
NVIDIA
Corp.
4.2%
Semiconductors
&
Semiconductor
Equipment,
United
States
PayPal
Holdings,
Inc.
3.6%
IT
Services,
United
States
Adyen
NV
2.9%
IT
Services,
Netherlands
Danaher
Corp.
2.9%
Health
Care
Equipment
&
Supplies,
United
States
Mastercard
,
Inc.
2.7%
IT
Services,
United
States
Performance
Summary
as
of
September
30,
2020
Franklin
Focused
Growth
Fund
12
franklintempleton.com
Annual
Report
The
performance
table
and
graphs
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
9/30/20
1
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
The
maximum
is
5.50%
and
the
minimum
is
0%.
Class
A
:
5.50%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
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
.
Share
Class
Cumulative
Total
Return
2
Average
Annual
Total
Return
3
–
A
4
1-Year
+50.77%
+42.47%
3-Year
+99.02%
+23.44%
Since
Inception
(4/12/16)
+165.86%
+22.90%
Advisor
1-Year
+51.20%
+51.20%
3-Year
+100.57%
+26.11%
Since
Inception
(4/12/16)
+168.92%
+24.80%
See
page
14
for
Performance
Summary
footnotes.
Franklin
Focused
Growth
Fund
Performance
Summary
13
franklintempleton.com
Annual
Report
See
page
14
for
Performance
Summary
footnotes.
Total
Return
Index
Comparison
for
a
Hypothetical
$10,000
Investment
1
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
index
includes
reinvestment
of
any
income
or
distributions.
It
differs
from
the
Fund
in
composition
and
does
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
Class
A
(4/12/16–9/30/20)
Advisor
Class
(4/12/16–
9/30/20
)
Franklin
Focused
Growth
Fund
Performance
Summary
14
franklintempleton.com
Annual
Report
Each
class
of
shares
is
available
to
certain
eligible
investors
and
has
different
annual
fees
and
expenses,
as
described
in
the
prospectus.
All
investments
involve
risks,
including
possible
loss
of
principal.
To
the
extent
the
Fund
focuses
on
particular
countries,
regions,
industries,
sectors
or
types
of
investment
from
time
to
time,
it
may
be
subject
to
greater
risks
of
adverse
developments
in
such
areas
of
focus
than
a
fund
that
invests
in
a
wider
variety
of
countries,
regions,
industries,
sectors
or
investments.
Growth
stock
prices
reflect
projections
of
future
earnings
or
revenues,
and
can,
therefore,
fall
dramati-
cally
if
the
company
fails
to
meet
those
projections.
The
Fund
may
also
invest
in
small-
and
mid-capitalization
companies,
which
can
be
particularly
sensitive
to
changing
economic
conditions,
and
their
prospects
for
growth
are
less
certain
than
those
of
larger,
more
established
companies.
Foreign
investing
carries
additional
risks
such
as
currency
and
market
volatility,
and
political
or
social
instability;
risks
which
are
heightened
in
developing
countries.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen.
The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
The
Fund
has
an
expense
reduction
contractually
guaranteed
through
1/31/21.
Fund
investment
results
reflect
the
expense
reduction;
without
this
reduction,
the
results
would
have
been
lower.
2.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
3.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
4.
Effective
2/14/20,
the
Fund
began
offering
Class
A
shares.
Class
A
performance
shown
has
been
calculated
as
follows:
(a)
for
periods
prior
to
2/14/20,
a
restated
figure
is
used
based
on
the
Fund’s
Advisor
Class
performance
that
includes
any
Rule
12b-1
rate
differential
that
exists
between
Class
A
and
Advisor
Class;
and
(b)
for
periods
after
2/14/20,
actual
Class
A
performance
is
used,
reflecting
all
charges
and
fees
applicable
to
that
class.
5.
Source:
Morningstar.
The
Russell
1000
Growth
Index
is
market
capitalization-weighted
and
measures
performance
of
those
Russell
1000
Index
companies
with
higher
price-to-book
ratios
and
higher
forecasted
growth
values.
6.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(10/1/19–9/30/20)
Share
Class
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Total
A
(2/14/20-9/30/20)
—
—
—
C
(2/14/20-9/30/20)
—
—
—
R
(2/14/20-9/30/20)
—
—
—
R6
(2/14/20-9/30/20)
—
—
—
Advisor
$0.0218
$1.0640
$1.0858
Total
Annual
Operating
Expenses
6
Share
Class
With
Fee
Waiver
Without
Fee
Waiver
A
1.11%
2.52%
Advisor
0.86%
2.27%
Your
Fund’s
Expenses
Franklin
Focused
Growth
Fund
15
franklintempleton.com
Annual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value”
for
each
class
of
shares.
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
for
your
class
of
shares
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
for
the
class
of
shares
you
hold
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
183/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
4/1/20
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$1,509.90
$6.85
$1,019.55
$5.51
1.09%
C
$1,000
$1,503.30
$11.46
$1,015.84
$9.23
1.83%
R
$1,000
$1,509.60
$6.52
$1,019.80
$5.25
1.04%
R6
$1,000
$1,511.10
$5.27
$1,020.80
$4.24
0.84%
Advisor
$1,000
$1,511.10
$5.32
$1,020.76
$4.28
0.85%
16
franklintempleton.com
Annual
Report
Franklin
Growth
Fund
This
annual
report
for
Franklin
Growth
Fund
covers
the
fiscal
year
ended
September
30,
2020
.
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
posted
a
+25.09%
cumulative
total
return
for
the
12
months
under
review.
In
comparison,
the
Standard
&
Poor’s
500
Index
(S&P
500),
which
is
a
broad
measure
of
U.S.
stock
performance,
posted
a
+15.15%
total
return.
1
You
can
find
the
Fund’s
long-term
performance
data
in
the
Performance
Summary
beginning
on
page
18
.
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
.
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.
The
investment
manager’s
process
generally
includes
an
assessment
of
the
potential
impacts
of
any
material
environmental,
social
and
governance
(“ESG”)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
Manager’s
Discussion
During
the
reporting
period,
the
information
technology
sector
(IT)
contributed
most
to
the
Fund’s
absolute
performance.
Many
IT
companies
enjoyed
strong
earnings
over
the
period,
including
personal
computing
device
manufacturer
and
service
provider
Apple,
information
and
services
firm
Microsoft,
cloud-based
IT
service
management
company
ServiceNow
and
semiconductor
company
NVIDIA,
as
COVID-19
accelerated
the
digital
transformation
of
companies.
Portfolio
Composition
9/30/20
%
of
Total
Net
Assets
Software
14.1%
IT
Services
6.9%
Internet
&
Direct
Marketing
Retail
6.7%
Health
Care
Equipment
&
Supplies
6.1%
Technology
Hardware,
Storage
&
Peripherals
5.8%
Road
&
Rail
4.7%
Semiconductors
&
Semiconductor
Equipment
4.6%
Pharmaceuticals
4.6%
Life
Sciences
Tools
&
Services
4.4%
Aerospace
&
Defense
4.4%
Interactive
Media
&
Services
4.2%
Machinery
3.5%
Professional
Services
3.5%
Chemicals
3.3%
Capital
Markets
2.9%
Beverages
2.8%
Electronic
Equipment,
Instruments
&
Components
2.3%
Biotechnology
2.3%
Equity
Real
Estate
Investment
Trusts
(REITs)
1.9%
Textiles,
Apparel
&
Luxury
Goods
1.3%
Entertainment
1.1%
Building
Products
1.1%
Health
Care
Providers
&
Services
1.1%
Other
5.5%
Short-Term
Investments
&
Other
Net
Assets
0.9%
1.
Source:
Morningstar.
The
index
is
unmanaged
and
includes
reinvestment
of
any
income
or
distributions.
It
does
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
65
.
Franklin
Growth
Fund
17
franklintempleton.com
Annual
Report
In
the
consumer
discretionary
sector,
online
marketplace
Amazon.com
contributed
to
absolute
results
as
people
increasingly
turned
to
the
online
retailer
for
basic
goods
as
they
spent
more
time
at
home,
boosting
sales.
The
company
also
benefited
from
the
increase
in
remote
working,
which
has
made
more
companies
reliant
on
technology
infrastructure
provided
by
Amazon
Web
Services.
In
contrast,
the
industrials
sector
was
a
key
detractor
from
absolute
performance.
The
aerospace
firm
Boeing
(not
held
at
period-end)
was
pressured
and
hard
hit
by
both
the
COVID-19
outbreak,
which
has
drastically
cut
international
travel,
and
continued
safety
concerns
about
Boeing’s
flagship
737
MAX
passenger
airliner.
Both
of
these
factors
have
led
to
significant
order
cancellations
for
the
737
MAX.
Also
in
the
sector,
Northrop
Grumman
underperformed
as
seasonally
weak
bookings
and
supply
chain
delays
due
to
COVID-19
disruptions
have
been
challenging
for
the
aerospace
contractor.
Defense
contractors
Raytheon
and
General
Dynamics
(not
held
at
period-end)
hurt
results
as
well.
In
the
materials
sector,
coatings
company
Axalta
Coating
Systems
(not
held
at
period-end)
faced
demand
headwinds
from
the
impact
of
global
automotive
production
shutdowns
in
the
face
of
COVID-19.
Thank
you
for
your
continued
participation
in
Franklin
Growth
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Serena
Perin
Vinton,
CFA
Lead
Portfolio
Manager
Chris
Anderson
Robert
Rendler,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
September
30,
2020
,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
Top
10
Holdings
9/30/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Apple,
Inc.
5.8%
Technology
Hardware,
Storage
&
Peripherals,
United
States
Amazon.com,
Inc.
5.7%
Internet
&
Direct
Marketing
Retail,
United
States
Microsoft
Corp.
4.1%
Software,
United
States
ServiceNow
,
Inc.
2.6%
Software,
United
States
Alphabet,
Inc.
2.5%
Interactive
Media
&
Services,
United
States
Mastercard
,
Inc.
2.5%
IT
Services,
United
States
Mettler
-Toledo
International,
Inc.
2.2%
Life
Sciences
Tools
&
Services,
United
States
Union
Pacific
Corp.
2.1%
Road
&
Rail,
United
States
Northrop
Grumman
Corp.
1.8%
Aerospace
&
Defense,
United
States
Intuit,
Inc.
1.7%
Software,
United
States
CFA
®
is
a
trademark
owned
by
CFA
Institute.
Performance
Summary
as
of
September
30,
2020
Franklin
Growth
Fund
18
franklintempleton.com
Annual
Report
The
performance
table
and
graphs
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
9/30/20
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
The
maximum
is
5.50%
and
the
minimum
is
0%.
Class
A
:
5.50%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
A
3
1-Year
+25.09%
+18.22%
5-Year
+113.70%
+15.09%
10-Year
+284.07%
+13.76%
Advisor
1-Year
+25.41%
+25.41%
5-Year
+116.39%
+16.69%
10-Year
+293.80%
+14.69%
See
page
20
for
Performance
Summary
footnotes.
Franklin
Growth
Fund
Performance
Summary
19
franklintempleton.com
Annual
Report
See
page
20
for
Performance
Summary
footnotes
.
Total
Return
Index
Comparison
for
a
Hypothetical
$10,000
Investment
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
index
includes
reinvestment
of
any
income
or
distributions.
It
differs
from
the
Fund
in
composition
and
does
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
Class
A
(10/1/10–9/30/20)
Advisor
Class
(10/1/10–9/30/20)
Franklin
Growth
Fund
Performance
Summary
20
franklintempleton.com
Annual
Report
Each
class
of
shares
is
available
to
certain
eligible
investors
and
has
different
annual
fees
and
expenses,
as
described
in
the
prospectus.
All
investments
involve
risks,
including
possible
loss
of
principal.
Historically,
the
Fund
has
focused
on
larger
companies.
The
Fund
may
also
invest
in
small,
relatively
new
and/or
unseasoned
companies,
which
involves
additional
risks,
as
the
price
of
these
securities
can
be
volatile,
particularly
over
the
short
term.
The
Fund
may
focus
on
particular
sectors
of
the
market
from
time
to
time,
which
can
carry
greater
risks
of
adverse
developments
in
such
sectors.
In
addition,
the
Fund
may
invest
up
to
40%
of
its
net
assets
in
stocks
of
foreign
companies,
which
involve
special
risks,
including
currency
fluctuations
and
economic
as
well
as
political
uncertainty.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
econo-
mies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen. The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
2.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
3.
Prior
to
9/10/18,
these
shares
were
offered
at
a
higher
initial
sales
charge
of
5.75%,
thus
actual
returns
(with
sales
charges)
would
have
differed.
Average
annual
total
returns
(with
sales
charges)
have
been
restated
to
reflect
the
current
maximum
initial
sales
charge
of
5.50%.
4.
Source:
Morningstar.
The
S&P
500
is
a
market
capitalization-weighted
index
of
500
stocks
designed
to
measure
total
U.S.
equity
market
performance.
5.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(10/1/19–9/30/20)
Share
Class
Net
Investment
Income
Long-Term
Capital
Gain
Total
A
$0.4554
$5.9943
$6.4497
C
–
$5.9943
$5.9943
R
$0.1320
$5.9943
$6.1263
R6
$0.8426
$5.9943
$6.8369
Advisor
$0.7272
$5.9943
$6.7215
Total
Annual
Operating
Expenses
5
Share
Class
A
0.84%
Advisor
0.59%
Your
Fund’s
Expenses
Franklin
Growth
Fund
21
franklintempleton.com
Annual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value”
for
each
class
of
shares.
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
for
your
class
of
shares
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
for
the
class
of
shares
you
hold
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
183/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
4/1/20
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$1,380.55
$4.86
$1,020.92
$4.12
0.82%
C
$1,000
$1,375.28
$9.30
$1,017.17
$7.90
1.57%
R
$1,000
$1,378.84
$6.34
$1,019.67
$5.39
1.07%
R6
$1,000
$1,382.64
$2.87
$1,022.59
$2.44
0.48%
Advisor
$1,000
$1,382.17
$3.38
$1,022.17
$2.87
0.57%
22
franklintempleton.com
Annual
Report
Franklin
Income
Fund
This
annual
report
for
Franklin
Income
Fund
covers
the
fiscal
year
ended
September
30,
2020
.
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
posted
a
cumulative
total
return
of
-4.48%
for
the
12
months
under
review.
In
comparison,
the
Fund’s
equity
benchmark,
the
Standard
&
Poor’s
500
Index
(S&P
500),
which
is
a
broad
measure
of
U.S.
stock
performance,
posted
a
+15.15%
total
return.
1
The
Fund’s
secondary
benchmark,
the
blended
50%
MSCI
USD
High
Dividend
Yield
Index
+
25%
Bloomberg
Barclays
High
Yield
Very
Liquid
Index
+
25%
Bloomberg
Barclays
U.S.
Aggregate
Bond
Index
(Blended
Benchmark),
which
is
a
combination
of
leading
stock
and
bond
indexes,
posted
a
+1.59%
total
return.
2
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,
posted
a
+5.65%
total
return.
3
You
can
find
the
Fund’s
long-term
performance
data
in
the
Performance
Summary
beginning
on
page
26
.
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
.
Investment
Strategy
In
analyzing
debt
and
equity
securities,
we
consider
such
factors
as
a
company’s
experience
and
managerial
strength;
responsiveness
to
changes
in
interest
rates
and
business
conditions;
debt
maturity
schedules
and
borrowing
requirements;
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.
When
choosing
investments
for
the
Fund,
we
apply
a
bottom-up,
value
oriented,
long-term
approach,
focusing
on
the
market
price
of
a
company’s
securities
relative
to
the
investment
manager’s
evaluation
of
the
company’s
long-term
earning,
asset
value
and
cash
flow
potential.
Manager’s
Discussion
During
the
period
under
review,
our
equity
weighting
increased
from
47.8%
to
64.2%,
and
our
fixed
income
weighting
decreased
from
50.0%
to
33.8%.
The
Fund’s
cash
position
decreased
from
2.2%
to
2.0%
of
total
net
assets.
The
period
under
review
was
characterized
by
a
relatively
calm
beginning
with
an
improving
growth
outlook
and
easing
trade
tensions.
What
followed
was
an
unprecedented
period
of
volatility
for
risk
assets.
The
novel
coronavirus
(COVID-19)
pandemic
hobbled
global
growth,
which
led
to
the
sharpest
contraction
on
record
as
economies
across
the
globe
implemented
aggressive
initiatives
to
try
to
control
the
spread
of
the
virus.
Historic
monetary
and
fiscal
policy
intervention
globally,
as
well
as
the
gradual
reopening
of
economies
during
the
second
half
of
the
period
under
review
led
to
a
sharp
reversal
in
risk
assets.
At
period-end,
the
global
economy
remained
in
the
midst
of
a
sharp
recovery
from
the
COVID-19
induced
shutdowns
with
a
number
of
geographies
around
the
world
dealing
with
new
spikes
in
infections.
The
second
quarter
of
2020
saw
sharp
U.S.
GDP
declines,
which
we
believe
are
expected
to
reverse
to
large
quarter-over-quarter
gains
in
the
third
quarter,
but
there
continue
to
be
concerns
around
the
sustainability
of
the
recovery
and
how
broad
based
it
will
be
with
certain
segments
and
sectors
of
the
market
seemingly
not
participating
in
the
broader
recovery.
A
contentious
U.S.
election
cycle
adds
to
uncertainty
as
we
look
out
to
the
fourth
quarter
of
2020.
Weakening
demand
for
energy
due
to
the
sharp
contraction
in
economic
activity
as
a
result
of
the
pandemic
was
also
compounded
by
a
market
share
battle,
which
resulted
as
negotiations
broke
down
between
major
oil
producers
within
the
Organization
of
the
Petroleum
Exporting
Countries
1.
Source:
Morningstar.
2.
Source:
Factset.
The
Fund’s
Blended
Benchmark
was
calculated
internally
and
rebalanced
monthly.
3.
Source:
Lipper,
a
Thomson
Reuters
Company.
For
the
12-month
period
ended
9/30/20,
this
category
consisted
of
584
funds.
Lipper
calculations
do
not
include
sales
charges
or
expense
subsidization
by
a
fund’s
manager.
The
Fund’s
performance
relative
to
the
average
may
have
differed
if
these
and
other
factors
had
been
considered.
The
indexes
are
unmanaged
and
include
reinvestment
of
any
income
or
distributions.
They
do
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
76
.
Franklin
Income
Fund
23
franklintempleton.com
Annual
Report
(collectively
OPEC+,
including
Saudi
Arabia
and
Russia).
Oil
prices
recovered
relative
to
their
peak
declines
of
greater
than
60%,
ending
the
period
down
roughly
35%
from
the
beginning
of
the
period.
The
markets
began
the
year
with
volatility
relatively
subdued
through
the
middle
of
February
2020,
with
record
spikes
in
volatility
to
all-time
highs
in
March
2020,
before
a
steady
decline
through
the
rest
of
the
period
under
review,
although
still
elevated
compared
to
levels
at
the
start
of
the
period,
as
measured
by
The
CBOE
Volatility
Index
(VIX).
Risk
free
assets,
U.S.
Treasury
securities
in
particular,
rallied
during
the
peak
periods
of
volatility
and
have
stayed
relatively
rangebound
for
the
final
six
months
of
the
period
under
review.
The
yield
on
10-year
U.S.
Treasuries
declined
from
1.66%
at
the
start
of
the
period
to
0.68%
at
period-end.
The
Fund
declined
3.86%
during
the
period
with
losses
experienced
in
February
and
March
2020
as
COVID-19
triggered
the
fastest
bear
market
on
record
followed
by
the
fastest
recovery
from
a
bear
market
on
record
as
well.
Dividend
stocks,
particularly
value-oriented
sectors,
underperformed
and
the
equity
component
of
the
Funds
blended
benchmark
declined
with
the
MSCI
USA
High
Dividend
Yield
Index
posting
negative
returns
for
the
12-month
period.
Corporate
credit
struggled
in
response
to
the
onset
of
the
COVID-19,
but
record
fiscal
and
monetary
accommodation
thawed
out
lending
markets
leading
to
unprecedented
supply,
as
well
as
notable
spread
tightening
from
their
peaks
during
the
period.
Buoyed
by
the
rally
in
U.S.
Treasuries,
the
benchmark
Bloomberg
Barclays
U.S.
Aggregate
Bond
Index
and
the
Bloomberg
Barclays
U.S.
High
Yield
Very
Liquid
Index
both
posted
positive
returns.
The
Fund
entered
the
period
with
a
fairly
balanced
weighting
across
fixed-income
and
equity
securities,
while
also
holding
a
portion
in
cash
equivalents.
The
Fund
had
a
considerable
shift
in
asset-mix
over
the
course
of
the
12-month
period,
which
resulted
in
a
reduction
in
the
fixed-income
weighting
and
an
increase
in
equity
weighting,
while
continuing
to
hold
a
portion
in
cash
equivalents.
*Includes
senior
floating
rate
interests
and
index-linked
notes.
Fixed
Income
holdings
declined
during
the
period
but
posted
positive
returns
with
outperformance
(relative
to
equities
during
the
period)
offset
by
shifts
in
asset
allocation
as
we
reduced
holdings
of
U.S.
Treasuries
and
Agency
MBS
in
order
to
take
advantage
of
lower
equity
prices
and
valuations.
Relative
to
the
Fund’s
blended
fixed-income
benchmark,
Fund
holdings
underperformed
due
to
the
shorter
duration
profile
of
the
Fund’s
assets
relative
to
the
benchmark
as
well
as
the
notable
negative
performance
of
energy
bond
holdings.
U.S.
Treasury
and
Agency
MBS
holdings
as
well
as
positions
in
the
health
care,
financials
and
communication
services
sectors
generated
positive
absolute
returns
during
the
period
Portfolio
Composition
9/30/20
%
of
Total
Net
Assets
Health
Care
Providers
&
Services
10.6%
Banks
9.7%
Pharmaceuticals
8.3%
Oil,
Gas
&
Consumable
Fuels
7.0%
Electric
Utilities
6.7%
Semiconductors
&
Semiconductor
Equipment
5.6%
Media
3.1%
Diversified
Financial
Services
3.1%
Beverages
3.0%
Multi-Utilities
3.0%
Diversified
Telecommunication
Services
2.8%
Wireless
Telecommunication
Services
2.1%
Metals
&
Mining
2.1%
Software
2.0%
Aerospace
&
Defense
1.9%
Capital
Markets
1.8%
Energy
Equipment
&
Services
1.6%
Insurance
1.6%
Automobiles
1.6%
Household
Products
1.4%
Interactive
Media
&
Services
1.3%
Thrifts
&
Mortgage
Finance
1.3%
IT
Services
1.2%
Internet
&
Direct
Marketing
Retail
1.2%
Machinery
1.1%
Consumer
Finance
1.1%
Other
12.0%
Short-Term
Investments
&
Other
Net
Assets
1.8%
Top
Five
Fixed
Income
Holdings
*
9/30/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
CHS/Community
Health
Systems,
Inc.
5.4%
Health
Care
Providers
&
Services
,
United
States
Tenet
Healthcare
Corp.
3.1%
Health
Care
Providers
&
Services
,
United
States
GNMA
II,
Single-family,
30
Year
1.5%
Diversified
Financial
Services
,
United
States
U.S.
Treasury
Bonds
1.5%
Diversified
Financial
Services
,
United
States
DISH
DBS
Corp.
1.4%
Media
,
United
States
Franklin
Income
Fund
24
franklintempleton.com
Annual
Report
with
the
most
notable
outperformers
relative
to
benchmark
positioning
attributed
to
the
communication
services
and
health
care
sectors.
Within
health
care,
the
debt
of
high-yield
rated
hospital
company
Tenet
Healthcare
paced
fixed
income
returns
alongside
high-yield
pharmaceutical
companies
Endo
and
Bausch
Health.
Debt
holdings
from
companies
including
Davita,
HCA,
CVS
Health,
Mylan
NV,
Bayer,
AbbVie,
and
Cigna
also
generated
positive
total
returns
during
the
period.
Hospital
company
CHS/Community
Health
Systems
was
a
notable
detractor
from
the
sector
during
the
period
due
to
the
company’s
positioning
heading
into
the
COVID-19
induced
disruptions.
Communication
services
holdings
in
Sprint
Corp.
helped
lead
sector
returns
as
the
company’s
debt
securities
performed
particularly
well
in
response
to
the
completion
of
the
long-awaited
merger
with
T-Mobile
(not
a
Fund
holding).
Relatedly,
DISH
DBS
Corp.
holdings
also
benefited
from
the
Sprint/T-Mobile
merger
as
the
company
was
able
to
acquire
seemingly
attractive
assets
being
sold
to
satisfy
the
regulatory
requirement
associated
with
the
merger.
Corporate
bond
weakness
was
felt
most
acutely
in
the
energy
sector
due
to
the
double
hit
from
extreme
demand
destruction
as
a
result
of
COVID-19
and
rising
supplies
due
to
the
market
share
war,
which
resulted
following
the
breakdown
in
negotiations
with
the
OPEC+
oil
producers
during
the
period.
Energy
sector
fixed-income
holdings
declined
over
the
period
with
the
most
substantial
declines
experienced
by
Chesapeake
Energy,
Weatherford
International,
and
HighPoint
Operating
Corporation.
Consumer
discretionary
holdings
were
the
only
other
detractor
from
absolute
returns
during
the
period
among
fixed-income
sectors.
Consumer
discretionary
holdings
struggled
as
businesses
across
the
country
succumbed
to
COVID-19
containment
measures
causing
many
businesses
to
shut
completely,
while
consumers
were
urged
to
stay
home
to
stop
the
spread.
As
a
result,
holdings
such
as
24-Hour
Fitness
Worldwide
(not
held
at
period-end),
AMC
Entertainment
(not
held
at
period-end),
and
Belk
department
stores
suffered
notable
losses
during
the
period.
Equity
holdings
increased
over
the
period.
As
an
asset-
class,
equities
underperformed
during
the
period.
We
used
the
weakness
and
volatility
during
the
second
half
of
the
period
under
review
(with
a
focus
during
the
months
of
February
and
March
2020)
to
shift
assets
out
of
areas
that
outperformed
including
U.S.
Treasuries
and
Agency
MBS,
while
adding
to
common
stocks,
convertible
securities,
and
equity
linked
notes.
*Includes
convertible
bonds.
Information
technology
and
health
care
holdings
were
large
positive
absolute
contributors
during
the
period
with
the
communication
services,
industrials,
and
materials
sectors
providing
notable
positive
contributions
as
well.
All
the
Fund’s
equity
positions
in
the
information
technology
sector
were
positive
contributors
during
the
period
with
holdings
of
semiconductor
companies
Broadcom
and
Texas
Instruments
leading
returns.
Other
notable
contributors
included
Microsoft,
Intel,
Apple,
Oracle,
Analog
Devices
and
NVIDIA.
Pharmaceutical
players
AstraZeneca
and
Bristol-Myers
Squibb
were
top
health
care
performers
in
the
period
under
review
with
notable
positive
contributions
from
Pfizer,
Johnson
&
Johnson,
Merck
&
Company,
AbbVie
and
CVS
Health.
Top
performers
in
the
Fund
outside
of
information
technology
and
health
care
were
Rio
Tinto
in
the
materials
sector
and
United
Parcel
Service
and
Union
Pacific
in
the
industrials
sector.
During
the
period,
negative
absolute
performance
was
focused
on
the
significant
weakness
in
the
energy
and
financials
with
more
modest
declines
in
real
estate
and
utilities.
Losses
in
energy
holdings
were
widespread
during
the
period
with
minimal
differentiation
related
to
long-term
viability.
The
Funds
weighting
in
the
sector
for
equity
holdings
declined
over
the
period.
Losses
were
extreme
among
both
oil
and
gas
producers
and
oilfield
service
companies
with
sharp
declines
experienced
by
Exxon
Mobil,
Occidental
Petroleum,
Weatherford
International,
and
Royal
Dutch
Shell.
Financials
sector
holdings
struggled
with
rapidly
falling
interest
rates
and
fears
of
elevated
credit
losses
as
recessionary
conditions
took
hold
due
to
COVID-19.
Top
Five
Equity
Holdings*
9/30/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
JPMorgan
Chase
&
Co.
2.4%
Banks
,
United
States
Southern
Co.
(The)
2.1%
Electric
Utilities
,
United
States
Chevron
Corp.
1.9%
Oil,
Gas
&
Consumable
Fuels
,
United
States
Dominion
Energy,
Inc.
1.8%
Multi-Utilities
,
United
States
PepsiCo,
Inc.
1.6%
Beverages
,
United
States
Franklin
Income
Fund
25
franklintempleton.com
Annual
Report
Holdings
of
Wells
Fargo,
Bank
of
America,
Truist
Financial,
Barclays,
and
JP
Morgan
Chase
all
negatively
impacted
Fund
results.
During
the
period,
the
Fund
used
derivatives
such
as
equity
call
and
put
options
to
sell
and
reduce
positions
and/or
to
initiate
and
add
to
positions.
The
Fund
also
used
equity
index
put
spreads,
which
generated
losses
during
the
period
under
review.
Thank
you
for
your
continued
participation
in
Franklin
Income
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Edward
D.
Perks,
CFA
Lead
Portfolio
Manager
Brendan
Circle,
CFA
Todd
Brighton,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
September
30,
2020
,
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.
Performance
Summary
as
of
September
30,
2020
Franklin
Income
Fund
26
franklintempleton.com
Annual
Report
The
performance
tables
and
graphs
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
9/30/20
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
The
maximum
is
3.75%
and
the
minimum
is
0%.
Class
A
:
3.75%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
A
3,4
1-Year
-4.48%
-8.06%
5-Year
+29.14%
+4.45%
10-Year
+71.46%
+5.14%
Advisor
1-Year
-3.86%
-3.86%
5-Year
+30.50%
+5.47%
10-Year
+74.98%
+5.75%
Share
Class
Distribution
Rate
5
30-Day
Standardized
Yield
6
A
5.44%
3.11%
Advisor
5.91%
3.48%
See
page
29
for
Performance
Summary
footnotes.
Franklin
Income
Fund
Performance
Summary
27
franklintempleton.com
Annual
Report
See
page
29
for
Performance
Summary
footnotes
.
Total
Return
Index
Comparison
for
a
Hypothetical
$10,000
Investment
1
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
indexes
include
reinvestment
of
any
income
or
distributions.
They
differ
from
the
Fund
in
composition
and
do
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
Class
A
(10/1/10–9/30/20)
Advisor
Class
(10/1/10–9/30/20)
Franklin
Income
Fund
Performance
Summary
28
franklintempleton.com
Annual
Report
Net
Asset
Value
Share
Class
(Symbol)
9/30/20
9/30/19
Change
A
(FKIQX)
$2.08
$2.30
-$0.22
A1
(FKINX)
$2.08
$2.30
-$0.22
C
(FCISX)
$2.12
$2.34
-$0.22
R
(FISRX)
$2.04
$2.26
-$0.22
R6
(FNCFX)
$2.07
$2.29
-$0.22
Advisor
(FRIAX)
$2.07
$2.28
-$0.21
Distributions
(10/1/19–9/30/20)
Share
Class
Net
Investment
Income
A
$0.1176
A1
$0.1200
C
$0.1084
R
$0.1120
R6
$0.1236
Advisor
$0.1224
Total
Annual
Operating
Expenses
10
Share
Class
A
0.72%
Advisor
0.47%
See
page
29
for
Performance
Summary
footnotes.
Franklin
Income
Fund
Performance
Summary
29
franklintempleton.com
Annual
Report
Each
class
of
shares
is
available
to
certain
eligible
investors
and
has
different
annual
fees
and
expenses,
as
described
in
the
prospectus.
All
investments
involve
risks,
including
possible
loss
of
principal.
The
Fund’s
portfolio
includes
a
substantial
portion
of
higher-yielding,
lower-rated
corporate
bonds
and
some
floating
rate
loans,
which
are
also
higher-yielding
and
lower-rated.
These
investments
have
more
credit
risk
than
investment-grade
securities
and
are
subject
to
increased
risk
of
default
and
potential
loss
of
principal.
The
Fund’s
share
price
and
yield
will
be
affected
by
interest
rate
movements.
Bond
prices
generally
move
in
the
opposite
direction
of
interest
rates.
Thus,
as
prices
of
bonds
in
the
Fund
adjust
to
a
rise
in
interest
rates,
the
Fund’s
share
price
may
decline.
Changes
in
the
financial
strength
of
a
bond
issuer
or
in
a
bond’s
credit
rating
may
affect
its
value.
Stock
prices
fluctuate,
sometimes
rapidly
and
dramatically,
due
to
factors
affecting
individual
companies,
particular
industries
or
sectors,
or
general
market
conditions.
Foreign
investing
involves
additional
risks
such
as
currency
and
market
volatility,
as
well
as
political
and
social
instability.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
dis-
eases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen. The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
2.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
3.
Effective
9/10/18,
Class
A
shares
closed
to
new
investors,
were
renamed
Class
A1
shares,
and
a
new
Class
A
share
with
a
different
expense
structure
became
available.
Class
A
performance
shown
has
been
calculated
as
follows:
(a)
for
periods
prior
to
9/10/18,
a
restated
figure
is
used
based
on
the
Fund’s
Class
A1
performance
that
includes
any
Rule
12b-1
rate
differential
that
exists
between
Class
A1
and
Class
A;
and
(b)
for
periods
after
9/10/18,
actual
Class
A
performance
is
used,
reflecting
all
charges
and
fees
applicable
to
that
class.
4.
Prior
to
3/1/19,
these
shares
were
offered
at
a
higher
initial
sales
charge
of
4.25%,
thus
actual
returns
(with
sales
charges)
would
have
differed.
Average
annual
total
returns
(with
sales
charges)
have
been
restated
to
reflect
the
current
maximum
initial
sales
charge
of
3.75%.
5.
Distribution
rate
is
based
on
an
annualization
of
the
respective
class’s
September
dividend
and
the
maximum
offering
price
(NAV
for
Advisor
Class)
per
share
on
9/30/20.
6.
The
Fund’s
30-day
standardized
yield
is
calculated
over
a
trailing
30-day
period
using
the
yield
to
maturity
on
bonds
and/or
the
dividends
accrued
on
stocks.
It
may
not
equal
the
Fund’s
actual
income
distribution
rate,
which
reflects
the
Fund’s
past
dividends
paid
to
shareholders.
7.
Source:
Morningstar.
The
S&P
500
is
a
market
capitalization-weighted
index
of
500
stocks
designed
to
measure
total
U.S.
equity
market
performance.
8.
Source:
Factset.
The
Blended
50%
MSCI
USD
High
Dividend
Yield
Index
+
25%
Bloomberg
Barclays
High
Yield
Very
Liquid
Index
+
25%
Bloomberg
Barclays
U.S.
Aggre-
gate
Index
measures
performance
of
high
dividend-paying
global
and
developed
and
emerging
stocks,
noninvestment-grade
corporate
bonds
and
tracks
performance
of
the
U.S.
investment-grade
bond
market.
9.
Source:
Lipper,
a
Thomas
Reuters
Company.
The
Lipper
Mixed-Asset
Target
Allocation
Moderate
Funds
Classification
Average
is
calculated
by
averaging
the
total
returns
of
all
funds
within
the
Lipper
Mixed-Asset
Target
Allocation
Moderate
Funds
classification
in
the
Lipper
Open-End
underlying
funds
universe.
Lipper
Mixed-Asset
Target
Allo-
cation
Moderate
Funds
are
defined
as
funds
that,
by
portfolio
practice,
maintain
a
mix
of
between
40%–60%
equity
securities,
with
the
remainder
invested
in
bonds,
cash
and
cash
equivalents.
For
the
one-year
period
ended
9/30/20,
there
were
584
funds
in
this
category.
Lipper
calculations
do
not
include
sales
charges
or
expense
subsidization
by
a
fund’s
manager.
The
Fund’s
performance
relative
to
the
average
may
have
differed
if
these
and
other
factors
had
been
considered.
10.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Your
Fund’s
Expenses
FRANKLIN
INCOME
FUND
30
franklintempleton.com
Annual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value”
for
each
class
of
shares.
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
for
your
class
of
shares
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
for
the
class
of
shares
you
hold
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
183/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
4/1/20
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$1,103.80
$3.77
$1,021.42
$3.62
0.72%
A1
$1,000
$1,104.20
$3.25
$1,021.92
$3.12
0.62%
C
$1,000
$1,104.90
$5.88
$1,019.41
$5.64
1.12%
R
$1,000
$1,104.40
$5.16
$1,020.10
$4.95
0.98%
R6
$1,000
$1,105.90
$2.07
$1,023.03
$1.99
0.39%
Advisor
$1,000
$1,111.40
$2.47
$1,022.66
$2.36
0.47%
31
franklintempleton.com
Annual
Report
Franklin
U.S.
Government
Securities
Fund
This
annual
report
for
Franklin
U.S.
Government
Securities
Fund
covers
the
fiscal
year
ended
September
30,
2020
.
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
Overview
The
Fund’s
Class
A
shares
posted
a
+3.01%
cumulative
total
return
for
the
12
months
under
review.
In
comparison,
the
Bloomberg
Barclays
U.S.
Government
-
Intermediate
Index,
the
intermediate
component
of
the
Bloomberg
Barclays
U.S.
Government
Index,
posted
a
+5.98%
total
return.
2
You
can
find
the
Fund’s
long-term
performance
data
in
the
Performance
Summary
beginning
on
page
33
.
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
togo
to
franklintempleton.com
or
call
(800)
342-5236
.
Investment
Strategy
We
currently
invest
the
Fund’s
assets
substantially
in
GNMA
obligations.
We
analyze
securities
using
proprietary
models
to
help
us
identify
attractive
investment
opportunities.
Manager’s
Discussion
Interest-rates
were
generally
range
bound
for
the
first
half
of
the
reporting
period
but
ended
the
period
significantly
lower
across
the
yield
curve.
As
the
seriousness
of
COVID-19
became
increasingly
apparent
over
the
first
quarter
of
2020,
risk
aversion
and
volatility
in
financial
markets
rose
sharply
and
U.S.
Treasuries
rallied.
The
10-year
Treasury
yield
declined
99
basis
points
(bps)
over
the
12
months,
ending
the
period
at
0.69%.
Prepayment
risk
remains
elevated
with
mortgage
rates
at
record
lows.
While
prepayments
have
increased,
overall
prepayment
activity
has
been
somewhat
constrained
due
to
elevated
primary
and
secondary
market
spreads.
As
the
economy
recovers,
we
expect
prepayments
to
rise
with
currently
more
than
half
of
the
agency
MBS
universe
having
an
incentive
to
refinance
at
current
rates.
Additionally,
if
the
primary/secondary
spreads
were
to
normalize
to
historical
averages,
almost
all
mortgages
in
the
universe
would
have
an
incentive
to
be
refinanced.
An
increase
in
forbearance
requests
starting
in
March
2020
contributed
to
higher
involuntary
prepayments
and
an
increase
in
overall
prepayment
speeds.
However,
forbearance
requests
have
been
declining
recently,
which
could
lead
to
lower
involuntary
prepayments
in
the
coming
months.
Through
the
end
of
September
2020,
the
Fed
had
purchased
over
$1.1
trillion
of
agency
MBS.
Their
sizable
purchases
of
agency
MBS
should
continue
to
support
the
market,
potentially
limiting
spread
widening
and
keeping
spreads
range
bound.
The
U.S.
housing
sector
was
fundamentally
sound
coming
into
the
most
recent
economic
downturn
and
it
is
our
expectation
that
current
supply
and
demand
forces
remain
supportive
of
the
sector.
Recent
U.S.
housing
market
data
showed
that
activity
continued
at
a
brisk
pace
as
COVID-19
pent-up
demand
fueled
by
historically
low
mortgage
interest
rates
was
met
with
a
dwindling
supply.
The
Fund
maintains
a
conservative,
disciplined
investment
strategy
and
invests
primarily
in
GNMA
mortgage
pass-
throughs,
which
remain
the
only
MBS
that
are
backed
by
Portfolio
Composition
9/30/20
%
of
Total
Net
Assets
Mortgage-Backed
Securities
97.0%
Other
0.4%
Short-Term
Investments
&
Other
Net
Assets
2.6%
1.
Securities
owned
by
the
Fund,
but
not
shares
of
the
Fund,
are
guaranteed
by
the
U.S.
government,
its
agencies
or
instrumentalities
as
to
the
timely
payment
of
principal
and
interest.
The
Fund’s
yield
and
share
price
are
not
guaranteed
and
will
vary
with
market
conditions.
2.
Source:
Morningstar.
The
index
is
unmanaged
and
includes
reinvestment
of
any
income
or
distributions.
It
does
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
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
96
.
Franklin
U.S.
Government
Securities
Fund
32
franklintempleton.com
Annual
Report
the
full
faith
and
credit
of
the
U.S.
government—the
same
guarantee
applicable
to
U.S.
Treasuries.
1
We
believe
our
collateral-intensive
research
approach
can
allow
us
to
uncover
dislocations
across
the
GNMA
markets
and
associated
mispricing
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.
Agency
mortgage-backed
securities
(MBS)
posted
positive
total
returns
but
underperformed
the
strong
performance
similar
duration
U.S.
Treasuries.
Within
the
MBS
sector,
Fannie
Mae
(FNMA)
MBS
was
the
best
performer
with
a
4.59%
total
return,
followed
by
Freddie
Mac
(FHLMC)
MBS
and
Ginnie
Mae
(GNMA)
MBS,
which
returned
4.51%
and
3.86%,
respectively.
Within
the
GNMA
sector,
GNMA
II
2.5%
and
GN
I
4.5%
and
4.0%
coupons
were
the
best
performers,
while
GNMA
I
5.0%
and
GN
II
2.0%
coupons
lagged.
During
the
period,
the
portfolio
retained
a
higher
weighting
to
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
2.5%
and
3.0%
coupons,
while
reducing
exposure
to
GN
II
3.5%
and
4.0%
coupons.
Our
heaviest
allocation
was
in
3.0%
and
3.5%
coupons
at
period-
end,
but
we
remain
underweight
both
coupons
relative
to
the
index.
The
Fund’s
overweight
allocation
to
GN
I
4.0%
through
5.0%
coupons
benefited
performance,
as
did
security
selection
in
GN
II
2.5%,
3.0%
and
4.0%
coupons.
Underweight
allocation
to
GN
II
3.0%
and
4.5%
coupons
were
the
largest
detractors
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.
Paul
Varunok
Neil
Dhruv
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
September
30,
2020,
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.
Performance
Summary
as
of
September
30,
2020
Franklin
U.S.
Government
Securities
Fund
33
franklintempleton.com
Annual
Report
The
performance
tables
and
graphs
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
9/30/20
1
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
The
maximum
is
3.75%
and
the
minimum
is
0%.
Class
A
:
3.75%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
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
.
Share
Class
Cumulative
Total
Return
2
Average
Annual
Total
Return
3
–
A
4,5
1-Year
+3.01%
-0.86%
5-Year
+10.37%
+1.22%
10-Year
+24.35%
+1.81%
Advisor
1-Year
+3.23%
+3.23%
5-Year
+11.32%
+2.17%
10-Year
+26.36%
+2.37%
30-Day
Standardized
Yield
7
Share
Class
Distribution
Rate
6
(with
fee
waiver)
(without
fee
waiver)
A
2.18%
1.82%
1.82%
Advisor
2.51%
2.15%
2.15%
See
page
35
for
Performance
Summary
footnotes.
Franklin
U.S.
Government
Securities
Fund
Performance
Summary
34
franklintempleton.com
Annual
Report
See
page
35
for
Performance
Summary
footnotes.
Total
Return
Index
Comparison
for
a
Hypothetical
$10,000
Investment
1
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
index
includes
reinvestment
of
any
income
or
distributions.
It
differs
from
the
Fund
in
composition
and
does
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
Class
A
(10/1/10–9/30/20)
Advisor
Class
(10/1/10–9/30/20)
Franklin
U.S.
Government
Securities
Fund
Performance
Summary
35
franklintempleton.com
Annual
Report
Each
class
of
shares
is
available
to
certain
eligible
investors
and
has
different
annual
fees
and
expenses,
as
described
in
the
prospectus.
All
investments
involve
risks,
including
loss
of
principal.
The
Fund’s
share
price
and
yield
will
be
affected
by
interest
rate
movements
and
mortgage
prepay-
ments.
Bond
prices
generally
move
in
the
opposite
direction
of
interest
rates.
Thus,
as
the
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.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen. The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
The
Fund
has
a
fee
waiver
associated
with
any
investment
it
makes
in
a
Franklin
Templeton
money
fund
and/or
other
Franklin
Templeton
fund,
contractually
guaranteed
through
1/31/21.
Fund
investment
results
reflect
the
fee
waiver;
without
this
waiver,
the
results
would
have
been
lower.
2.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
3.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
4.
Effective
9/10/18,
Class
A
shares
closed
to
new
investors,
were
renamed
Class
A1
shares,
and
a
new
Class
A
share
with
a
different
expense
structure
became
available.
Class
A
performance
shown
has
been
calculated
as
follows:
(a)
for
periods
prior
to
9/10/18,
a
restated
figure
is
used
based
on
the
Fund’s
Class
A1
performance
that
includes
any
Rule
12b-1
rate
differential
that
exists
between
Class
A1
and
Class
A;
and
(b)
for
periods
after
9/10/18,
actual
Class
A
performance
is
used,
reflecting
all
charges
and
fees
applicable
to
that
class.
5.
Prior
to
3/1/19,
these
shares
were
offered
at
a
higher
initial
sales
charge
of
4.25%,
thus
actual
returns
(with
sales
charges)
would
have
differed.
Average
annual
total
returns
(with
sales
charges)
have
been
restated
to
reflect
the
current
maximum
initial
sales
charge
of
3.75%.
6.
Distribution
rate
is
based
on
an
annualization
of
the
respective
class’s
September
dividend
and
the
maximum
offering
price
(NAV
for
Advisor
Class)
per
share
on
9/30/20.
7.
The
Fund’s
30-day
standardized
yield
is
calculated
over
a
trailing
30-day
period
using
the
yield
to
maturity
on
bonds
and/or
the
dividends
accrued
on
stocks.
It
may
not
equal
the
Fund’s
actual
income
distribution
rate,
which
reflects
the
Fund’s
past
dividends
paid
to
shareholders.
8.
Source:
Morningstar.
Bloomberg
Barclays
U.S.
Government
Intermediate
Index,
the
intermediate
component
of
the
Bloomberg
Barclays
U.S.
Government
Index,
which
includes
public
obligations
of
the
U.S.
Treasury
with
at
least
one
year
to
final
maturity
and
publicly
issued
debt
of
U.S.
government
agencies,
quasi-federal
corporations,
and
corporate
or
foreign
debt
guaranteed
by
the
U.S.
government.
9.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(10/1/19–9/30/20)
Share
Class
Net
Investment
Income
A
$0.1608
A1
$0.1660
C
$0.1354
R
$0.1441
R6
$0.1815
Advisor
$0.1749
Total
Annual
Operating
Expenses
9
Share
Class
With
Fee
Waiver
Without
Fee
Waiver
A
0.89%
0.90%
Advisor
0.64%
0.65%
Your
Fund’s
Expenses
Franklin
U.S.
Government
Securities
Fund
36
franklintempleton.com
Annual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value”
for
each
class
of
shares.
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
for
your
class
of
shares
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
for
the
class
of
shares
you
hold
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
183/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
4/1/20
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$1,002.84
$4.42
$1,020.59
$4.45
0.88%
A1
$1,000
$1,001.67
$3.86
$1,021.15
$3.89
0.77%
C
$1,000
$999.11
$6.36
$1,018.64
$6.42
1.27%
R
$1,000
$1,001.42
$5.61
$1,019.40
$5.66
1.12%
R6
$1,000
$1,004.49
$2.63
$1,022.37
$2.66
0.53%
Advisor
$1,000
$1,002.39
$3.11
$1,021.90
$3.14
0.62%
37
franklintempleton.com
Annual
Report
Franklin
Utilities
Fund
This
annual
report
for
Franklin
Utilities
Fund
covers
the
fiscal
year
ended
September
30,
2020
.
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
the
securities
of
public
utility
companies.
These
are
companies
that
provide
electricity,
natural
gas,
water,
and
communications
services
to
the
public
and
companies
that
provide
services
to
public
utilities
companies.
The
Fund
concentrates
(invests
more
than
25%
of
its
total
assets)
in
companies
operating
in
the
utilities
industry.
The
Fund
invests
primarily
in
equity
securities,
which
consist
mainly
of
common
stocks.
Performance
Overview
The
Fund’s
Class
A
shares
posted
a
-8.68%
cumulative
total
return
for
the
12
months
under
review.
In
comparison,
the
S&P
500
Utilities
Index,
which
measures
the
performance
of
all
utilities
stocks
in
the
S&P
500,
posted
a
-4.97%
total
return
1
and
the
Standard
&
Poor’s
500
Index
(S&P
500),
which
is
a
broad
measure
of
U.S.
stock
performance,
posted
a
+15.15%
total
return.
You
can
find
the
Fund’s
long-term
performance
data
in
the
Performance
Summary
beginning
on
page
39
.
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
.
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
seek
to
invest
in
companies
producing
a
high
percentage
of
earnings
from
their
regulated
operations.
Manager’s
Discussion
During
the
one
year
under
review,
NextEra
was
a
leading
contributor
to
fund
performance.
The
clean
energy
company
reported
resilient
earnings
supported
by
ongoing
progress
in
its
renewable-power
construction
projects
and
the
deeper
integration
of
a
recent
acquisition,
pushing
the
cost
structure
of
that
business
lower
and,
thus,
profitability
higher.
Among
the
Fund’s
other
notable
contributors
were
water
and
waste
services
provider
American
Water
Works
and
renewable
energy
company
Clearway
Energy.
American
Water
Works
is
a
top-quality
utility
that
generates
more
than
80%
of
its
total
revenue
from
regulated
assets.
Despite
the
COVID-19
uncertainty,
demand
for
water
services
remained
strong
as
people
still
need
access
to
clean
water.
Clearway
owns
and
operates
a
portfolio
of
clean
power-generating
assets
including
wind,
solar,
and
natural
gas
facilities
and
district
energy
systems.
It
sells
the
electricity
produced
by
its
generation
facilities
as
well
as
the
warm
and
chilled
air
produced
by
its
district
energy
systems
to
utilities
and
other
end
users
under
long
term,
fixed-rate
contracts.
Those
agreements
provide
the
company
with
relatively
predictable
cash
flow,
which
gives
Clearway
Energy
the
money
to
pay
a
solid
dividend
and
expand
its
clean
energy
portfolio.
Portfolio
Composition
9/30/20
%
of
Total
Net
Assets
Electric
Utilities
57.1%
Multi-Utilities
32.3%
Water
Utilities
2.9%
Gas
Utilities
2.8%
Oil,
Gas
&
Consumable
Fuels
2.7%
Independent
Power
and
Renewable
Electricity
Producers
1.1%
Other
0.6%
Short-Term
Investments
&
Other
Net
Assets
0.5%
1.
Source:
Morningstar.
The
indexes
are
unmanaged
and
include
reinvestment
of
any
income
or
distributions.
They
do
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
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
105
.
Franklin
Utilities
Fund
38
franklintempleton.com
Annual
Report
In
contrast,
the
investigation
of
FirstEnergy
for
corruption
and
racketeering
activities
weighed
on
the
shares
of
the
electric
utility
company.
Edison
International,
a
renewable
energy
company
that
generates
and
distributes
electric
power,
had
its
shares
impacted
by
ongoing
litigation
of
the
2017–2018
Southern
California
wildfires.
Investor
concerns
later
subsided
as
preliminary
evidence
showed
the
company’s
equipment
likely
was
not
the
source
of
the
wildfires.
Elsewhere,
Exelon,
a
utility
services
holding
company
that
engages
in
the
energy
generation,
power
marketing,
and
energy
delivery
business,
detracted
from
Fund
results
as
a
federal
investigation
into
lobbying
practices
impacted
earnings.
Thank
you
for
your
continued
participation
in
Franklin
Utilities
Fund.
We
look
forward
to
serving
your
future
investment
needs.
John
C.
Kohli,
CFA
J.
Blair
Schmicker,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
September
30,
2020,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
Top
10
Holdings
9/30/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
aa
NextEra
Energy,
Inc.
11.4%
Electric
Utilities
,
United
States
Dominion
Energy,
Inc.
5.2%
Multi-Utilities
,
United
States
CMS
Energy
Corp.
5.1%
Duke
Energy
Corp.
4.2%
Electric
Utilities
,
United
States
American
Electric
Power
Co.,
Inc.
4.0%
Exelon
Corp.
4.0%
Sempra
Energy
3.9%
Multi-Utilities
,
United
States
Southern
Co.
(The)
3.7%
Electric
Utilities
,
United
States
Entergy
Corp.
3.6%
DTE
Energy
Co.
3.6%
Multi-Utilities
,
United
States
Performance
Summary
as
of
September
30,
2020
Franklin
Utilities
Fund
39
franklintempleton.com
Annual
Report
The
performance
tables
and
graphs
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
9/30/20
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
The
maximum
is
3.75%
and
the
minimum
is
0%.
Class
A
:
3.75%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
A
3,4
1-Year
-8.68%
-12.11%
5-Year
+54.38%
+8.24%
10-Year
+162.64%
+9.72%
Advisor
1-Year
-8.51%
-8.51%
5-Year
+55.86%
+9.28%
10-Year
+167.32%
+10.33%
Share
Class
Distribution
Rate
5
30-Day
Standardized
Yield
6
A
2.24%
2.28%
Advisor
2.56%
2.61%
See
page
41
for
Performance
Summary
footnotes.
Franklin
Utilities
Fund
Performance
Summary
40
franklintempleton.com
Annual
Report
See
page
41
for
Performance
Summary
footnotes.
Total
Return
Index
Comparison
for
a
Hypothetical
$10,000
Investment
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
indexes
include
reinvestment
of
any
income
or
distributions.
They
differ
from
the
Fund
in
composition
and
do
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
Class
A
(10/1/10–9/30/20)
Advisor
Class
(10/1/10–9/30/20)
Franklin
Utilities
Fund
Performance
Summary
41
franklintempleton.com
Annual
Report
Each
class
of
shares
is
available
to
certain
eligible
investors
and
has
different
annual
fees
and
expenses,
as
described
in
the
prospectus.
All
investments
involve
risks,
including
loss
of
principal.
Investing
in
a
Fund
concentrating
in
the
utilities
sector
involves
special
risks,
including
increased
susceptibility
to
adverse
economic
and
regulatory
developments
affecting
the
sector.
Stocks
historically
have
outperformed
other
asset
classes
over
the
long
term,
but
tend
to
fluctuate
more
dramatically
over
the
short
term.
Securities
issued
by
utility
companies
have
been
historically
sensitive
to
interest
rate
changes.
When
interest
rates
fall,
utility
securities
prices,
and
thus
a
utilities
Fund’s
share
price,
tend
to
rise;
when
interest
rates
rise,
their
prices
generally
fall.
Unexpect-
ed
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen. The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
2.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
3.
Effective
9/10/18,
Class
A
shares
closed
to
new
investors,
were
renamed
Class
A1
shares,
and
a
new
Class
A
share
with
a
different
expense
structure
became
available.
Class
A
performance
shown
has
been
calculated
as
follows:
(a)
for
periods
prior
to
9/10/18,
a
restated
figure
is
used
based
on
the
Fund’s
Class
A1
performance
that
includes
any
Rule
12b-1
rate
differential
that
exists
between
Class
A1
and
Class
A;
and
(b)
for
periods
after
9/10/18,
actual
Class
A
performance
is
used,
reflecting
all
charges
and
fees
applicable
to
that
class.
4.
Prior
to
3/1/19,
these
shares
were
offered
at
a
higher
initial
sales
charge
of
4.25%,
thus
actual
returns
(with
sales
charges)
would
have
differed.
Average
annual
total
returns
(with
sales
charges)
have
been
restated
to
reflect
the
current
maximum
initial
sales
charge
of
3.75%.
5.
Distribution
rate
is
based
on
an
annualization
of
the
respective
class’s
current
quarterly
dividend
and
the
maximum
offering
price
(NAV
for
Advisor
Class)
per
share
on
9/30/20.
6.
The
Fund’s
30-day
standardized
yield
is
calculated
over
a
trailing
30-day
period
using
the
yield
to
maturity
on
bonds
and/or
the
dividends
accrued
on
stocks.
It
may
not
equal
the
Fund’s
actual
income
distribution
rate,
which
reflects
the
Fund’s
past
dividends
paid
to
shareholders.
7.
Morningstar.
The
S&P
500
is
a
market
capitalization-weighted
index
of
500
stocks
designed
to
measure
total
U.S.
equity
market
performance.
The
S&P
500
Utilities
Index
is
market
capitalization
weighted
and
consists
of
all
utility
stocks
in
the
S&P
500.
8.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Net
Asset
Value
Share
Class
(Symbol)
9/30/20
9/30/19
Change
A
(FKUQX)
$19.76
$22.53
-$2.77
A1
(FKUTX)
$19.77
$22.54
-$2.77
C
(FRUSX)
$19.65
$22.42
-$2.77
R
(FRURX)
$19.68
$22.45
-$2.77
R6
(FUFRX)
$19.93
$22.73
-$2.80
Advisor
(FRUAX)
$19.93
$22.73
-$2.80
Distributions
(10/1/19–9/30/20)
Share
Class
Net
Investment
Income
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Total
A
$0.5043
$0.0293
$0.3160
$0.8496
A1
$0.5259
$0.0293
$0.3160
$0.8712
C
$0.4196
$0.0293
$0.3160
$0.7649
R
$0.4513
$0.0293
$0.3160
$0.7966
R6
$0.5744
$0.0293
$0.3160
$0.9197
Advisor
$0.5578
$0.0293
$0.3160
$0.9031
Total
Annual
Operating
Expenses
8
Share
Class
A
0.83%
Advisor
0.58%
Your
Fund’s
Expenses
Franklin
Utilities
Fund
42
franklintempleton.com
Annual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value”
for
each
class
of
shares.
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
for
your
class
of
shares
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
for
the
class
of
shares
you
hold
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
183/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
4/1/20
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
Ending
Account
Value
9/30/20
Expenses
Paid
During
Period
4/1/20–9/30/20
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$1,069.49
$4.36
$1,020.79
$4.25
0.84%
A1
$1,000
$1,070.00
$3.86
$1,021.27
$3.77
0.75%
C
$1,000
$1,067.20
$6.44
$1,018.77
$6.29
1.25%
R
$1,000
$1,067.89
$5.66
$1,019.53
$5.53
1.09%
R6
$1,000
$1,071.18
$2.59
$1,022.50
$2.53
0.50
%
Advisor
$1,000
$1,070.76
$3.08
$1,022.03
$3.00
0.59%
Franklin
Custodian
Funds
Financial
Highlights
Franklin
DynaTech
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
43
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$82.84
$81.16
$63.10
$52.05
$46.04
Income
from
investment
operations
a
:
Net
investment
income
(loss)
b
....................
(0.38)
(0.20)
(0.23)
(0.18)
(0.14)
Net
realized
and
unrealized
gains
(losses)
...........
39.44
3.79
19.45
12.92
7.35
Total
from
investment
operations
....................
39.06
3.59
19.22
12.74
7.21
Less
distributions
from:
Net
realized
gains
.............................
(0.66)
(1.91)
(1.16)
(1.69)
(1.20)
Net
asset
value,
end
of
year
.......................
$121.24
$82.84
$81.16
$63.10
$52.05
Total
return
c
...................................
47.47%
4.77%
30.88%
25.67%
15.73%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.85%
0.86%
0.86%
0.92%
0.91%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
0.84%
d
0.85%
d
0.86%
d,e
0.91%
d
0.90%
Net
investment
income
(loss)
......................
(0.39)%
(0.26)%
(0.32)%
(0.33)%
(0.30)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$8,378,574
$4,504,434
$3,741,562
$2,498,393
$2,123,082
Portfolio
turnover
rate
............................
13.82%
20.01%
17.22%
19.85%
22.42%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
DynaTech
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
44
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$68.60
$68.07
$53.49
$44.71
$40.00
Income
from
investment
operations
a
:
Net
investment
income
(loss)
b
....................
(0.91)
(0.66)
(0.65)
(0.50)
(0.43)
Net
realized
and
unrealized
gains
(losses)
...........
32.46
3.10
16.39
10.97
6.34
Total
from
investment
operations
....................
31.55
2.44
15.74
10.47
5.91
Less
distributions
from:
Net
realized
gains
.............................
(0.66)
(1.91)
(1.16)
(1.69)
(1.20)
Net
asset
value,
end
of
year
.......................
$99.49
$68.60
$68.07
$53.49
$44.71
Total
return
c
...................................
46.37%
3.97%
29.93%
24.72%
14.86%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.60%
1.61%
1.61%
1.67%
1.66%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
1.59%
d
1.60%
d
1.61%
d,e
1.66%
d
1.65%
Net
investment
income
(loss)
......................
(1.14)%
(1.01)%
(1.07)%
(1.08)%
(1.05)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$1,095,702
$597,927
$611,221
$374,502
$318,896
Portfolio
turnover
rate
............................
13.82%
20.01%
17.22%
19.85%
22.42%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
DynaTech
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
45
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$80.26
$78.88
$61.51
$50.90
$45.16
Income
from
investment
operations
a
:
Net
investment
income
(loss)
b
....................
(0.60)
(0.39)
(0.40)
(0.31)
(0.26)
Net
realized
and
unrealized
gains
(losses)
...........
38.13
3.68
18.93
12.61
7.20
Total
from
investment
operations
....................
37.53
3.29
18.53
12.30
6.94
Less
distributions
from:
Net
realized
gains
.............................
(0.66)
(1.91)
(1.16)
(1.69)
(1.20)
Net
asset
value,
end
of
year
.......................
$117.13
$80.26
$78.88
$61.51
$50.90
Total
return
....................................
47.09%
4.52%
30.57%
25.36%
15.43%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.10%
1.11%
1.11%
1.17%
1.16%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
1.09%
c
1.10%
c
1.11%
c,d
1.16%
c
1.15%
Net
investment
income
(loss)
......................
(0.63)%
(0.51)%
(0.57)%
(0.58)%
(0.55)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$221,041
$123,721
$95,925
$47,860
$38,862
Portfolio
turnover
rate
............................
13.82%
20.01%
17.22%
19.85%
22.42%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
DynaTech
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
46
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$86.46
$84.31
$65.28
$53.56
$47.15
Income
from
investment
operations
a
:
Net
investment
income
(loss)
b
....................
(0.05)
0.07
0.04
0.06
0.06
Net
realized
and
unrealized
gains
(losses)
...........
41.26
3.99
20.15
13.35
7.55
Total
from
investment
operations
....................
41.21
4.06
20.19
13.41
7.61
Less
distributions
from:
Net
realized
gains
.............................
(0.66)
(1.91)
(1.16)
(1.69)
(1.20)
Net
asset
value,
end
of
year
.......................
$127.01
$86.46
$84.31
$65.28
$53.56
Total
return
....................................
47.97%
5.15%
31.38%
26.17%
16.21%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.50%
0.51%
0.50%
0.49%
0.49%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
0.50%
c,d
0.50%
c
0.50%
c,d
0.48%
c
0.48%
Net
investment
income
(loss)
......................
(0.05)%
0.09%
0.04%
0.10%
0.12%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$5,817,028
$2,473,942
$1,688,595
$457,846
$359,505
Portfolio
turnover
rate
............................
13.82%
20.01%
17.22%
19.85%
22.42%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
DynaTech
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
47
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$85.58
$83.56
$64.78
$53.25
$46.96
Income
from
investment
operations
a
:
Net
investment
income
(loss)
b
....................
(0.15)
(0.01)
(0.06)
(0.04)
(0.03)
Net
realized
and
unrealized
gains
(losses)
...........
40.81
3.94
20.00
13.26
7.52
Total
from
investment
operations
....................
40.66
3.93
19.94
13.22
7.49
Less
distributions
from:
Net
realized
gains
.............................
(0.66)
(1.91)
(1.16)
(1.69)
(1.20)
Net
asset
value,
end
of
year
.......................
$125.58
$85.58
$83.56
$64.78
$53.25
Total
return
....................................
47.83%
5.04%
31.21%
25.98%
16.02%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.60%
0.61%
0.61%
0.67%
0.66%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
0.59%
c
0.60%
c
0.61%
c,d
0.66%
c
0.65%
Net
investment
income
(loss)
......................
(0.15)%
(0.01)%
(0.07)%
(0.08)%
(0.05)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$2,884,489
$1,154,604
$680,066
$712,762
$203,443
Portfolio
turnover
rate
............................
13.82%
20.01%
17.22%
19.85%
22.42%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Statement
of
Investments,
September
30,
2020
Franklin
DynaTech
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
48
a
Country
Shares
a
Value
a
Common
Stocks
98.5%
Aerospace
&
Defense
0.3%
a
Axon
Enterprise,
Inc.
...................................
United
States
300,000
$
27,210,000
a
Mercury
Systems,
Inc.
..................................
United
States
400,000
30,984,000
58,194,000
Automobiles
0.8%
a
Tesla,
Inc.
...........................................
United
States
365,000
156,588,650
a
Biotechnology
2.2%
a,b
Applied
Molecular
Transport,
Inc.
.........................
United
States
622,200
19,798,404
a
Argenx
SE
..........................................
Netherlands
300,000
79,233,053
a
CRISPR
Therapeutics
AG
...............................
Switzerland
500,000
41,820,000
a
Deciphera
Pharmaceuticals,
Inc.
..........................
United
States
200,000
10,260,000
a
Dyne
Therapeutics,
Inc.
................................
United
States
1,237,200
24,979,068
a,b
Invitae
Corp.
.........................................
United
States
350,000
15,172,500
a
Iovance
Biotherapeutics
,
Inc.
.............................
United
States
2,000,000
65,840,000
a,b
Legend
Biotech
Corp.,
ADR
.............................
United
States
200,000
6,174,000
a
Natera
,
Inc.
..........................................
United
States
350,000
25,284,000
a
Neurocrine
Biosciences,
Inc.
.............................
United
States
625,000
60,100,000
a,b
Novavax
,
Inc.
........................................
United
States
200,000
21,670,000
a
PTC
Therapeutics,
Inc.
.................................
United
States
300,000
14,025,000
a,b
Repare
Therapeutics,
Inc.
...............................
Canada
407,900
12,551,083
396,907,108
Capital
Markets
2.3%
MarketAxess
Holdings,
Inc.
..............................
United
States
10,000
4,815,900
Moody's
Corp.
........................................
United
States
350,000
101,447,500
MSCI,
Inc.
...........................................
United
States
555,000
198,012,900
Tradeweb
Markets,
Inc.,
A
...............................
United
States
2,000,000
116,000,000
420,276,300
Diversified
Consumer
Services
0.4%
a
Chegg
,
Inc.
..........................................
United
States
1,050,000
75,012,000
a
Diversified
Financial
Services
0.1%
a
Nuvei
Corp.
.........................................
Canada
272,900
11,521,838
a
Electric
Utilities
0.7%
NextEra
Energy,
Inc.
...................................
United
States
435,000
120,738,600
Electronic
Equipment,
Instruments
&
Components
1.0%
Amphenol
Corp.,
A
....................................
United
States
600,000
64,962,000
Keyence
Corp.
.......................................
Japan
130,000
60,755,027
a
Keysight
Technologies,
Inc.
..............................
United
States
650,000
64,207,000
189,924,027
Entertainment
3.1%
Activision
Blizzard,
Inc.
.................................
United
States
150,000
12,142,500
a
Netflix,
Inc.
..........................................
United
States
175,000
87,505,250
Nintendo
Co.
Ltd.
.....................................
Japan
50,000
28,326,505
a
Sea
Ltd.,
ADR
........................................
Taiwan
2,500,000
385,100,000
a
Spotify
Technology
SA
..................................
United
States
260,000
63,068,200
576,142,455
Equity
Real
Estate
Investment
Trusts
(REITs)
3.2%
American
Tower
Corp.
..................................
United
States
500,000
120,865,000
Crown
Castle
International
Corp.
..........................
United
States
500,000
83,250,000
Digital
Realty
Trust,
Inc.
................................
United
States
550,000
80,718,000
Equinix
,
Inc.
.........................................
United
States
200,000
152,026,000
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
DynaTech
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
49
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
Equity
Real
Estate
Investment
Trusts
(REITs)
(continued)
SBA
Communications
Corp.
.............................
United
States
500,000
$
159,240,000
596,099,000
Health
Care
Equipment
&
Supplies
7.3%
Abbott
Laboratories
....................................
United
States
1,500,000
163,245,000
a
CryoPort
,
Inc.
........................................
United
States
50,000
2,370,000
Danaher
Corp.
.......................................
United
States
1,200,000
258,396,000
a
DexCom
,
Inc.
........................................
United
States
200,000
82,446,000
a
Edwards
Lifesciences
Corp.
.............................
United
States
1,350,000
107,757,000
a
IDEXX
Laboratories,
Inc.
................................
United
States
500,000
196,555,000
a,b
Inari
Medical,
Inc.
.....................................
United
States
500,000
34,510,000
a
Intuitive
Surgical,
Inc.
..................................
United
States
200,000
141,908,000
a
iRhythm
Technologies,
Inc.
..............................
United
States
300,000
71,433,000
ResMed
,
Inc.
........................................
United
States
550,000
94,286,500
STERIS
plc
..........................................
United
States
500,000
88,095,000
Stryker
Corp.
........................................
United
States
500,000
104,185,000
1,345,186,500
Health
Care
Providers
&
Services
0.6%
a
Guardant
Health,
Inc.
..................................
United
States
400,000
44,712,000
UnitedHealth
Group,
Inc.
................................
United
States
200,000
62,354,000
107,066,000
Health
Care
Technology
3.1%
a,b
Accolade,
Inc.
........................................
United
States
52,500
2,040,675
a
American
Well
Corp.,
A
.................................
United
States
47,700
1,413,828
a,b
GoodRx
Holdings,
Inc.,
A
...............................
United
States
50,000
2,780,000
a
Inspire
Medical
Systems,
Inc.
............................
United
States
750,000
96,787,500
a
Livongo
Health,
Inc.
...................................
United
States
810,000
113,440,500
a,b
Teladoc
Health,
Inc.
...................................
United
States
350,000
76,734,000
a
Veeva
Systems,
Inc.,
A
.................................
United
States
1,000,000
281,190,000
574,386,503
Industrial
Conglomerates
0.7%
Roper
Technologies,
Inc.
................................
United
States
350,000
138,288,500
Insurance
0.0%
†
a,b
Lemonade,
Inc.
.......................................
United
States
15,100
750,772
a
Interactive
Media
&
Services
6.4%
a
Adevinta
ASA
........................................
France
1,000,000
17,179,479
a
Alphabet,
Inc.,
A
......................................
United
States
200,000
293,120,000
a
Alphabet,
Inc.,
C
......................................
United
States
62,170
91,365,032
a
Facebook,
Inc.,
A
.....................................
United
States
1,500,000
392,850,000
a
Match
Group,
Inc.
.....................................
United
States
900,000
99,585,000
a
Pinterest,
Inc.,
A
......................................
United
States
100,000
4,151,000
Tencent
Holdings
Ltd.
..................................
China
3,250,000
219,517,434
a,b
ZoomInfo
Technologies,
Inc.,
A
...........................
United
States
1,350,000
58,036,500
1,175,804,445
Internet
&
Direct
Marketing
Retail
13.6%
a
Alibaba
Group
Holding
Ltd.,
ADR
.........................
China
1,050,000
308,679,000
a
Amazon.com,
Inc.
.....................................
United
States
450,000
1,416,928,500
a
Booking
Holdings,
Inc.
.................................
United
States
35,000
59,873,800
a,b
Chewy,
Inc.,
A
........................................
United
States
1,650,000
90,469,500
a,c
Delivery
Hero
SE,
144A,
Reg
S
...........................
Germany
700,000
80,300,370
a
Fiverr
International
Ltd.
.................................
Israel
1,000,000
138,980,000
a
MercadoLibre
,
Inc.
....................................
Argentina
300,000
324,744,000
a
THG
Holdings
Ltd.
....................................
United
Kingdom
2,770,400
21,385,196
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
DynaTech
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
50
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
Internet
&
Direct
Marketing
Retail
(continued)
a,c
Zalando
SE,
144A,
Reg
S
...............................
Germany
650,000
$
60,716,489
2,502,076,855
IT
Services
15.2%
a,c
Adyen
NV,
144A,
Reg
S
................................
Netherlands
200,000
368,818,179
a
Afterpay
Ltd.
.........................................
Australia
200,000
11,783,987
a
EPAM
Systems,
Inc.
...................................
United
States
200,000
64,656,000
Jack
Henry
&
Associates,
Inc.
............................
United
States
300,000
48,777,000
a
Kingsoft
Cloud
Holdings
Ltd.,
ADR
........................
China
69,000
2,037,570
Mastercard
,
Inc.,
A
....................................
United
States
1,000,000
338,170,000
a
MongoDB,
Inc.
.......................................
United
States
600,000
138,906,000
a
Okta
,
Inc.
...........................................
United
States
810,000
173,218,500
a
PayPal
Holdings,
Inc.
..................................
United
States
2,000,000
394,060,000
a
Shift4
Payments,
Inc.,
A
................................
United
States
350,000
16,926,000
a
Shopify,
Inc.,
A
.......................................
Canada
505,000
516,372,644
a,b
Snowflake,
Inc.,
A
.....................................
United
States
201,700
50,626,700
a
Square,
Inc.,
A
.......................................
United
States
825,000
134,103,750
a
Twilio
,
Inc.,
A
.........................................
United
States
715,000
176,669,350
Visa,
Inc.,
A
..........................................
United
States
1,300,000
259,961,000
a
Wix.com
Ltd.
.........................................
Israel
415,000
105,762,750
2,800,849,430
Life
Sciences
Tools
&
Services
4.2%
a
10X
Genomics,
Inc.,
A
..................................
United
States
350,000
43,638,000
a,b
Berkeley
Lights,
Inc.
...................................
United
States
235,000
17,944,600
a,b
Evotec
SE
...........................................
Germany
500,000
13,179,369
a
Illumina,
Inc.
.........................................
United
States
350,000
108,178,000
Lonza
Group
AG
......................................
Switzerland
215,000
132,648,140
a
Medpace
Holdings,
Inc.
.................................
United
States
90,000
10,057,500
a
QIAGEN
NV
.........................................
United
States
65,000
3,396,900
a
Repligen
Corp.
.......................................
United
States
650,000
95,901,000
Thermo
Fisher
Scientific,
Inc.
............................
United
States
500,000
220,760,000
a,c
Wuxi
Biologics
Cayman,
Inc.,
144A,
Reg
S
..................
China
5,000,000
122,541,134
768,244,643
Machinery
0.1%
Fortive
Corp.
.........................................
United
States
200,000
15,242,000
Media
1.0%
a
Charter
Communications,
Inc.,
A
..........................
United
States
130,000
81,164,200
a
Liberty
Broadband
Corp.,
A
..............................
United
States
750,000
106,357,500
187,521,700
Pharmaceuticals
1.8%
AstraZeneca
plc
......................................
United
Kingdom
1,500,000
163,903,053
a
Catalent
,
Inc.
........................................
United
States
950,000
81,377,000
Zoetis,
Inc.
..........................................
United
States
500,000
82,685,000
327,965,053
Professional
Services
1.6%
a
CoStar
Group,
Inc.
....................................
United
States
200,000
169,702,000
a
Dun
&
Bradstreet
Holdings,
Inc.
...........................
United
States
1,000,000
25,660,000
Verisk
Analytics,
Inc.
...................................
United
States
500,000
92,655,000
288,017,000
Semiconductors
&
Semiconductor
Equipment
5.8%
Analog
Devices,
Inc.
...................................
United
States
500,000
58,370,000
ASML
Holding
NV,
NYRS
...............................
Netherlands
365,000
134,783,550
Entegris
,
Inc.
.........................................
United
States
350,000
26,019,000
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
DynaTech
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
51
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
Semiconductors
&
Semiconductor
Equipment
(continued)
Intel
Corp.
...........................................
United
States
800,000
$
41,424,000
KLA
Corp.
...........................................
United
States
305,000
59,090,700
Lam
Research
Corp.
...................................
United
States
450,000
149,287,500
Monolithic
Power
Systems,
Inc.
...........................
United
States
450,000
125,824,500
NVIDIA
Corp.
........................................
United
States
650,000
351,793,000
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.,
ADR
...........
Taiwan
55,000
4,458,850
Teradyne,
Inc.
........................................
United
States
325,000
25,824,500
Xilinx,
Inc.
...........................................
United
States
900,000
93,816,000
1,070,691,600
Software
21.5%
a
Adobe,
Inc.
..........................................
United
States
575,000
281,997,250
a
ANSYS,
Inc.
.........................................
United
States
400,000
130,892,000
a
Asana,
Inc.,
A
........................................
United
States
519,700
14,967,360
a
Aspen
Technology,
Inc.
.................................
United
States
300,000
37,977,000
a
Atlassian
Corp.
plc,
A
..................................
United
States
1,000,000
181,790,000
a
Autodesk,
Inc.
........................................
United
States
500,000
115,505,000
a
Avalara,
Inc.
.........................................
United
States
725,000
92,321,500
a
Bentley
Systems,
Inc.,
B
................................
United
States
149,400
4,691,160
a
Bill.com
Holdings,
Inc.
..................................
United
States
525,000
52,662,750
a
Cadence
Design
Systems,
Inc.
...........................
United
States
1,000,000
106,630,000
a
Cerence
,
Inc.
........................................
United
States
800,000
39,096,000
a
Coupa
Software,
Inc.
...................................
United
States
635,000
174,142,400
a
Crowdstrike
Holdings,
Inc.,
A
.............................
United
States
325,000
44,629,000
a
Datadog
,
Inc.,
A
......................................
United
States
800,000
81,728,000
a
DocuSign,
Inc.
.......................................
United
States
1,100,000
236,764,000
a
Duck
Creek
Technologies,
Inc.
...........................
United
States
67,300
3,057,439
a
Globant
SA
..........................................
Argentina
100,000
17,922,000
a
HubSpot
,
Inc.
........................................
United
States
550,000
160,726,500
Intuit,
Inc.
...........................................
United
States
500,000
163,105,000
a
JFrog
Ltd.
...........................................
Israel
10,000
846,500
Microsoft
Corp.
.......................................
United
States
3,000,000
630,990,000
a,b
nCino
,
Inc.
United
States
93,300
7,434,144
a
Outset
Medical,
Inc.
...................................
United
States
103,500
5,175,000
a
Q2
Holdings,
Inc.
.....................................
United
States
1,000,000
91,260,000
a
RingCentral,
Inc.,
A
....................................
United
States
450,000
123,574,500
a
salesforce.com,
Inc.
...................................
United
States
1,000,000
251,320,000
a
ServiceNow
,
Inc.
......................................
United
States
1,000,000
485,000,000
a
Synopsys,
Inc.
.......................................
United
States
775,000
165,834,500
a
Tyler
Technologies,
Inc.
.................................
United
States
210,000
73,197,600
a,b
Vertex,
Inc.,
A
........................................
United
States
160,400
3,689,200
a
Workday,
Inc.,
A
......................................
United
States
500,000
107,565,000
a
Xero
Ltd.
............................................
New
Zealand
130,000
9,478,890
a
Zendesk
,
Inc.
........................................
United
States
500,000
51,460,000
3,947,429,693
Specialty
Retail
0.3%
a
Carvana
Co.
.........................................
United
States
250,000
55,765,000
a
Vroom,
Inc.
..........................................
United
States
100,000
5,178,000
60,943,000
Technology
Hardware,
Storage
&
Peripherals
1.0%
Apple,
Inc.
..........................................
United
States
1,600,000
185,296,000
Textiles,
Apparel
&
Luxury
Goods
0.2%
NIKE,
Inc.,
B
.........................................
United
States
250,000
31,385,000
Total
Common
Stocks
(Cost
$9,325,104,406)
....................................
18,128,548,672
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
DynaTech
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
52
s
Short
Term
Investments
2.3%
a
a
Country
Shares
a
Value
a
Money
Market
Funds
1.8%
d,e
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
........
United
States
323,931,348
$
323,931,348
Total
Money
Market
Funds
(Cost
$323,931,348)
.................................
323,931,348
f
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
0.5%
a
a
a
a
a
Money
Market
Funds
0.4%
d,e
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
........
United
States
72,237,000
72,237,000
Principal
Amount
*
Repurchase
Agreements
0.1%
g
Joint
Repurchase
Agreement,
BNP
Paribas
SA,
0.06%,
10/01/20
(Maturity
Value
$11,739,749)
Collateralized
by
U.S.
Treasury
Bond,
Strip,
8/15/25;
and
U.S.
Treasury
Note,
Index
Linked,
0.375%,
7/15/23
(valued
at
$11,974,544)
.......................................
11,739,729
11,739,729
g
Joint
Repurchase
Agreement,
J.P.
Morgan
Securities
LLC,
0.06%,
10/01/20
(Maturity
Value
$7,087,038)
Collateralized
by
U.S.
Treasury
Bond,
Strip,
7/15/22;
and
U.S.
Treasury
Note,
Index
Linked,
0.125%,
1/15/23
(valued
at
$7,228,767)
........................................
7,087,026
7,087,026
Total
Repurchase
Agreements
(Cost
$18,826,755)
.............................................
18,826,755
Total
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
(Cost
$91,063,755)
...........................................................
91,063,755
Total
Short
Term
Investments
(Cost
$414,995,103
)
...............................
414,995,103
a
Total
Investments
(Cost
$9,740,099,509)
100.8%
................................
$18,543,543,775
Other
Assets,
less
Liabilities
(0.8)%
...........................................
(146,709,565)
Net
Assets
100.0%
...........................................................
$18,396,834,210
See
abbreviations
on
page
146
.
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
Non-income
producing.
b
A
portion
or
all
of
the
security
is
on
loan
at
September
30,
2020.
See
Note
1(h)
c
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
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.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
September
30,
2020,
the
aggregate
value
of
these
securities
was
$632,376,172,
representing
3.4%
of
net
assets.
d
See
Note
3(f)
regarding
investments
in
affiliated
management
investment
companies.
e
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
f
See
Note
1(h)
regarding
securities
on
loan.
g
See
Note
1(c)
regarding
joint
repurchase
agreement.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Focused
Growth
Fund
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
53
a
Year
Ended
September
30,
2020
a
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
.....................................................................
$20.16
Income
from
investment
operations
b
:
Net
investment
(loss)
c
............................................................................
(0.10)
Net
realized
and
unrealized
gains
(losses)
.............................................................
4.99
Total
from
investment
operations
......................................................................
4.89
Net
asset
value,
end
of
year
.........................................................................
$25.05
Total
return
d
.....................................................................................
24.26%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
........................................................
1.81%
Expenses
net
of
waiver
and
payments
by
affiliates
.........................................................
1.10%
Net
investment
(loss)
..............................................................................
(0.72)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.......................................................................
$26,793
Portfolio
turnover
rate
..............................................................................
33.93%
a
For
the
period
February
14,
2020
(effective
date)
to
September
30,
2020.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Focused
Growth
Fund
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Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
54
a
Year
Ended
September
30,
2020
a
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
.....................................................................
$20.16
Income
from
investment
operations
b
:
Net
investment
(loss)
c
............................................................................
(0.21)
Net
realized
and
unrealized
gains
(losses)
.............................................................
4.99
Total
from
investment
operations
......................................................................
4.78
Net
asset
value,
end
of
year
.........................................................................
$24.94
Total
return
d
.....................................................................................
23.71%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
........................................................
2.56%
Expenses
net
of
waiver
and
payments
by
affiliates
.........................................................
1.85%
Net
investment
(loss)
..............................................................................
(1.47)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.......................................................................
$3,931
Portfolio
turnover
rate
..............................................................................
33.93%
a
For
the
period
February
14,
2020
(effective
date)
to
September
30,
2020.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Focused
Growth
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
55
a
Year
Ended
September
30,
2020
a
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
.....................................................................
$20.16
Income
from
investment
operations
b
:
Net
investment
(loss)
c
............................................................................
(0.11)
Net
realized
and
unrealized
gains
(losses)
.............................................................
5.01
Total
from
investment
operations
......................................................................
4.90
Net
asset
value,
end
of
year
.........................................................................
$25.06
Total
return
d
.....................................................................................
24.31%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
........................................................
1.65%
Expenses
net
of
waiver
and
payments
by
affiliates
.........................................................
1.04%
Net
investment
(loss)
..............................................................................
(0.77)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.......................................................................
$643
Portfolio
turnover
rate
..............................................................................
33.93%
a
For
the
period
February
14,
2020
(effective
date)
to
September
30,
2020.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Focused
Growth
Fund
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Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
56
a
Year
Ended
September
30,
2020
a
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
.....................................................................
$20.16
Income
from
investment
operations
b
:
Net
investment
(loss)
c
............................................................................
(0.07)
Net
realized
and
unrealized
gains
(losses)
.............................................................
5.01
Total
from
investment
operations
......................................................................
4.94
Net
asset
value,
end
of
year
.........................................................................
$25.10
Total
return
d
.....................................................................................
24.50%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
........................................................
2.08%
Expenses
net
of
waiver
and
payments
by
affiliates
.........................................................
0.85%
Net
investment
(loss)
..............................................................................
(0.52)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.......................................................................
$65
Portfolio
turnover
rate
..............................................................................
33.93%
a
For
the
period
February
14,
2020
(effective
date)
to
September
30,
2020.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Focused
Growth
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
57
a
Year
Ended
September
30,
Year
Ended
September
30,
2016
a
2020
2019
2018
2017
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$17.62
$17.24
$13.36
$10.93
$10.00
Income
from
investment
operations
b
:
Net
investment
(loss)
c
..........................
(0.09)
(0.06)
(0.05)
(0.02)
(0.01)
Net
realized
and
unrealized
gains
(losses)
...........
8.66
0.52
3.93
2.49
0.94
Total
from
investment
operations
....................
8.57
0.46
3.88
2.47
0.93
Less
distributions
from:
Net
investment
income
..........................
—
(0.01)
—
(0.01)
—
Net
realized
gains
.............................
(1.09)
(0.07)
—
(0.03)
—
Total
distributions
...............................
(1.09)
(0.08)
—
(0.04)
—
Net
asset
value,
end
of
year
.......................
$25.10
$17.62
$17.24
$13.36
$10.93
Total
return
d
...................................
51.20%
2.80%
29.04%
22.78%
9.30%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
......
2.04%
2.4
1%
2.23%
2.31%
4.76%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
0.88%
1.00%
1.00%
f
1.00%
f
1.00%
Net
investment
(loss)
............................
(0.41)%
(0.36)%
(0.34)%
(0.20)%
(0.18)%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$16,747
$4,404
$4,310
$3,341
$2,732
Portfolio
turnover
rate
............................
33.93%
28.65%
14.47%
28.48%
7.46%
a
For
the
period
April
12,
2016
(commencement
of
operations)
to
September
30,
2016.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Statement
of
Investments,
September
30,
2020
Franklin
Focused
Growth
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
58
a
Country
Shares
a
Value
a
Common
Stocks
94.2%
Automobiles
1.3%
a
Tesla,
Inc.
...........................................
United
States
1,446
$
620,348
a
Capital
Markets
1.3%
MSCI,
Inc.
...........................................
United
States
1,747
623,295
Electric
Utilities
2.2%
NextEra
Energy,
Inc.
...................................
United
States
3,778
1,048,622
Entertainment
4.0%
a
Netflix,
Inc.
..........................................
United
States
868
434,026
a
Sea
Ltd.,
ADR
........................................
Taiwan
6,965
1,072,888
a
Spotify
Technology
SA
..................................
United
States
1,742
422,557
1,929,471
Equity
Real
Estate
Investment
Trusts
(REITs)
1.9%
Crown
Castle
International
Corp.
..........................
United
States
5,511
917,581
Food
&
Staples
Retailing
1.9%
Costco
Wholesale
Corp.
................................
United
States
2,619
929,745
Health
Care
Equipment
&
Supplies
9.1%
Abbott
Laboratories
....................................
United
States
7,530
819,490
Danaher
Corp.
.......................................
United
States
6,384
1,374,667
a
IDEXX
Laboratories,
Inc.
................................
United
States
2,906
1,142,378
a
Intuitive
Surgical,
Inc.
..................................
United
States
1,453
1,030,961
4,367,496
Health
Care
Technology
2.5%
a
Veeva
Systems,
Inc.,
A
.................................
United
States
4,350
1,223,176
a
Industrial
Conglomerates
1.7%
Roper
Technologies,
Inc.
................................
United
States
2,036
804,444
Interactive
Media
&
Services
6.8%
a
Facebook,
Inc.,
A
.....................................
United
States
8,411
2,202,841
Tencent
Holdings
Ltd.
..................................
China
15,646
1,056,791
3,259,632
Internet
&
Direct
Marketing
Retail
14.2%
a
Alibaba
Group
Holding
Ltd.,
ADR
.........................
China
3,476
1,021,875
a
Amazon.com,
Inc.
.....................................
United
States
1,451
4,568,807
a
MercadoLibre
,
Inc.
....................................
Argentina
1,159
1,254,594
6,845,276
IT
Services
15.2%
a,b
Adyen
NV,
144A,
Reg
S
................................
Netherlands
761
1,403,353
Mastercard
,
Inc.,
A
....................................
United
States
3,778
1,277,606
a
PayPal
Holdings,
Inc.
..................................
United
States
8,709
1,715,934
a
Shopify,
Inc.,
A
.......................................
Canada
2,332
2,384,517
a
Square,
Inc.,
A
.......................................
United
States
3,199
519,998
7,301,408
Life
Sciences
Tools
&
Services
1.9%
a
Illumina,
Inc.
.........................................
United
States
1,161
358,842
a,b
Wuxi
Biologics
Cayman,
Inc.,
144A,
Reg
S
..................
China
21,970
538,446
897,288
Media
2.2%
a
Charter
Communications,
Inc.,
A
..........................
United
States
1,738
1,085,103
a
Personal
Products
0.9%
Estee
Lauder
Cos.,
Inc.
(The),
A
..........................
United
States
2,057
448,940
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Focused
Growth
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
59
s
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
Professional
Services
2.5%
a
CoStar
Group,
Inc.
....................................
United
States
870
$
738,204
Verisk
Analytics,
Inc.
...................................
United
States
2,617
484,956
1,223,160
Semiconductors
&
Semiconductor
Equipment
5.8%
Analog
Devices,
Inc.
...................................
United
States
2,612
304,925
ASML
Holding
NV,
NYRS
...............................
Netherlands
1,161
428,723
NVIDIA
Corp.
........................................
United
States
3,774
2,042,564
2,776,212
Software
18.8%
a
Adobe,
Inc.
..........................................
United
States
2,030
995,573
a
Atlassian
Corp.
plc,
A
..................................
United
States
2,030
369,034
a
Coupa
Software,
Inc.
...................................
United
States
1,740
477,177
Microsoft
Corp.
.......................................
United
States
19,158
4,029,502
a
salesforce.com,
Inc.
...................................
United
States
4,355
1,094,499
a
ServiceNow
,
Inc.
......................................
United
States
4,351
2,110,235
9,076,020
Total
Common
Stocks
(Cost
$36,726,776)
......................................
45,377,217
Short
Term
Investments
4.9%
a
a
Country
Shares
a
Value
a
Money
Market
Funds
4.9%
c,d
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
........
United
States
2,346,648
2,346,648
Total
Money
Market
Funds
(Cost
$2,346,648)
...................................
2,346,648
Total
Short
Term
Investments
(Cost
$2,346,648
)
.................................
2,346,648
a
Total
Investments
(Cost
$39,073,424)
99.1%
....................................
$47,723,865
Other
Assets,
less
Liabilities
0.9%
.............................................
454,504
Net
Assets
100.0%
...........................................................
$48,178,369
See
abbreviations
on
page
146
.
a
Non-income
producing.
b
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
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.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
September
30,
2020,
the
aggregate
value
of
these
securities
was
$1,941,799,
representing
4.0%
of
net
assets.
c
See
Note
3(f)
regarding
investments
in
affiliated
management
investment
companies.
d
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Growth
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
60
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$110.04
$107.59
$91.61
$78.54
$72.40
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.33
0.46
0.41
0.40
0.47
c
Net
realized
and
unrealized
gains
(losses)
...........
25.99
3.47
18.18
15.56
8.51
Total
from
investment
operations
....................
26.32
3.93
18.59
15.96
8.98
Less
distributions
from:
Net
investment
income
..........................
(0.46)
(0.44)
(0.36)
(0.39)
(0.47)
Net
realized
gains
.............................
(5.99)
(1.04)
(2.25)
(2.50)
(2.37)
Total
distributions
...............................
(6.45)
(1.48)
(2.61)
(2.89)
(2.84)
Net
asset
value,
end
of
year
.......................
$129.91
$110.04
$107.59
$91.61
$78.54
Total
return
d
...................................
25.09%
3.79%
20.72%
21.12%
12.57%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.82%
0.83%
0.83%
0.88%
0.88%
Expenses
net
of
waiver
and
payments
by
affiliates
e
......
0.81%
0.83%
f
0.83%
f
0.87%
0.86%
Net
investment
income
...........................
0.29%
0.45%
0.41%
0.47%
0.63%
c
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$10,990,297
$9,157,154
$9,044,834
$8,051,641
$7,628,523
Portfolio
turnover
rate
............................
9.01%
4.91%
g
6.05%
g
5.60%
7.53%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.10
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.50%.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
e
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
13.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Growth
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
61
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$100.21
$98.38
$84.25
$72.60
$67.17
Income
from
investment
operations
a
:
Net
investment
(loss)
b
..........................
(0.47)
(0.29)
(0.30)
(0.21)
(0.08)
c
Net
realized
and
unrealized
gains
(losses)
...........
23.52
3.16
16.68
14.36
7.88
Total
from
investment
operations
....................
23.05
2.87
16.38
14.15
7.80
Less
distributions
from:
Net
realized
gains
.............................
(5.99)
(1.04)
(2.25)
(2.50)
(2.37)
Net
asset
value,
end
of
year
.......................
$117.27
$100.21
$98.38
$84.25
$72.60
Total
return
d
...................................
24.16%
3.02%
19.82%
20.21%
11.74%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.57%
1.58%
1.58%
1.63%
1.63%
Expenses
net
of
waiver
and
payments
by
affiliates
e
......
1.56%
1.58%
f
1.58%
f
1.62%
1.61%
Net
investment
(loss)
............................
(0.46)%
(0.30)%
(0.34)%
(0.28)%
(0.12)%
c
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$727,093
$704,217
$1,060,258
$930,751
$846,965
Portfolio
turnover
rate
............................
9.01%
4.91%
g
6.05%
g
5.60%
7.53%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.10
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
(0.25)%.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
e
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
13.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Growth
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
62
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$109.49
$107.00
$91.13
$78.14
$71.93
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.05
0.21
0.16
0.19
0.29
c
Net
realized
and
unrealized
gains
(losses)
...........
25.86
3.46
18.09
15.51
8.45
Total
from
investment
operations
....................
25.91
3.67
18.25
15.70
8.74
Less
distributions
from:
Net
investment
income
..........................
(0.13)
(0.14)
(0.13)
(0.21)
(0.16)
Net
realized
gains
.............................
(5.99)
(1.04)
(2.25)
(2.50)
(2.37)
Total
distributions
...............................
(6.12)
(1.18)
(2.38)
(2.71)
(2.53)
Net
asset
value,
end
of
year
.......................
$129.28
$109.49
$107.00
$91.13
$78.14
Total
return
....................................
24.78%
3.54%
20.42%
20.81%
12.29%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.07%
1.08%
1.08%
1.13%
1.13%
Expenses
net
of
waiver
and
payments
by
affiliates
d
......
1.06%
1.08%
e
1.08%
e
1.12%
1.11%
Net
investment
income
...........................
0.04%
0.20%
0.16%
0.22%
0.38%
c
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$420,082
$435,331
$524,960
$510,317
$477,221
Portfolio
turnover
rate
............................
9.01%
4.91%
f
6.05%
f
5.60%
7.53%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.10
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.25%.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
f
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
13.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Growth
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
63
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$110.37
$107.90
$91.90
$78.79
$72.69
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.71
0.83
0.77
0.74
0.78
c
Net
realized
and
unrealized
gains
(losses)
...........
26.06
3.47
18.22
15.59
8.56
Total
from
investment
operations
....................
26.77
4.30
18.99
16.33
9.34
Less
distributions
from:
Net
investment
income
..........................
(0.84)
(0.79)
(0.74)
(0.72)
(0.87)
Net
realized
gains
.............................
(5.99)
(1.04)
(2.25)
(2.50)
(2.37)
Total
distributions
...............................
(6.83)
(1.83)
(2.99)
(3.22)
(3.24)
Net
asset
value,
end
of
year
.......................
$130.31
$110.37
$107.90
$91.90
$78.79
Total
return
....................................
25.51%
4.16%
21.17%
21.61%
13.05%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.48%
0.48%
0.47%
0.46%
0.46%
Expenses
net
of
waiver
and
payments
by
affiliates
d
......
0.48%
e
0.48%
e
0.46%
0.45%
0.44%
Net
investment
income
...........................
0.63%
0.80%
0.78%
0.89%
1.05%
c
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$2,999,370
$2,545,800
$2,634,455
$1,700,993
$1,247,825
Portfolio
turnover
rate
............................
9.01%
4.91%
f
6.05%
f
5.60%
7.53%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.10
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.92%.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
f
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
13.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Growth
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
64
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$110.41
$107.95
$91.90
$78.80
$72.67
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.62
0.72
0.66
0.60
0.65
c
Net
realized
and
unrealized
gains
(losses)
...........
26.07
3.47
18.23
15.61
8.56
Total
from
investment
operations
....................
26.69
4.19
18.89
16.21
9.21
Less
distributions
from:
Net
investment
income
..........................
(0.73)
(0.69)
(0.59)
(0.61)
(0.71)
Net
realized
gains
.............................
(5.99)
(1.04)
(2.25)
(2.50)
(2.37)
Total
distributions
...............................
(6.72)
(1.73)
(2.84)
(3.11)
(3.08)
Net
asset
value,
end
of
year
.......................
$130.38
$110.41
$107.95
$91.90
$78.80
Total
return
....................................
25.41%
4.05%
21.02%
21.43%
12.85%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.57%
0.58%
0.58%
0.63%
0.63%
Expenses
net
of
waiver
and
payments
by
affiliates
d
......
0.56%
0.58%
e
0.58%
e
0.62%
0.61%
Net
investment
income
...........................
0.54%
0.70%
0.66%
0.72%
0.88%
c
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$3,549,412
$3,154,342
$3,139,208
$2,801,153
$1,998,483
Portfolio
turnover
rate
............................
9.01%
4.91%
f
6.05%
f
5.60%
7.53%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.10
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.75%.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
f
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
13.
Franklin
Custodian
Funds
Statement
of
Investments,
September
30,
2020
Franklin
Growth
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
65
a
Country
Shares
a
Value
a
Common
Stocks
99.1%
Aerospace
&
Defense
4.4%
BWX
Technologies,
Inc.
................................
United
States
1,404,022
$
79,060,479
Lockheed
Martin
Corp.
.................................
United
States
494,945
189,702,519
a
Mercury
Systems,
Inc.
..................................
United
States
814,100
$
63,060,186
Northrop
Grumman
Corp.
...............................
United
States
1,088,879
343,530,436
Raytheon
Technologies
Corp.
............................
United
States
2,462,983
141,720,042
817,073,662
Auto
Components
0.0%
†
Aptiv
plc
............................................
United
States
14,860
1,362,365
Beverages
2.8%
Brown-Forman
Corp.
,
B
................................
United
States
1,608,570
121,157,492
Constellation
Brands,
Inc.
,
A
.............................
United
States
552,040
104,617,101
a
Monster
Beverage
Corp.
................................
United
States
2,696,800
216,283,360
PepsiCo,
Inc.
........................................
United
States
643,429
89,179,259
531,237,212
Biotechnology
2.3%
AbbVie,
Inc.
.........................................
United
States
455,350
39,884,107
Amgen,
Inc.
.........................................
United
States
847,689
215,448,636
a
Deciphera
Pharmaceuticals,
Inc.
..........................
United
States
577,400
29,620,620
a
Iovance
Biotherapeutics,
Inc.
.............................
United
States
409,200
13,470,864
a
Neurocrine
Biosciences,
Inc.
.............................
United
States
494,945
47,593,911
a
PTC
Therapeutics,
Inc.
.................................
United
States
971,300
45,408,275
a
Regeneron
Pharmaceuticals,
Inc.
.........................
United
States
75,300
42,151,434
433,577,847
Building
Products
1.1%
Allegion
plc
..........................................
United
States
692,923
68,537,014
Trane
Technologies
plc
.................................
United
States
1,088,879
132,026,579
200,563,593
Capital
Markets
2.9%
BlackRock,
Inc.
.......................................
United
States
227,796
128,374,436
Charles
Schwab
Corp.
(The)
.............................
United
States
3,019,527
109,397,463
Intercontinental
Exchange,
Inc.
...........................
United
States
1,410,905
141,161,045
MarketAxess
Holdings,
Inc.
..............................
United
States
58,900
28,365,651
S&P
Global,
Inc.
......................................
United
States
104,980
37,855,788
T
Rowe
Price
Group,
Inc.
...............................
United
States
432,534
55,459,510
Tradeweb
Markets,
Inc.
,
A
...............................
United
States
615,700
35,710,600
536,324,493
Chemicals
3.3%
Air
Products
and
Chemicals,
Inc.
..........................
United
States
494,945
147,424,318
Celanese
Corp.
.......................................
United
States
1,237,362
132,954,547
Ecolab,
Inc.
..........................................
United
States
617,359
123,373,022
International
Flavors
&
Fragrances,
Inc.
.....................
United
States
400,000
48,980,000
Linde
plc
............................................
United
Kingdom
719,187
171,260,000
623,991,887
Commercial
Services
&
Supplies
0.3%
Republic
Services,
Inc.
.................................
United
States
644,400
60,154,740
Construction
Materials
0.5%
Martin
Marietta
Materials,
Inc.
............................
United
States
395,957
93,192,439
Electric
Utilities
0.8%
NextEra
Energy,
Inc.
...................................
United
States
508,055
141,015,746
Electrical
Equipment
0.4%
AMETEK,
Inc.
........................................
United
States
692,923
68,876,546
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Growth
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
66
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
Electronic
Equipment,
Instruments
&
Components
2.3%
Amphenol
Corp.
,
A
....................................
United
States
1,433,535
155,208,834
Cognex
Corp.
........................................
United
States
413,136
26,895,154
a
Keysight
Technologies,
Inc.
..............................
United
States
724,829
$
71,598,609
TE
Connectivity
Ltd.
...................................
United
States
1,850,000
180,819,000
434,521,597
Entertainment
1.1%
Walt
Disney
Co.
(The)
..................................
United
States
1,724,626
213,991,594
Equity
Real
Estate
Investment
Trusts
(REITs)
1.9%
Crown
Castle
International
Corp.
..........................
United
States
1,132,500
188,561,250
Digital
Realty
Trust,
Inc.
................................
United
States
20,875
3,063,615
Equinix,
Inc.
.........................................
United
States
198,755
151,079,638
SBA
Communications
Corp.
.............................
United
States
10,230
3,258,051
345,962,554
Food
Products
0.7%
Lamb
Weston
Holdings,
Inc.
.............................
United
States
542,780
35,970,031
Mondelez
International,
Inc.
,
A
............................
United
States
1,484,834
85,303,713
121,273,744
Health
Care
Equipment
&
Supplies
6.1%
Abbott
Laboratories
....................................
United
States
1,336,351
145,435,079
Danaher
Corp.
.......................................
United
States
1,140,384
245,558,887
a
Edwards
Lifesciences
Corp.
.............................
United
States
1,187,871
94,815,863
a
Haemonetics
Corp.
....................................
United
States
989,889
86,367,815
a
Intuitive
Surgical,
Inc.
..................................
United
States
445,451
316,065,303
Stryker
Corp.
........................................
United
States
406,347
84,670,524
Teleflex,
Inc.
.........................................
United
States
501,695
170,787,012
1,143,700,483
Health
Care
Providers
&
Services
1.1%
a
Laboratory
Corp.
of
America
Holdings
......................
United
States
494,945
93,183,295
Quest
Diagnostics,
Inc.
.................................
United
States
890,901
101,999,256
UnitedHealth
Group,
Inc.
................................
United
States
9,100
2,837,107
198,019,658
Health
Care
Technology
0.1%
a
American
Well
Corp.
,
A
.................................
United
States
51,000
1,511,640
a
GoodRx
Holdings,
Inc.
,
A
...............................
United
States
30,200
1,679,120
a
Veeva
Systems,
Inc.
,
A
.................................
United
States
75,700
21,286,083
24,476,843
Hotels,
Restaurants
&
Leisure
0.4%
Las
Vegas
Sands
Corp.
.................................
United
States
1,443,700
67,363,042
Interactive
Media
&
Services
4.2%
a
Alphabet,
Inc.
,
A
......................................
United
States
166,053
243,367,277
a
Alphabet,
Inc.
,
C
......................................
United
States
156,831
230,478,837
a
Facebook,
Inc.
,
A
.....................................
United
States
798,200
209,048,580
a
IAC/InterActiveCorp
...................................
United
States
296,967
35,570,707
a
Match
Group,
Inc.
.....................................
United
States
640,973
70,923,663
789,389,064
Internet
&
Direct
Marketing
Retail
6.7%
a
Alibaba
Group
Holding
Ltd.
,
ADR
.........................
China
525,454
154,472,967
a
Amazon.com,
Inc.
.....................................
United
States
341,052
1,073,880,664
Expedia
Group,
Inc.
...................................
United
States
346,462
31,767,101
1,260,120,732
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Growth
Fund
(continued)
franklintempleton.com
The
accompanying
notes
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an
integral
part
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financial
statements.
Annual
Report
67
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
IT
Services
6.9%
a,b
Adyen
NV
,
144A
,
Reg
S
................................
Netherlands
59,955
$
110,562,470
Automatic
Data
Processing,
Inc.
..........................
United
States
692,923
96,655,829
Mastercard,
Inc.
,
A
....................................
United
States
1,397,305
472,526,632
a
Okta,
Inc.
...........................................
United
States
84,000
17,963,400
a
PayPal
Holdings,
Inc.
..................................
United
States
729,700
143,772,791
a,c
Snowflake,
Inc.
,
A
.....................................
United
States
257,400
64,607,400
a
Twilio,
Inc.
,
A
.........................................
United
States
455,209
112,477,592
Visa,
Inc.
,
A
..........................................
United
States
1,385,845
277,127,424
1,295,693,538
Life
Sciences
Tools
&
Services
4.4%
a
10X
Genomics,
Inc.
,
A
..................................
United
States
188,800
23,539,584
Agilent
Technologies,
Inc.
...............................
United
States
1,286,856
129,895,245
a
Illumina,
Inc.
.........................................
United
States
595,452
184,042,304
a
Mettler-Toledo
International,
Inc.
..........................
United
States
423,824
409,308,028
a,b
Wuxi
Biologics
Cayman,
Inc.
,
144A
,
Reg
S
..................
China
3,141,300
76,987,693
823,772,854
Machinery
3.5%
Caterpillar,
Inc.
.......................................
United
States
544,440
81,203,226
Deere
&
Co.
.........................................
United
States
494,945
109,694,660
Fortive
Corp.
.........................................
United
States
1,084,722
82,666,664
Illinois
Tool
Works,
Inc.
.................................
United
States
989,889
191,256,454
a
Ingersoll
Rand,
Inc.
....................................
United
States
960,826
34,205,405
Otis
Worldwide
Corp.
..................................
United
States
525,303
32,789,413
Stanley
Black
&
Decker,
Inc.
.............................
United
States
785,829
127,461,464
659,277,286
Media
1.0%
Cable
One,
Inc.
.......................................
United
States
79,192
149,310,972
Comcast
Corp.
,
A
.....................................
United
States
795,018
36,777,533
186,088,505
Personal
Products
0.1%
Estee
Lauder
Cos.,
Inc.
(The)
,
A
..........................
United
States
92,020
20,083,365
Pharmaceuticals
4.6%
AstraZeneca
plc
,
ADR
..................................
United
Kingdom
2,030,908
111,293,758
a
Catalent,
Inc.
........................................
United
States
3,365,622
288,299,181
Eli
Lilly
and
Co.
.......................................
United
States
1,240,175
183,570,703
a,c
GW
Pharmaceuticals
plc
,
ADR
...........................
United
Kingdom
204,657
19,923,359
Johnson
&
Johnson
...................................
United
States
1,187,967
176,864,527
Merck
&
Co.,
Inc.
.....................................
United
States
989,889
82,111,293
862,062,821
Professional
Services
3.5%
a
CoStar
Group,
Inc.
....................................
United
States
62,805
53,290,671
Equifax,
Inc.
.........................................
United
States
544,440
85,422,636
IHS
Markit
Ltd.
.......................................
United
States
2,916,239
228,953,924
Verisk
Analytics,
Inc.
...................................
United
States
1,501,824
278,303,005
645,970,236
Road
&
Rail
4.7%
Canadian
National
Railway
Co.
...........................
Canada
989,889
105,383,583
Canadian
Pacific
Railway
Ltd.
............................
Canada
494,945
150,676,107
JB
Hunt
Transport
Services,
Inc.
..........................
United
States
494,945
62,551,149
Kansas
City
Southern
..................................
United
States
742,417
134,251,266
a
Uber
Technologies,
Inc.
.................................
United
States
1,008,700
36,797,376
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Growth
Fund
(continued)
franklintempleton.com
Annual
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
68
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
Road
&
Rail
(continued)
Union
Pacific
Corp.
....................................
United
States
2,009,475
395,605,343
885,264,824
Semiconductors
&
Semiconductor
Equipment
4.6%
ASML
Holding
NV
,
NYRS
...............................
Netherlands
478,729
176,780,258
Lam
Research
Corp.
...................................
United
States
29,697
9,851,980
Monolithic
Power
Systems,
Inc.
...........................
United
States
445,451
124,552,554
NVIDIA
Corp.
........................................
United
States
509,040
275,502,629
NXP
Semiconductors
NV
...............................
Netherlands
670,800
83,722,548
Texas
Instruments,
Inc.
.................................
United
States
1,385,845
197,884,807
868,294,776
Software
14.1%
a
Adobe,
Inc.
..........................................
United
States
168,700
$
82,735,541
a
Atlassian
Corp.
plc
,
A
..................................
United
States
163,500
29,722,665
a
Autodesk,
Inc.
........................................
United
States
853,512
197,169,807
a
Avalara,
Inc.
.........................................
United
States
403,250
51,349,855
a
Bill.com
Holdings,
Inc.
..................................
United
States
1,072,636
107,596,117
a,c
Duck
Creek
Technologies,
Inc.
...........................
United
States
75,100
3,411,793
Intuit,
Inc.
...........................................
United
States
989,889
322,911,691
Microsoft
Corp.
.......................................
United
States
3,675,252
773,015,753
a
Paycom
Software,
Inc.
.................................
United
States
83,000
25,837,900
a
PTC,
Inc.
...........................................
United
States
1,192,028
98,604,556
a
salesforce.com,
Inc.
...................................
United
States
558,120
140,266,718
a
ServiceNow,
Inc.
......................................
United
States
999,769
484,887,965
a
Synopsys,
Inc.
.......................................
United
States
446,900
95,627,662
a
Tyler
Technologies,
Inc.
.................................
United
States
179,452
62,549,789
a
Workday,
Inc.
,
A
......................................
United
States
742,728
159,783,075
2,635,470,887
Technology
Hardware,
Storage
&
Peripherals
5.8%
Apple,
Inc.
..........................................
United
States
9,316,960
1,078,997,138
Textiles,
Apparel
&
Luxury
Goods
1.3%
NIKE,
Inc.
,
B
.........................................
United
States
1,886,312
236,807,608
Trading
Companies
&
Distributors
0.7%
Fastenal
Co.
.........................................
United
States
2,721,500
122,712,435
Water
Utilities
0.5%
American
Water
Works
Co.,
Inc.
..........................
United
States
692,923
100,390,684
Total
Common
Stocks
(Cost
$
5,746,666,867
)
....................................
18,527,076,798
Short
Term
Investments
0.8%
a
a
Country
Shares
a
Value
a
Money
Market
Funds
0.5%
d,e
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio
,
0
%
........
United
States
94,207,855
94,207,855
Total
Money
Market
Funds
(Cost
$
94,207,855
)
..................................
94,207,855
f
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
0.3%
a
a
a
a
a
Money
Market
Funds
0.3%
d,e
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio
,
0
%
........
United
States
46,871,000
46,871,000
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Growth
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
69
See
Abbreviations
on
page
146
.
Short
Term
Investments
(continued)
a
a
Principal
Amount
*
a
Value
a
a
a
a
a
a
Repurchase
Agreements
0.0%
†
g
Joint
Repurchase
Agreement,
BNP
Paribas
SA
,
0.06
%
,
10/01/20
(Maturity
Value
$
3,551,851
)
Collateralized
by
U.S.
Treasury
Bond,
Strip,
8/15/25;
and
U.S.
Treasury
Note,
Index
Linked,
0.375%,
7/15/23
(valued
at
$
3,622,888
)
........................................
3,551,845
$
3,551,845
g
Joint
Repurchase
Agreement,
BofA
Securities,
Inc.
,
0.06
%
,
10/01/20
(Maturity
Value
$
8,167,091
)
Collateralized
by
U.S.
Treasury
Note,
2.25%,
12/31/24
(valued
at
$
8,330,443
)
........................................
8,167,077
8,167,077
Total
Repurchase
Agreements
(Cost
$
11,718,922
)
.............................................
11,718,922
Total
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
(Cost
$
58,589,922
)
...........................................................
58,589,922
Total
Short
Term
Investments
(Cost
$
152,797,777
)
...............................
152,797,777
a
Total
Investments
(Cost
$
5,899,464,644
)
99
.9
%
..................................
$18,679,874,575
Other
Assets,
less
Liabilities
0
.1
%
.............................................
6,379,866
Net
Assets
100.0%
...........................................................
$18,686,254,441
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
Non-income
producing.
b
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
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.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
September
30,
2020,
the
aggregate
value
of
these
securities
was
$187,550,163,
representing
1.0%
of
net
assets.
c
A
portion
or
all
of
the
security
is
on
loan
at
September
30,
2020.
See
Note
1(h)
d
See
Note
3(f)
regarding
investments
in
affiliated
management
investment
companies.
e
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
f
See
Note
1(h)
regarding
securities
on
loan.
g
See
Note
1(c)
regarding
joint
repurchase
agreement.
Franklin
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Funds
Financial
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statements.
70
a
Year
Ended
September
30,
Year
Ended
September
30,
2018
a
2020
2019
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
............................................
$2.30
$2.32
$2.31
Income
from
investment
operations
b
:
Net
investment
income
(loss)
c
.............................................
0.08
0.08
(0.04)
Net
realized
and
unrealized
gains
(losses)
....................................
(0.18)
0.02
0.05
Total
from
investment
operations
.............................................
(0.10)
0.10
0.01
Less
distributions
from:
Net
investment
income
...................................................
(0.12)
(0.12)
—
Net
asset
value,
end
of
year
................................................
$2.08
$2.30
$2.32
Total
return
d
............................................................
(4.48)%
4.40%
0.43%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
...............................
0.71%
0.72%
0.71%
Expenses
net
of
waiver
and
payments
by
affiliates
f
...............................
0.70%
0.72%
g
0.71%
g
Net
investment
income
....................................................
3.64%
3.92%
3.89%
Supplemental
data
Net
assets,
end
of
year
(000’s)
..............................................
$10,072,437
$7,427,468
$107,057
Portfolio
turnover
rate
.....................................................
69.13%
43.63%
49.95%
a
For
the
period
September
10,
2018
(effective
date)
to
September
30,
2018.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year..
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Income
Fund
(continued)
franklintempleton.com
The
accompanying
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an
integral
part
of
these
financial
statements.
Annual
Report
71
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
A1
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$2.30
$2.32
$2.39
$2.25
$2.10
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.08
0.09
0.09
0.10
0.10
Net
realized
and
unrealized
gains
(losses)
...........
(0.18)
0.01
(0.04)
0.16
0.17
Total
from
investment
operations
....................
(0.10)
0.10
0.05
0.26
0.27
Less
distributions
from:
Net
investment
income
..........................
(0.12)
(0.12)
(0.12)
(0.12)
(0.12)
Net
asset
value,
end
of
year
.......................
$2.08
$2.30
$2.32
$2.39
$2.25
Total
return
c
...................................
(4.39)%
4.50%
2.18%
11.86%
13.31%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.61%
0.62%
0.61%
0.62%
0.61%
Expenses
net
of
waiver
and
payments
by
affiliates
d
......
0.60%
0.62%
e
0.61%
e
0.61%
0.61%
e
Net
investment
income
...........................
3.74%
4.02%
3.99%
4.22%
4.57%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$32,693,224
$39,625,649
$42,929,573
$46,505,632
$45,515,127
Portfolio
turnover
rate
............................
69.13%
43.63%
49.95%
34.12%
61.26%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Income
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
72
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$2.34
$2.35
$2.42
$2.27
$2.13
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.07
0.08
0.08
0.09
0.09
Net
realized
and
unrealized
gains
(losses)
...........
(0.18)
0.02
(0.04)
0.17
0.16
Total
from
investment
operations
....................
(0.11)
0.10
0.04
0.26
0.25
Less
distributions
from:
Net
investment
income
..........................
(0.11)
(0.11)
(0.11)
(0.11)
(0.11)
Net
asset
value,
end
of
year
.......................
$2.12
$2.34
$2.35
$2.42
$2.27
Total
return
c
...................................
(4.80)%
4.35%
1.61%
11.63%
12.07%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.11%
1.12%
1.11%
1.12%
1.11%
Expenses
net
of
waiver
and
payments
by
affiliates
d
......
1.10%
1.12%
e
1.11%
e
1.11%
1.11%
e
Net
investment
income
...........................
3.24%
3.52%
3.49%
3.72%
4.07%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$9,339,238
$13,488,627
$19,895,441
$23,036,875
$23,841,466
Portfolio
turnover
rate
............................
69.13%
43.63%
49.95%
34.12%
61.26%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Income
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
73
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$2.26
$2.28
$2.35
$2.21
$2.07
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.07
0.08
0.08
0.09
0.09
Net
realized
and
unrealized
gains
(losses)
...........
(0.18)
0.01
(0.04)
0.16
0.16
Total
from
investment
operations
....................
(0.11)
0.09
0.04
0.25
0.25
Less
distributions
from:
Net
investment
income
..........................
(0.11)
(0.11)
(0.11)
(0.11)
(0.11)
Net
asset
value,
end
of
year
.......................
$2.04
$2.26
$2.28
$2.35
$2.21
Total
return
....................................
(4.82)%
4.20%
1.86%
11.67%
12.62%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.96%
0.97%
0.96%
0.97%
0.96%
Expenses
net
of
waiver
and
payments
by
affiliates
c
......
0.95%
0.97%
d
0.96%
d
0.96%
0.96%
d
Net
investment
income
...........................
3.40%
3.67%
3.64%
3.87%
4.22%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$221,584
$265,531
$296,098
$361,603
$396,107
Portfolio
turnover
rate
............................
69.13%
43.63%
49.95%
34.12%
61.26%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Income
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
74
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$2.29
$2.30
$2.37
$2.23
$2.09
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.09
0.10
0.10
0.11
0.10
Net
realized
and
unrealized
gains
(losses)
...........
(0.19)
0.01
(0.05)
0.15
0.16
Total
from
investment
operations
....................
(0.10)
0.11
0.05
0.26
0.26
Less
distributions
from:
Net
investment
income
..........................
(0.12)
(0.12)
(0.12)
(0.12)
(0.12)
Net
asset
value,
end
of
year
.......................
$2.07
$2.29
$2.30
$2.37
$2.23
Total
return
....................................
(4.23)%
5.17%
2.40%
12.15%
13.15%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.40%
0.41%
0.39%
0.39%
0.38%
Expenses
net
of
waiver
and
payments
by
affiliates
c
......
0.39%
0.40%
0.39%
d
0.38%
0.38%
d
Net
investment
income
...........................
3.96%
4.24%
4.21%
4.45%
4.80%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$1,626,735
$1,902,027
$2,062,334
$1,815,977
$1,737,577
Portfolio
turnover
rate
............................
69.13%
43.63%
49.95%
34.12%
61.26%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Income
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
75
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$2.28
$2.30
$2.37
$2.23
$2.09
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.08
0.09
0.10
0.10
0.10
Net
realized
and
unrealized
gains
(losses)
...........
(0.17)
0.01
(0.05)
0.16
0.16
Total
from
investment
operations
....................
(0.09)
0.10
0.05
0.26
0.26
Less
distributions
from:
Net
investment
income
..........................
(0.12)
(0.12)
(0.12)
(0.12)
(0.12)
Net
asset
value,
end
of
year
.......................
$2.07
$2.28
$2.30
$2.37
$2.23
Total
return
....................................
(3.86)%
4.65%
2.34%
12.09%
13.06%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.46%
0.47%
0.46%
0.47%
0.46%
Expenses
net
of
waiver
and
payments
by
affiliates
c
......
0.45%
0.47%
d
0.46%
d
0.46%
0.46%
d
Net
investment
income
...........................
3.89%
4.17%
4.14%
4.37%
4.72%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$9,712,076
$11,816,599
$11,328,761
$11,671,173
$8,143,479
Portfolio
turnover
rate
............................
69.13%
43.63%
49.95%
34.12%
61.26%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Statement
of
Investments,
September
30,
2020
Franklin
Income
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
76
a
A
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
41.1%
Aerospace
&
Defense
1.1%
Boeing
Co.
(The)
.....................................
United
States
833,516
$
137,746,854
Lockheed
Martin
Corp.
.................................
United
States
500,000
191,640,000
Raytheon
Technologies
Corp.
............................
United
States
6,350,000
365,379,000
694,765,854
Air
Freight
&
Logistics
0.8%
a
United
Parcel
Service,
Inc.,
B
............................
United
States
3,000,000
499,890,000
Automobiles
0.3%
General
Motors
Co.
....................................
United
States
6,500,000
192,335,000
Banks
4.7%
Bank
of
America
Corp.
.................................
United
States
20,000,000
481,800,000
b
Barclays
plc
.........................................
United
Kingdom
175,000,000
220,781,499
Citigroup,
Inc.
........................................
United
States
6,000,000
258,660,000
JPMorgan
Chase
&
Co.
.................................
United
States
15,000,000
1,444,050,000
Truist
Financial
Corp.
..................................
United
States
8,528,400
324,505,620
US
Bancorp
.........................................
United
States
8,000,000
286,800,000
3,016,597,119
Beverages
3.0%
Coca-Cola
Co.
(The)
...................................
United
States
17,500,000
863,975,000
a
PepsiCo,
Inc.
........................................
United
States
7,500,000
1,039,500,000
1,903,475,000
Capital
Markets
0.3%
Morgan
Stanley
.......................................
United
States
4,000,000
193,400,000
Chemicals
0.6%
BASF
SE
...........................................
Germany
6,000,000
365,298,527
Containers
&
Packaging
0.4%
International
Paper
Co.
.................................
United
States
5,626,574
228,101,326
Diversified
Telecommunication
Services
2.4%
AT&T,
Inc.
...........................................
United
States
10,000,000
285,100,000
BCE,
Inc.
...........................................
Canada
7,500,000
310,993,467
Verizon
Communications,
Inc.
............................
United
States
16,000,000
951,840,000
1,547,933,467
Electric
Utilities
5.5%
American
Electric
Power
Co.,
Inc.
.........................
United
States
6,500,000
531,245,000
Duke
Energy
Corp.
....................................
United
States
11,500,000
1,018,440,000
Edison
International
...................................
United
States
7,525,000
382,571,000
Exelon
Corp.
.........................................
United
States
6,000,000
214,560,000
FirstEnergy
Corp.
.....................................
United
States
3,000,000
86,130,000
PPL
Corp.
...........................................
United
States
4,000,000
108,840,000
Southern
Co.
(The)
....................................
United
States
21,000,688
1,138,657,304
3,480,443,304
Energy
Equipment
&
Services
0.0%
†
b,c
Weatherford
International
plc
.............................
United
States
14,700,000
28,665,000
Equity
Real
Estate
Investment
Trusts
(REITs)
0.1%
Host
Hotels
&
Resorts,
Inc.
..............................
United
States
7,386,982
79,705,536
Health
Care
Providers
&
Services
0.5%
CVS
Health
Corp.
.....................................
United
States
5,000,000
292,000,000
Household
Products
1.4%
Procter
&
Gamble
Co.
(The)
.............................
United
States
6,500,000
903,435,000
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
77
a
A
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Industrial
Conglomerates
1.0%
Honeywell
International,
Inc.
.............................
United
States
4,000,000
$
658,440,000
Insurance
0.8%
MetLife,
Inc.
.........................................
United
States
14,000,000
520,380,000
IT
Services
0.5%
International
Business
Machines
Corp.
.....................
United
States
2,500,000
304,175,000
Machinery
0.6%
Cummins,
Inc.
........................................
United
States
1,704,588
359,940,802
Media
0.3%
Comcast
Corp.,
A
.....................................
United
States
3,750,000
173,475,000
Metals
&
Mining
0.8%
Nucor
Corp.
.........................................
United
States
1,000,000
44,860,000
Rio
Tinto
plc,
ADR
.....................................
Australia
7,500,000
452,925,000
497,785,000
Multiline
Retail
0.5%
a
Target
Corp.
.........................................
United
States
2,085,000
328,220,700
Multi-Utilities
2.6%
Dominion
Energy,
Inc.
..................................
United
States
14,000,000
1,105,020,000
DTE
Energy
Co.
......................................
United
States
2,500,000
287,600,000
Sempra
Energy
.......................................
United
States
2,000,000
236,720,000
1,629,340,000
Oil,
Gas
&
Consumable
Fuels
4.9%
BP
plc,
ADR
.........................................
United
Kingdom
9,000,000
157,140,000
Chevron
Corp.
.......................................
United
States
17,000,000
1,224,000,000
Exxon
Mobil
Corp.
.....................................
United
States
30,000,000
1,029,900,000
d
Royal
Dutch
Shell
plc,
ADR,
A
............................
Netherlands
6,500,000
163,605,000
d
TOTAL
SE,
ADR
......................................
France
12,500,000
428,750,000
Valero
Energy
Corp.
...................................
United
States
2,500,000
108,300,000
3,111,695,000
Personal
Products
0.3%
Unilever
plc
..........................................
United
Kingdom
3,000,000
184,966,880
Pharmaceuticals
4.6%
AstraZeneca
plc
......................................
United
Kingdom
6,500,000
710,246,561
Bristol-Myers
Squibb
Co.
................................
United
States
5,000,000
301,450,000
Johnson
&
Johnson
...................................
United
States
5,000,000
744,400,000
Merck
&
Co.,
Inc.
.....................................
United
States
9,000,000
746,550,000
Pfizer,
Inc.
...........................................
United
States
12,600,000
462,420,000
2,965,066,561
Road
&
Rail
0.6%
Union
Pacific
Corp.
....................................
United
States
2,000,000
393,740,000
Semiconductors
&
Semiconductor
Equipment
1.5%
Broadcom,
Inc.
.......................................
United
States
250,000
91,080,000
Intel
Corp.
...........................................
United
States
10,000,000
517,800,000
a
Texas
Instruments,
Inc.
.................................
United
States
2,523,767
360,368,690
969,248,690
Software
0.3%
Oracle
Corp.
.........................................
United
States
3,000,000
179,100,000
Tobacco
0.6%
Philip
Morris
International,
Inc.
...........................
United
States
5,000,000
374,950,000
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
78
a
A
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Wireless
Telecommunication
Services
0.1%
Vodafone
Group
plc
...................................
United
Kingdom
50,000,000
$
66,274,104
Total
Common
Stocks
(Cost
$24,425,289,727)
...................................
26,142,842,870
e
Equity-Linked
Securities
19.5%
Aerospace
&
Defense
0.7%
f
BNP
Paribas
Issuance
BV
into
Raytheon
Technologies
Corp.,
144A,
9%,
6/16/21
........................................
United
States
4,546,000
270,534,331
f
Morgan
Stanley
Finance
LLC
into
General
Dynamics
Corp.,
Senior
Unsecured
Note,
144A,
8%,
5/24/21
......................
United
States
1,450,000
200,560,747
471,095,078
Airlines
0.1%
f
Wells
Fargo
Bank
NA
into
Delta
Air
Lines,
Inc.,
144A,
10%,
4/12/21
United
States
2,000,000
63,705,539
Automobiles
0.7%
f
Societe
Generale
SA
into
Ford
Motor
Co.,
144A,
12%,
2/23/21
...
United
States
37,800,000
241,781,392
f
Wells
Fargo
Bank
NA
into
General
Motors
Co.,
Senior
Unsecured
Note,
144A,
8.5%,
11/25/20
............................
United
States
6,512,000
197,763,461
439,544,853
Banks
0.9%
f
Barclays
Bank
plc
into
Bank
of
America
Corp.,
Senior
Unsecured
Note,
144A,
8.5%,
11/25/20
............................
United
States
9,040,000
223,922,074
f
Credit
Suisse
AG
into
Bank
of
America
Corp.,
Senior
Unsecured
Note,
144A,
7%,
10/21/20
.............................
United
States
8,550,000
211,415,058
f
Credit
Suisse
AG
into
Wells
Fargo
&
Co.,
Senior
Unsecured
Note,
144A,
8%,
11/30/20
..................................
United
States
5,640,000
138,429,481
573,766,613
Biotechnology
0.7%
f
Merrill
Lynch
International
&
Co.
CV
into
Gilead
Sciences,
Inc.,
BANK
GUARANTEED
Note,
144A,
9%,
12/30/20
............
United
States
2,540,000
160,770,279
f
Royal
Bank
of
Canada
into
AbbVie,
Inc.,
Senior
Unsecured
Note,
144A,
9%,
2/02/21
...................................
United
States
2,900,000
255,176,092
415,946,371
Capital
Markets
0.8%
f
Barclays
Bank
plc
into
Morgan
Stanley,
144A,
8%,
8/20/21
......
United
States
5,148,000
252,651,818
f
JPMorgan
Chase
Bank
NA
into
Morgan
Stanley,
Senior
Unsecured
Note,
144A,
8.5%,
12/21/20
............................
United
States
5,100,000
243,735,183
496,387,001
Communications
Equipment
0.7%
f
Credit
Suisse
AG
into
Cisco
Systems,
Inc.,
Senior
Unsecured
Note,
144A,
10%,
6/01/21
..................................
United
States
5,085,000
207,685,906
f
JPMorgan
Chase
Bank
NA
into
Cisco
Systems,
Inc.,
Senior
Unsecured
Note,
144A,
7.5%,
1/19/21
....................
United
States
6,050,000
243,548,914
451,234,820
Energy
Equipment
&
Services
0.7%
f
Barclays
Bank
plc
into
Schlumberger
Ltd.,
Senior
Unsecured
Note,
144A,
9%,
1/28/21
...................................
United
States
7,150,000
115,190,880
f
JPMorgan
Chase
Bank
NA
into
Baker
Hughes
Co.,
144A,
8.5%,
12/08/20
..........................................
United
States
11,360,000
155,072,093
f
Wells
Fargo
Bank
NA
into
Halliburton
Co.,
Senior
Unsecured
Note,
144A,
10%,
1/11/21
..................................
United
States
12,700,000
162,580,133
432,843,106
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
79
a
A
Country
Shares
a
Value
a
a
a
a
a
a
e
Equity-Linked
Securities
(continued)
Health
Care
Providers
&
Services
0.7%
f
Morgan
Stanley
Finance
LLC
into
CVS
Health
Corp.,
Senior
Unsecured
Note,
144A,
8%,
5/25/21
......................
United
States
3,732,000
$
222,569,646
f
Royal
Bank
of
Canada
into
CVS
Health
Corp.,
144A,
7.5%,
9/03/21
United
States
3,933,000
233,348,036
455,917,682
Insurance
0.7%
f
BNP
Paribas
Issuance
BV
into
MetLife,
Inc.,
BANK
GUARANTEED
Note,
144A,
9%,
9/07/21
..............................
United
States
6,597,000
249,163,979
f
Goldman
Sachs
International
Bank
into
MetLife,
Inc.,
144A,
7.5%,
12/29/20
..........................................
United
States
5,210,000
195,674,243
444,838,222
Interactive
Media
&
Services
1.3%
f
Citigroup
Global
Markets
Holdings,
Inc.
into
Alphabet,
Inc.,
Senior
Unsecured
Note,
144A,
7.5%,
3/19/21
....................
United
States
259,000
354,263,939
f
Goldman
Sachs
International
Bank
into
Facebook,
Inc.,
144A,
9%,
3/26/21
...........................................
United
States
2,590,000
487,488,017
841,751,956
Internet
&
Direct
Marketing
Retail
1.1%
f
Citigroup
Global
Markets
Holdings,
Inc.
into
Amazon.com,
Inc.,
Senior
Unsecured
Note,
144A,
8%,
11/19/20
...............
United
States
169,100
331,311,431
f
Goldman
Sachs
International
Bank
into
Amazon.com,
Inc.,
144A,
7.5%,
1/11/21
.......................................
United
States
190,000
374,918,940
706,230,371
IT
Services
0.7%
f
Barclays
Bank
plc
into
Fidelity
National
Information
Services,
Inc.,
144A,
7.5%,
6/02/21
.................................
United
States
1,495,000
213,836,405
f
Barclays
Bank
plc
into
International
Business
Machines
Corp.,
Senior
Unsecured
Note,
144A,
8%,
12/31/20
...............
United
States
2,000,000
244,298,923
458,135,328
Machinery
0.3%
f
UBS
AG
into
Caterpillar,
Inc.,
144A,
9.5%,
4/29/21
.............
United
States
1,428,600
189,786,431
Media
0.8%
f
Barclays
Bank
plc
into
Comcast
Corp.,
Senior
Unsecured
Note,
144A,
9%,
4/28/21
...................................
United
States
6,400,000
268,875,676
f
Merrill
Lynch
International
&
Co.
CV
into
Comcast
Corp.,
BANK
GUARANTEED
Note,
144A,
7%,
8/09/21
..................
United
States
5,600,000
246,879,136
515,754,812
Metals
&
Mining
0.9%
f
Barclays
Bank
plc
into
Rio
Tinto
plc,
Senior
Unsecured
Note,
144A,
10%,
10/27/20
......................................
United
Kingdom
5,000,000
302,279,752
f
JPMorgan
Chase
Bank
NA
into
Barrick
Gold
Corp.,
144A,
10%,
2/09/21
...........................................
Canada
13,200,000
272,930,375
575,210,127
Pharmaceuticals
1.7%
f
Goldman
Sachs
International
Bank
into
Bristol-Myers
Squibb
Co.,
144A,
8%,
11/04/20
..................................
United
States
5,000,000
293,753,322
f
Goldman
Sachs
International
Bank
into
Bristol-Myers
Squibb
Co.,
144A,
8%,
2/10/21
...................................
United
States
3,984,000
243,047,472
f
Merrill
Lynch
International
&
Co.
CV
into
Pfizer,
Inc.,
BANK
GUARANTEED
Note,
144A,
8%,
8/17/21
..................
United
States
7,000,000
261,557,361
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
80
a
A
Country
Shares
a
Value
a
a
a
a
a
a
e
Equity-Linked
Securities
(continued)
Pharmaceuticals
(continued)
f
Royal
Bank
of
Canada
into
Merck
&
Co.,
Inc.,
Senior
Unsecured
Note,
144A,
7%,
1/25/21
..............................
United
States
3,220,000
$
271,009,444
1,069,367,599
Semiconductors
&
Semiconductor
Equipment
3.1%
f
BNP
Paribas
Issuance
BV
into
Texas
Instruments,
Inc.,
BANK
GUARANTEED
Note,
144A,
8.5%,
6/01/21
.................
United
States
1,439,000
192,877,601
f
Credit
Suisse
AG
into
Broadcom,
Inc.,
144A,
10%,
4/14/21
......
United
States
1,275,000
410,177,438
f
Credit
Suisse
AG
into
Texas
Instruments,
Inc.,
144A,
8%,
8/13/21
.
United
States
2,239,000
305,383,622
f
Merrill
Lynch
International
&
Co.
CV
into
Intel
Corp.,
BANK
GUARANTEED
Note,
144A,
8%,
2/23/21
..................
United
States
4,583,000
244,725,638
f
Royal
Bank
of
Canada
into
Analog
Devices,
Inc.,
Senior
Unsecured
Note,
144A,
8%,
9/15/21
..............................
United
States
1,718,000
203,006,262
f
Royal
Bank
of
Canada
into
Analog
Devices,
Inc.,
Senior
Unsecured
Note,
144A,
8.5%,
12/21/20
............................
United
States
1,700,000
195,378,199
f
Royal
Bank
of
Canada
into
Analog
Devices,
Inc.,
144A,
8.5%,
9/10/21
...........................................
United
States
1,240,000
149,208,761
f
Royal
Bank
of
Canada
into
Intel
Corp.,
Senior
Unsecured
Note,
144A,
8%,
11/18/20
..................................
United
States
5,070,000
266,740,377
1,967,497,898
Software
1.7%
f
Citigroup
Global
Markets
Holdings,
Inc.
into
Microsoft
Corp.,
Senior
Unsecured
Note,
144A,
8%,
4/12/21
......................
United
States
2,200,000
389,844,471
f
Societe
Generale
SA
into
Microsoft
Corp.,
BANK
GUARANTEED
Note,
144A,
8%,
8/24/21
..............................
United
States
1,240,000
265,816,954
f
Societe
Generale
SA
into
Oracle
Corp.,
BANK
GUARANTEED
Note,
144A,
8%,
8/05/21
...................................
United
States
3,390,000
196,451,202
f
UBS
AG
into
Oracle
Corp.,
144A,
9%,
4/29/21
................
United
States
4,303,900
245,886,349
1,097,998,976
Specialty
Retail
0.6%
f
BNP
Paribas
Issuance
BV
into
Home
Depot,
Inc.
(The),
BANK
GUARANTEED
Note,
144A,
7%,
2/16/21
..................
United
States
1,680,000
399,357,310
Technology
Hardware,
Storage
&
Peripherals
0.6%
f
Citigroup
Global
Markets
Holdings,
Inc.
into
Apple,
Inc.,
Senior
Unsecured
Note,
144A,
8%,
1/13/21
......................
United
States
1,180,000
361,825,799
Total
Equity-Linked
Securities
(Cost
$13,000,576,952)
...........................
12,428,195,892
Convertible
Preferred
Stocks
3.6%
Banks
0.7%
Bank
of
America
Corp.,
7.25%,
L
..........................
United
States
300,000
446,400,000
Capital
Markets
0.1%
b
KKR
&
Co.,
Inc.,
6%,
C
.................................
United
States
1,350,000
70,200,000
b
Chemicals
0.0%
†
International
Flavors
&
Fragrances,
Inc.,
6%
.................
United
States
250,000
11,075,000
Electric
Utilities
1.2%
b,d
American
Electric
Power
Co.,
Inc.,
6.125%
..................
United
States
1,000,000
49,020,000
NextEra
Energy,
Inc.,
5.279%
............................
United
States
4,000,000
186,720,000
b
NextEra
Energy,
Inc.,
6.219%
............................
United
States
6,300,000
300,825,000
Southern
Co.
(The),
6.75%,
2019
.........................
United
States
4,727,400
220,013,196
756,578,196
Health
Care
Equipment
&
Supplies
0.1%
Danaher
Corp.,
5%,
B
..................................
United
States
50,000
63,878,000
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
81
a
A
Country
Shares
a
Value
a
a
a
a
a
a
Convertible
Preferred
Stocks
(continued)
Machinery
0.1%
Fortive
Corp.,
5%,
A
...................................
United
States
81,266
$
76,092,606
Multi-Utilities
0.4%
d
Dominion
Energy,
Inc.,
7.25%,
A
..........................
United
States
500,000
50,880,000
DTE
Energy
Co.,
6.25%
................................
United
States
1,000,000
45,160,000
Sempra
Energy,
6%,
A
.................................
United
States
500,000
49,225,000
Sempra
Energy,
6.75%,
B
...............................
United
States
839,000
82,230,390
227,495,390
Semiconductors
&
Semiconductor
Equipment
0.8%
Broadcom,
Inc.,
8%,
A
..................................
United
States
420,000
523,635,000
Thrifts
&
Mortgage
Finance
0.2%
b
FNMA,
5.375%
.......................................
United
States
4,250
115,387,500
b
Total
Convertible
Preferred
Stocks
(Cost
$2,154,199,926)
........................
2,290,741,692
Preferred
Stocks
0.2%
Banks
0.1%
d
JPMorgan
Chase
&
Co.,
6%,
EE
..........................
United
States
1,859,084
51,013,265
Thrifts
&
Mortgage
Finance
0.1%
b,d
FHLMC,
8.375%,
Z
....................................
United
States
6,500,000
57,850,000
b
FNMA,
8.25%,
S
......................................
United
States
4,500,000
39,960,000
97,810,000
Total
Preferred
Stocks
(Cost
$309,520,975)
.....................................
148,823,265
a
Principal
Amount
*
Convertible
Bonds
0.1%
Airlines
0.1%
Southwest
Airlines
Co.
,
Senior
Note
,
1.25
%
,
5/01/25
...........
United
States
60,000,000
78,600,000
Oil,
Gas
&
Consumable
Fuels
0.0%
†
g
Chesapeake
Energy
Corp.
,
Senior
Note
,
5.5
%
,
9/15/26
.........
United
States
203,359,000
7,646,298
Total
Convertible
Bonds
(Cost
$153,486,360)
...................................
86,246,298
Corporate
Bonds
29.1%
Aerospace
&
Defense
0.1%
Raytheon
Technologies
Corp.
,
Senior
Note
,
3.125
%
,
5/04/27
.....
United
States
40,000,000
44,411,182
Air
Freight
&
Logistics
0.1%
f
XPO
Logistics,
Inc.
,
Senior
Note
,
144A
,
6.5
%
,
6/15/22
..........
United
States
50,000,000
50,236,250
Airlines
0.0%
†
f
American
Airlines
Group,
Inc.
,
Senior
Note
,
144A
,
5
%
,
6/01/22
...
United
States
16,000,000
10,920,000
Automobiles
0.6%
Ford
Motor
Co.
,
Senior
Note,
9%,
4/22/25
.............................
United
States
50,000,000
57,389,750
Senior
Note,
4.346%,
12/08/26
.........................
United
States
120,000,000
118,620,000
General
Motors
Co.
,
Senior
Bond,
5.15%,
4/01/38
...........................
United
States
150,000,000
159,244,723
Senior
Note,
6.125%,
10/01/25
.........................
United
States
20,000,000
23,263,522
358,517,995
Banks
3.3%
Bank
of
America
Corp.
,
h
AA,
Junior
Sub.
Bond,
6.1%
to
3/17/25,
FRN
thereafter,
Perpetual
United
States
75,000,000
81,697,875
h
U,
Junior
Sub.
Bond,
5.2%
to
6/01/23,
FRN
thereafter,
Perpetual
United
States
75,000,000
75,789,970
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
82
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
Corporate
Bonds
(continued)
Banks
(continued)
Bank
of
America
Corp.,
(continued)
h
X,
Junior
Sub.
Bond,
6.25%
to
9/05/24,
FRN
thereafter,
Perpetual
United
States
55,000,000
$
59,037,760
Senior
Bond,
3.419%
to
12/20/27,
FRN
thereafter,
12/20/28
...
United
States
135,000,000
150,563,866
Senior
Note,
3.004%
to
12/20/22,
FRN
thereafter,
12/20/23
....
United
States
40,000,000
42,024,196
Barclays
plc
,
Senior
Note,
4.61%
to
2/15/22,
FRN
thereafter,
2/15/23
.......
United
Kingdom
40,000,000
41,881,297
Senior
Note,
3.65%,
3/16/25
...........................
United
Kingdom
50,000,000
54,031,736
Senior
Note,
3.932%
to
5/07/24,
FRN
thereafter,
5/07/25
......
United
Kingdom
50,000,000
53,883,338
Senior
Note,
4.375%,
1/12/26
..........................
United
Kingdom
125,000,000
140,174,709
Citigroup,
Inc.
,
h
Junior
Sub.
Bond,
5.95%
to
1/30/23,
FRN
thereafter,
Perpetual
.
United
States
155,000,000
159,659,264
h
D,
Junior
Sub.
Bond,
5.35%
to
5/15/23,
FRN
thereafter,
Perpetual
United
States
140,000,000
140,068,600
h
M,
Junior
Sub.
Bond,
6.3%
to
5/15/24,
FRN
thereafter,
Perpetual
United
States
135,000,000
141,506,325
Sub.
Bond,
4.125%,
7/25/28
...........................
United
States
130,000,000
149,640,568
h
JPMorgan
Chase
&
Co.
,
i
I,
Junior
Sub.
Bond,
FRN,
3.738%,
(3-month
USD
LIBOR
+
3.47%),
Perpetual
...................................
United
States
178,959,000
171,709,374
Q,
Junior
Sub.
Bond,
5.15%
to
5/01/23,
FRN
thereafter,
Perpetual
United
States
90,700,000
91,561,107
R,
Junior
Sub.
Bond,
6%
to
8/01/23,
FRN
thereafter,
Perpetual
.
United
States
65,000,000
66,840,975
S,
Junior
Sub.
Bond,
6.75%
to
2/01/24,
FRN
thereafter,
Perpetual
United
States
80,000,000
86,773,366
U,
Junior
Sub.
Bond,
6.125%
to
4/30/24,
FRN
thereafter,
Perpetual
.........................................
United
States
60,000,000
62,448,063
i
V,
Junior
Sub.
Bond,
FRN,
3.616%,
(3-month
USD
LIBOR
+
3.32%),
Perpetual
...................................
United
States
168,100,000
155,874,995
X,
Junior
Sub.
Bond,
6.1%
to
10/01/24,
FRN
thereafter,
Perpetual
United
States
75,000,000
78,915,242
h
Wells
Fargo
&
Co.
,
S
,
Junior
Sub.
Bond
,
5.9%
to
6/15/24,
FRN
thereafter
,
Perpetual
.................................
United
States
100,000,000
102,541,082
2,106,623,708
Beverages
0.0%
†
Anheuser-Busch
InBev
Worldwide,
Inc.
,
Senior
Bond
,
4
%
,
4/13/28
Belgium
25,000,000
28,910,121
Biotechnology
0.3%
AbbVie,
Inc.
,
Senior
Note,
2.9%,
11/06/22
...........................
United
States
35,000,000
36,720,284
f
Senior
Note,
144A,
3.8%,
3/15/25
.......................
United
States
100,000,000
111,072,330
Senior
Note,
3.2%,
5/14/26
............................
United
States
25,000,000
27,591,381
175,383,995
Capital
Markets
0.3%
Goldman
Sachs
Group,
Inc.
(The)
,
Senior
Note,
2.876%
to
10/31/21,
FRN
thereafter,
10/31/22
....
United
States
100,000,000
102,422,855
Senior
Note,
3.272%
to
9/29/24,
FRN
thereafter,
9/29/25
......
United
States
100,000,000
108,347,761
210,770,616
Chemicals
0.1%
f
Olin
Corp.
,
Senior
Note
,
144A
,
9.5
%
,
6/01/25
................
United
States
40,000,000
46,674,000
Communications
Equipment
0.1%
f
CommScope
Technologies
LLC
,
Senior
Note
,
144A
,
6
%
,
6/15/25
..
United
States
19,972,000
20,269,583
f
CommScope
,
Inc.
,
Senior
Note
,
144A
,
7.125
%
,
7/01/28
.........
United
States
45,000,000
46,296,900
66,566,483
Construction
Materials
0.3%
f
CEMEX
Finance
LLC
,
Senior
Secured
Note
,
144A
,
6
%
,
4/01/24
..
Mexico
57,800,000
59,239,798
f
Cemex
SAB
de
CV
,
Senior
Secured
Bond,
144A,
5.7%,
1/11/25
................
Mexico
65,000,000
66,462,500
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
83
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
Corporate
Bonds
(continued)
Construction
Materials
(continued)
f
Cemex
SAB
de
CV,
(continued)
Senior
Secured
Bond,
144A,
7.75%,
4/16/26
...............
Mexico
50,100,000
$
52,855,500
178,557,798
Consumer
Finance
1.1%
Capital
One
Financial
Corp.
,
Sub.
Note,
4.2%,
10/29/25
............................
United
States
113,000,000
125,393,344
Sub.
Note,
3.75%,
7/28/26
............................
United
States
100,200,000
109,069,553
Ford
Motor
Credit
Co.
LLC
,
Senior
Note,
3.336%,
3/18/21
..........................
United
States
48,000,000
48,086,400
Senior
Note,
5.125%,
6/16/25
..........................
United
States
60,000,000
61,950,000
Senior
Note,
4.134%,
8/04/25
..........................
United
States
149,650,000
148,496,198
Senior
Note,
5.113%,
5/03/29
..........................
United
States
110,000,000
113,162,500
General
Motors
Financial
Co.,
Inc.
,
Senior
Note
,
4.15
%
,
6/19/23
..
United
States
75,000,000
79,522,633
685,680,628
Containers
&
Packaging
0.5%
f
Mauser
Packaging
Solutions
Holding
Co.
,
Senior
Note,
144A,
7.25%,
4/15/25
......................
United
States
200,995,000
189,437,788
Senior
Secured
Note,
144A,
5.5%,
4/15/24
................
United
States
105,000,000
105,525,000
294,962,788
Diversified
Telecommunication
Services
0.4%
AT&T,
Inc.
,
Senior
Bond,
4.125%,
2/17/26
..........................
United
States
75,000,000
85,934,197
Senior
Note,
3%,
6/30/22
.............................
United
States
90,000,000
93,593,766
f
CCO
Holdings
LLC
/
CCO
Holdings
Capital
Corp.
,
Senior
Bond,
144A,
5.5%,
5/01/26
.......................
United
States
40,000,000
41,756,200
Senior
Bond,
144A,
5.125%,
5/01/27
.....................
United
States
30,000,000
31,606,650
252,890,813
Energy
Equipment
&
Services
0.9%
f
Weatherford
International
Ltd.
,
144A,
8.75%,
9/01/24
................................
United
States
190,000,000
195,175,600
Senior
Note,
144A,
11%,
12/01/24
.......................
United
States
670,113,000
403,743,082
598,918,682
Entertainment
0.4%
Netflix,
Inc.
,
Senior
Bond,
4.375%,
11/15/26
.........................
United
States
100,000,000
109,096,000
Senior
Bond,
4.875%,
4/15/28
..........................
United
States
69,300,000
77,555,709
Senior
Bond,
5.875%,
11/15/28
.........................
United
States
50,000,000
59,749,500
246,401,209
Equity
Real
Estate
Investment
Trusts
(REITs)
0.3%
American
Tower
Corp.
,
Senior
Bond
,
3.375
%
,
10/15/26
.........
United
States
30,000,000
33,239,809
Equinix
,
Inc.
,
Senior
Bond
,
5.375
%
,
5/15/27
.................
United
States
70,000,000
76,386,436
f
Iron
Mountain,
Inc.
,
Senior
Note
,
144A
,
4.875
%
,
9/15/27
........
United
States
110,610,000
113,117,252
222,743,497
Food
Products
0.4%
Kraft
Heinz
Foods
Co.
,
Senior
Bond,
4.625%,
1/30/29
..........................
United
States
24,400,000
27,187,155
f
Senior
Bond,
144A,
5.5%,
6/01/50
.......................
United
States
39,200,000
45,010,263
Senior
Note,
3.95%,
7/15/25
...........................
United
States
25,041,000
27,219,655
f
Post
Holdings,
Inc.
,
Senior
Bond,
144A,
5%,
8/15/26
........................
United
States
87,000,000
89,325,945
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
84
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
Corporate
Bonds
(continued)
Food
Products
(continued)
f
Post
Holdings,
Inc.,
(continued)
Senior
Bond,
144A,
5.625%,
1/15/28
.....................
United
States
60,000,000
$
63,656,400
252,399,418
Health
Care
Providers
&
Services
9.4%
CHS/Community
Health
Systems,
Inc.
,
f
Secured
Note,
144A,
11%,
6/30/23
......................
United
States
1,385,000,000
1,078,423,325
f
Secured
Note,
144A,
8.125%,
6/30/24
....................
United
States
755,000,000
553,037,500
Senior
Note,
6.875%,
2/01/22
..........................
United
States
23,805,000
21,260,841
f
Senior
Note,
144A,
6.875%,
4/01/28
.....................
United
States
1,275,000,000
604,828,125
f
Senior
Secured
Note,
144A,
6.625%,
2/15/25
..............
United
States
300,000,000
290,940,000
f
Senior
Secured
Note,
144A,
8%,
3/15/26
..................
United
States
370,000,000
363,668,375
f
Senior
Secured
Note,
144A,
8%,
12/15/27
.................
United
States
544,000,000
533,120,000
Cigna
Corp.
,
Senior
Note
,
3.75
%
,
7/15/23
...................
United
States
36,552,000
39,638,485
CVS
Health
Corp.
,
Senior
Bond,
4.3%,
3/25/28
............................
United
States
125,000,000
146,412,426
Senior
Bond,
5.05%,
3/25/48
...........................
United
States
50,000,000
63,790,954
HCA,
Inc.
,
Senior
Bond,
5.875%,
5/01/23
..........................
United
States
90,000,000
98,100,000
Senior
Bond,
5.625%,
9/01/28
..........................
United
States
90,000,000
103,115,250
Senior
Secured
Note,
5%,
3/15/24
.......................
United
States
124,800,000
139,962,658
Tenet
Healthcare
Corp.
,
Secured
Note,
5.125%,
5/01/25
.........................
United
States
133,300,000
133,599,925
Senior
Bond,
6.875%,
11/15/31
.........................
United
States
55,258,000
54,349,558
Senior
Note,
8.125%,
4/01/22
..........................
United
States
850,000,000
945,540,000
Senior
Note,
6.75%,
6/15/23
...........................
United
States
565,000,000
593,815,000
f
Senior
Note,
144A,
6.125%,
10/01/28
....................
United
States
145,000,000
141,465,625
Senior
Secured
Note,
4.625%,
7/15/24
...................
United
States
85,200,000
85,498,200
5,990,566,247
Hotels,
Restaurants
&
Leisure
0.7%
f
Caesars
Entertainment,
Inc.
,
Senior
Note,
144A,
8.125%,
7/01/27
.....................
United
States
40,000,000
42,452,200
Senior
Secured
Note,
144A,
6.25%,
7/01/25
...............
United
States
30,000,000
31,312,650
f
Golden
Nugget,
Inc.
,
Senior
Note
,
144A
,
6.75
%
,
10/15/24
.......
United
States
51,500,000
43,066,875
f
Wynn
Las
Vegas
LLC
/
Wynn
Las
Vegas
Capital
Corp.
,
Senior
Bond,
144A,
5.5%,
3/01/25
.......................
United
States
164,500,000
158,228,438
Senior
Note,
144A,
4.25%,
5/30/23
......................
United
States
84,000,000
79,800,000
Senior
Note,
144A,
5.25%,
5/15/27
......................
United
States
99,827,000
93,774,988
448,635,151
Household
Durables
0.2%
f
Shea
Homes
LP
/
Shea
Homes
Funding
Corp.
,
Senior
Bond
,
144A
,
6.125
%
,
4/01/25
.....................................
United
States
96,278,000
99,709,829
Insurance
0.1%
Prudential
Financial,
Inc.
,
Junior
Sub.
Bond
,
5.7%
to
9/15/28,
FRN
thereafter
,
9/15/48
...................................
United
States
65,000,000
73,639,581
Internet
&
Direct
Marketing
Retail
0.1%
Alibaba
Group
Holding
Ltd.
,
Senior
Note
,
3.4
%
,
12/06/27
.......
China
40,000,000
44,854,333
Machinery
0.1%
f
Navistar
International
Corp.
,
Senior
Secured
Note
,
144A
,
9.5
%
,
5/01/25
...........................................
United
States
30,000,000
33,750,900
f
Vertical
US
Newco,
Inc.
,
Senior
Secured
Note
,
144A
,
5.25
%
,
7/15/27
Germany
50,000,000
52,057,000
85,807,900
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
85
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
Corporate
Bonds
(continued)
Media
2.0%
f
Diamond
Sports
Group
LLC
/
Diamond
Sports
Finance
Co.
,
Senior
Secured
Note
,
144A
,
5.375
%
,
8/15/26
....................
United
States
175,000,000
$
124,235,125
DISH
DBS
Corp.
,
Senior
Note,
5.875%,
7/15/22
..........................
United
States
391,500,000
407,551,500
Senior
Note,
5%,
3/15/23
.............................
United
States
300,000,000
306,375,000
Senior
Note,
5.875%,
11/15/24
.........................
United
States
128,200,000
132,206,250
f
Senior
Note,
144A,
7.375%,
7/01/28
.....................
United
States
40,000,000
41,250,000
f
Univision
Communications,
Inc.
,
Senior
Secured
Note,
144A,
5.125%,
2/15/25
..............
United
States
202,220,000
191,982,612
Senior
Secured
Note,
144A,
9.5%,
5/01/25
................
United
States
55,000,000
59,125,000
Senior
Secured
Note,
144A,
6.625%,
6/01/27
..............
United
States
30,000,000
29,362,500
1,292,087,987
Metals
&
Mining
0.4%
f
Cleveland-Cliffs,
Inc.
,
Senior
Secured
Note
,
144A
,
6.75
%
,
3/15/26
.
United
States
50,000,000
50,922,500
f
FMG
Resources
August
2006
Pty.
Ltd.
,
Senior
Note,
144A,
4.75%,
5/15/22
......................
Australia
40,200,000
41,230,125
Senior
Note,
144A,
5.125%,
3/15/23
.....................
Australia
25,000,000
26,150,000
Senior
Note,
144A,
5.125%,
5/15/24
.....................
Australia
60,540,000
64,739,962
Freeport-McMoRan,
Inc.
,
Senior
Bond,
5.25%,
9/01/29
...........................
United
States
30,000,000
32,225,700
Senior
Note,
3.875%,
3/15/23
..........................
United
States
62,636,000
64,653,506
279,921,793
Oil,
Gas
&
Consumable
Fuels
2.0%
Calumet
Specialty
Products
Partners
LP
/
Calumet
Finance
Corp.
,
Senior
Note,
7.625%,
1/15/22
..........................
United
States
64,263,000
64,006,912
Senior
Note,
7.75%,
4/15/23
...........................
United
States
142,585,000
128,163,240
f
Senior
Note,
144A,
11%,
4/15/25
........................
United
States
290,380,000
263,516,947
f
Senior
Secured
Note,
144A,
9.25%,
7/15/24
...............
United
States
118,402,000
129,535,340
g
Chesapeake
Energy
Corp.
,
f
Secured
Note,
144A,
11.5%,
1/01/25
.....................
United
States
1,070,000,000
146,311,800
Senior
Note,
7%,
10/01/24
............................
United
States
410,000,000
15,887,500
HighPoint
Operating
Corp.
,
Senior
Bond,
7%,
10/15/22
............................
United
States
205,783,000
52,169,077
Senior
Note,
8.75%,
6/15/25
...........................
United
States
175,845,000
44,840,475
Kinder
Morgan,
Inc.
,
Senior
Bond
,
7.75
%
,
1/15/32
.............
United
States
95,000,000
132,247,910
Occidental
Petroleum
Corp.
,
Senior
Note,
8%,
7/15/25
.............................
United
States
50,000,000
50,405,250
Senior
Note,
6.375%,
9/01/28
..........................
United
States
60,000,000
55,654,500
Senior
Note,
6.625%,
9/01/30
..........................
United
States
60,000,000
55,462,500
f
PBF
Holding
Co.
LLC
/
PBF
Finance
Corp.
,
Senior
Note,
144A,
6%,
2/15/28
........................
United
States
37,000,000
24,898,225
Senior
Secured
Note,
144A,
9.25%,
5/15/25
...............
United
States
50,000,000
51,322,250
Sunoco
LP
/
Sunoco
Finance
Corp.
,
Senior
Note
,
5.5
%
,
2/15/26
..
United
States
62,775,000
62,920,010
1,277,341,936
Pharmaceuticals
2.0%
AstraZeneca
plc
,
Senior
Note,
2.375%,
11/16/20
.........................
United
Kingdom
25,000,000
25,063,507
Senior
Note,
2.375%,
6/12/22
..........................
United
Kingdom
31,500,000
32,493,895
f
Bausch
Health
Americas,
Inc.
,
Senior
Note
,
144A
,
9.25
%
,
4/01/26
.
United
States
137,000,000
150,878,100
f
Bausch
Health
Cos.,
Inc.
,
Senior
Bond,
144A,
6.125%,
4/15/25
.....................
United
States
122,400,000
125,429,400
Senior
Note,
144A,
5.5%,
3/01/23
.......................
United
States
52,984,000
52,950,885
Senior
Note,
144A,
5.875%,
5/15/23
.....................
United
States
27,338,000
27,222,634
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
franklintempleton.com
Annual
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
86
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
Corporate
Bonds
(continued)
Pharmaceuticals
(continued)
f
Bausch
Health
Cos.,
Inc.,
(continued)
Senior
Note,
144A,
9%,
12/15/25
.......................
United
States
105,000,000
$
114,481,500
Senior
Note,
144A,
7%,
1/15/28
........................
United
States
30,000,000
31,775,700
Senior
Secured
Note,
144A,
7%,
3/15/24
..................
United
States
87,300,000
90,442,800
Senior
Secured
Note,
144A,
5.5%,
11/01/25
...............
United
States
91,000,000
93,252,250
f
Bayer
US
Finance
II
LLC
,
Senior
Note
,
144A
,
4.25
%
,
12/15/25
...
Germany
65,000,000
74,442,495
Bristol-Myers
Squibb
Co.
,
Senior
Note
,
3.4
%
,
7/26/29
..........
United
States
40,000,000
46,545,116
f
Endo
Dac
/
Endo
Finance
LLC
/
Endo
Finco
,
Inc.
,
Secured
Note,
144A,
9.5%,
7/31/27
......................
United
States
69,939,000
73,217,391
Senior
Note,
144A,
6%,
6/30/28
........................
United
States
107,739,000
79,295,904
Mylan
NV
,
Senior
Note
,
3.95
%
,
6/15/26
.....................
United
States
130,000,000
146,226,476
f
Par
Pharmaceutical,
Inc.
,
Senior
Secured
Note
,
144A
,
7.5
%
,
4/01/27
United
States
76,744,000
80,503,688
1,244,221,741
Road
&
Rail
0.1%
f
Ashtead
Capital,
Inc.
,
Senior
Note,
144A,
4.375%,
8/15/27
.....................
United
Kingdom
34,500,000
35,966,250
Senior
Note,
144A,
4%,
5/01/28
........................
United
Kingdom
25,000,000
26,000,000
61,966,250
Semiconductors
&
Semiconductor
Equipment
0.2%
Broadcom
Corp.
/
Broadcom
Cayman
Finance
Ltd.
,
Senior
Note
,
3.5
%
,
1/15/28
......................................
United
States
40,000,000
43,357,518
Microchip
Technology,
Inc.
,
Senior
Secured
Note
,
4.333
%
,
6/01/23
United
States
69,000,000
74,369,893
117,727,411
Tobacco
0.4%
BAT
Capital
Corp.
,
Senior
Note,
3.222%,
8/15/24
..........................
United
Kingdom
88,500,000
94,781,716
Senior
Note,
3.557%,
8/15/27
..........................
United
Kingdom
170,000,000
183,896,524
278,678,240
Trading
Companies
&
Distributors
0.2%
United
Rentals
North
America,
Inc.
,
Senior
Bond
,
4.875
%
,
1/15/28
United
States
93,000,000
97,766,250
f
WESCO
Distribution,
Inc.
,
Senior
Note
,
144A
,
7.125
%
,
6/15/25
...
United
States
30,000,000
32,718,750
130,485,000
Wireless
Telecommunication
Services
2.0%
Sprint
Communications,
Inc.
,
Senior
Note,
11.5%,
11/15/21
..........................
United
States
200,000,000
219,795,000
Senior
Note,
6%,
11/15/22
.............................
United
States
347,700,000
375,081,375
Sprint
Corp.
,
Senior
Note,
7.875%,
9/15/23
..........................
United
States
187,350,000
215,007,544
Senior
Note,
7.125%,
6/15/24
..........................
United
States
190,650,000
219,604,015
Senior
Note,
7.625%,
3/01/26
..........................
United
States
86,300,000
104,414,370
f
Sprint
Spectrum
Co.
LLC
/
Sprint
Spectrum
Co.
II
LLC
/
Sprint
Spectrum
Co.
III
LLC
,
Senior
Secured
Note
,
144A
,
5.152
%
,
3/20/28
...........................................
United
States
130,000,000
153,481,250
1,287,383,554
Total
Corporate
Bonds
(Cost
$21,350,355,552)
..................................
18,544,596,136
Units
j
Index-Linked
Notes
0.3%
Capital
Markets
0.3%
f,k
Credit
Suisse
AG,
Senior
Unsecured
Note,
144A,
11.06%,
2/08/21
Switzerland
33,000
97,818,930
f,k
UBS
AG,
Senior
Unsecured
Note,
144A,
0%,
5/07/21
..........
Switzerland
75,000
74,256,750
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
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The
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notes
are
an
integral
part
of
these
financial
statements.
Annual
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87
a
a
Country
Units
a
Value
a
a
a
a
a
a
j
Index-Linked
Notes
(continued)
Capital
Markets
(continued)
172,075,680
Total
Index-Linked
Notes
(Cost
$174,480,150)
...................................
$
172,075,680
Principal
Amount
*
i,l
Senior
Floating
Rate
Interests
0.2%
Airlines
0.0%
†
m
Delta
Air
Lines,
Inc.
/
SkyMiles
IP
Ltd.,
Initial
Term
Loan,
4.75%,
(6-month
USD
LIBOR
+
3.75%),
10/20/27
.................
United
States
25,000,000
25,246,100
Hotels,
Restaurants
&
Leisure
0.0%
†
Golden
Nugget
Online
Gaming,
Inc.,
2020
Buyback
Term
Loan,
13%,
(1-month
USD
LIBOR
+
12%),
10/04/23
...................
United
States
13,867,491
16,086,289
Media
0.0%
†
Univision
Communications,
Inc.,
First
Lien,
2017
Replacement
Repriced
Term
Loan,
3.75%,
(1-month
USD
LIBOR
+
2.75%),
3/15/24
...........................................
United
States
25,254,625
24,383,341
Oil,
Gas
&
Consumable
Fuels
0.1%
g
Chesapeake
Energy
Corp.,
Term
Loan,
A,
(1-month
USD
LIBOR
+
8%),
6/24/24
.......................................
United
States
77,725,000
55,573,375
Specialty
Retail
0.1%
Belk,
Inc.,
First
Lien,
Term
Loan,
7.75%,
(3-month
USD
LIBOR
+
6.75%),
7/31/25
.....................................
United
States
86,348,727
33,151,780
Total
Senior
Floating
Rate
Interests
(Cost
$218,870,625)
.........................
154,440,885
U.S.
Government
and
Agency
Securities
1.6%
U.S.
Treasury
Bonds
,
7.5%,
11/15/24
......................................
United
States
350,000,000
455,095,704
6.875%,
8/15/25
.....................................
United
States
400,000,000
527,906,248
Total
U.S.
Government
and
Agency
Securities
(Cost
$921,665,648)
................
983,001,952
Mortgage-Backed
Securities
2.5%
Federal
National
Mortgage
Association
(FNMA)
Fixed
Rate
1.0%
FNMA,
30
Year,
3%,
8/01/50
.............................
United
States
438,515,367
461,300,687
FNMA,
30
Year,
3%,
7/01/50
.............................
United
States
82,248,191
86,494,817
FNMA,
30
Year,
4%,
8/01/49
-
2/01/50
......................
United
States
65,817,039
71,558,767
619,354,271
Government
National
Mortgage
Association
(GNMA)
Fixed
Rate
1.5%
GNMA
II,
Single-family,
30
Year,
3%,
7/20/50
.................
United
States
428,250,644
451,897,389
GNMA
II,
Single-family,
30
Year,
3.5%,
1/20/50
-
6/20/50
........
United
States
498,787,259
526,837,938
GNMA
II,
Single-family,
30
Year,
4%,
11/20/49
................
United
States
—
—
978,735,327
Total
Mortgage-Backed
Securities
(Cost
$1,597,650,294)
.........................
1,598,089,598
Shares
Escrows
and
Litigation
Trusts
0.0%
b,n
Motors
Liquidation
Co.,
Escrow
Account
....................
United
States
400,000,000
—
b,n
Motors
Liquidation
Co.,
Escrow
Account,
Convertible
Preferred,
C
.
United
States
11,000,000
—
Total
Escrows
and
Litigation
Trusts
(Cost
$2,416,248)
...........................
—
Total
Long
Term
Investments
(Cost
$64,308,512,457)
............................
62,549,054,268
a
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
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part
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these
financial
statements.
88
Short
Term
Investments
1.1%
a
a
Country
Shares
a
Value
a
Money
Market
Funds
1.0%
o,p
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
........
United
States
639,000,040
$
639,000,040
Total
Money
Market
Funds
(Cost
$639,000,040)
.................................
639,000,040
q
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
0.1%
a
a
a
a
a
Money
Market
Funds
0.1%
o,p
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
........
United
States
23,122,000
23,122,000
Principal
Amount
*
Repurchase
Agreements
0.0%
†
r
Joint
Repurchase
Agreement,
J.P.
Morgan
Securities
LLC,
0.06%,
10/01/20
(Maturity
Value
$11,734,649)
Collateralized
by
U.S.
Treasury
Bond,
Strip,
7/15/22;
and
U.S.
Treasury
Note,
Index
Linked,
0.125%,
1/15/23
(valued
at
$11,969,323)
.......................................
11,734,630
11,734,630
Total
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
(Cost
$34,856,630)
...........................................................
34,856,630
Total
Short
Term
Investments
(Cost
$673,856,670
)
...............................
673,856,670
a
Total
Investments
(Cost
$64,982,369,127)
99.3%
................................
$63,222,910,938
Options
Written
(0.0)%
.......................................................
(2,942,000)
Other
Assets,
less
Liabilities
0.7%
.............................................
445,324,889
Net
Assets
100.0%
...........................................................
$63,665,293,827
Number
of
Contracts
Notional
Amount
#
s
Options
Written
(0.0)%
†
Calls
-
Exchange-Traded
Equity
Options
PepsiCo,
Inc.,
October
Strike
Price
$145.00,
Expires
10/16/20
....
5,000
69,300,000
(340,000)
Target
Corp.,
October
Strike
Price
$165.00,
Expires
10/16/20
....
5,000
78,710,000
(480,000)
Texas
Instruments,
Inc.,
October
Strike
Price
$150.00,
Expires
10/16/20
..........................................
5,000
71,395,000
(530,000)
United
Parcel
Service,
Inc.,
October
Strike
Price
$180.00,
Expires
10/16/20
..........................................
5,000
83,315,000
(335,000)
(1,685,000)
Puts
-
Exchange-Traded
Equity
Options
Alphabet,
Inc.,
October
Strike
Price
$1,350.00,
Expires
10/16/20
..
1,200
175,872,000
(642,000)
Apple,
Inc.,
October
Strike
Price
$95.00,
Expires
10/16/20
.......
15,000
173,715,000
(255,000)
Microsoft
Corp.,
October
Strike
Price
$185.00,
Expires
10/16/20
..
10,000
210,330,000
(360,000)
(1,257,000)
Total
Options
Written
(Premiums
received
$13,413,252)
..........................
$
(2,942,000)
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Income
Fund
(continued)
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integral
part
of
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financial
statements.
Annual
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89
See
abbreviations
on
page
146
.
#
Notional
amount
is
the
number
of
units
specified
in
the
contract,
and
can
include
currency
units,
bushels,
shares,
pounds,
barrels
or
other
units.
Currency
units
are
stated
in
U.S.
dollars
unless
otherwise
indicated.
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
A
portion
or
all
of
the
security
is
held
in
connection
with
written
option
contracts
open
at
year
end.
b
Non-income
producing.
c
See
Note
10
regarding
holdings
of
5%
voting
securities.
d
A
portion
or
all
of
the
security
is
on
loan
at
September
30,
2020.
See
Note
1(h)
e
See
Note
1(g)
regarding
equity-linked
securities.
f
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
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.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
September
30,
2020,
the
aggregate
value
of
these
securities
was
$21,028,929,826,
representing
33.0%
of
net
assets.
g
See
Note
7
regarding
defaulted
securities.
h
Perpetual
security
with
no
stated
maturity
date.
i
The
coupon
rate
shown
represents
the
rate
at
period
end.
j
See
Note
1(f)
regarding
index-linked
notes.
k
Security
pays
variable
interest
based
on
the
distributions
of
the
strategy
index
and
proceeds
earned
from
related
equity
derivatives.
The
coupon
rate
shown
represents
the
combined
rate
at
period
end.
Cash
payment
at
maturity
or
upon
early
redemption
is
based
on
the
performance
of
the
strategy
index.
l
See
Note
1(j)
regarding
senior
floating
rate
interests.
m
A
portion
or
all
of
the
security
purchased
on
a
delayed
delivery
basis.
See
Note
1(j)
n
Fair
valued
using
significant
unobservable
inputs.
See
Note
14
regarding
fair
value
measurements.
o
See
Note
3(f)
regarding
investments
in
affiliated
management
investment
companies.
p
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
q
See
Note
1(h)
regarding
securities
on
loan.
r
See
Note
1(c)
regarding
joint
repurchase
agreement.
s
See
Note
1(e)
regarding
written
options.
Franklin
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integral
part
of
these
financial
statements.
90
a
Year
Ended
September
30,
Year
Ended
September
30,
2018
a
2020
2019
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
............................................
$6.07
$5.86
$5.89
Income
from
investment
operations
b
:
Net
investment
income
c
..................................................
0.10
0.14
0.01
Net
realized
and
unrealized
gains
(losses)
....................................
0.08
0.25
(0.02)
Total
from
investment
operations
.............................................
0.18
0.39
(0.01)
Less
distributions
from:
Net
investment
income
...................................................
(0.16)
(0.18)
(0.02)
Net
asset
value,
end
of
year
................................................
$6.09
$6.07
$5.86
Total
return
d
............................................................
3.01%
6.70%
(0.23)%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
...............................
0.89%
0.89%
0.86%
Expenses
net
of
waiver
and
payments
by
affiliates
f
...............................
0.88%
0.88%
0.86%
g
Net
investment
income
....................................................
1.58%
2.36%
2.40%
Supplemental
data
Net
assets,
end
of
year
(000’s)
..............................................
$1,097,545
$336,646
$4,472
Portfolio
turnover
rate
.....................................................
65.54%
41.34%
44.67%
Portfolio
turnover
rate
excluding
mortgage
dollar
rolls
h
.............................
65.54%
41.34%
44.67%
a
For
the
period
September
10,
2018
(effective
date)
to
September
30,
2018.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
See
Note
1(i)
regarding
mortgage
dollar
rolls.
Franklin
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Financial
Highlights
Franklin
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Government
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Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
91
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
A1
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$6.07
$5.85
$6.13
$6.35
$6.40
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.10
0.15
0.15
0.13
0.14
Net
realized
and
unrealized
gains
(losses)
...........
0.09
0.25
(0.25)
(0.16)
0.01
Total
from
investment
operations
....................
0.19
0.40
(0.10)
(0.03)
0.15
Less
distributions
from:
Net
investment
income
..........................
(0.17)
(0.18)
(0.18)
(0.19)
(0.20)
Net
asset
value,
end
of
year
.......................
$6.09
$6.07
$5.85
$6.13
$6.35
Total
return
c
...................................
3.09%
6.94%
(1.60)%
(0.45)%
2.35%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.78%
0.79%
0.76%
0.79%
0.76%
Expenses
net
of
waiver
and
payments
by
affiliates
d
......
0.77%
0.78%
0.76%
e
0.79%
e
0.76%
e
Net
investment
income
...........................
1.69%
2.46%
2.50%
2.17%
2.21%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$2,661,888
$2,885,194
$3,099,373
$3,581,769
$4,235,819
Portfolio
turnover
rate
............................
65.54%
41.34%
44.67%
86.72%
92.18%
Portfolio
turnover
rate
excluding
mortgage
dollar
rolls
f
....
65.54%
41.34%
44.67%
86.72%
92.18%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
f
See
Note
1(i)
regarding
mortgage
dollar
rolls.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
U.S.
Government
Securities
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
92
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$6.03
$5.81
$6.08
$6.30
$6.36
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.07
0.12
0.12
0.10
0.11
Net
realized
and
unrealized
gains
(losses)
...........
0.08
0.25
(0.24)
(0.16)
—
c
Total
from
investment
operations
....................
0.15
0.37
(0.12)
(0.06)
0.11
Less
distributions
from:
Net
investment
income
..........................
(0.14)
(0.15)
(0.15)
(0.16)
(0.17)
Net
asset
value,
end
of
year
.......................
$6.04
$6.03
$5.81
$6.08
$6.30
Total
return
d
...................................
2.43%
6.45%
(1.94)%
(0.96)%
1.70%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.29%
1.29%
1.26%
1.29%
1.26%
Expenses
net
of
waiver
and
payments
by
affiliates
e
......
1.28%
1.28%
1.26%
f
1.29%
f
1.26%
f
Net
investment
income
...........................
1.18%
1.96%
2.00%
1.67%
1.71%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$354,483
$389,021
$571,525
$797,394
$1,034,410
Portfolio
turnover
rate
............................
65.54%
41.34%
44.67%
86.72%
92.18%
Portfolio
turnover
rate
excluding
mortgage
dollar
rolls
g
....
65.54%
41.34%
44.67%
86.72%
92.18%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Amount
rounds
to
less
than
$0.01
per
share.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
e
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
See
Note
1(i)
regarding
mortgage
dollar
rolls.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
U.S.
Government
Securities
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
93
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$6.07
$5.85
$6.12
$6.34
$6.40
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.08
0.13
0.13
0.11
0.12
Net
realized
and
unrealized
gains
(losses)
...........
0.08
0.25
(0.24)
(0.16)
—
c
Total
from
investment
operations
....................
0.16
0.38
(0.11)
(0.05)
0.12
Less
distributions
from:
Net
investment
income
..........................
(0.14)
(0.16)
(0.16)
(0.17)
(0.18)
Net
asset
value,
end
of
year
.......................
$6.09
$6.07
$5.85
$6.12
$6.34
Total
return
....................................
2.73%
6.58%
(1.78)%
(0.81)%
1.84%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.13%
1.14%
1.11%
1.13%
1.11%
Expenses
net
of
waiver
and
payments
by
affiliates
d
......
1.12%
1.13%
1.11%
e
1.13%
e
1.11%
e
Net
investment
income
...........................
1.34%
2.11%
2.15%
1.83%
1.86%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$27,746
$32,906
$31,144
$38,363
$59,785
Portfolio
turnover
rate
............................
65.54%
41.34%
44.67%
86.72%
92.18%
Portfolio
turnover
rate
excluding
mortgage
dollar
rolls
f
....
65.54%
41.34%
44.67%
86.72%
92.18%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Amount
rounds
to
less
than
$0.01
per
share.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
f
See
Note
1(i)
regarding
mortgage
dollar
rolls.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
U.S.
Government
Securities
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
94
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$6.10
$5.87
$6.15
$6.37
$6.42
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.12
0.16
0.17
0.15
0.16
Net
realized
and
unrealized
gains
(losses)
...........
0.08
0.27
(0.25)
(0.16)
0.01
Total
from
investment
operations
....................
0.20
0.43
(0.08)
(0.01)
0.17
Less
distributions
from:
Net
investment
income
..........................
(0.18)
(0.20)
(0.20)
(0.21)
(0.22)
Net
asset
value,
end
of
year
.......................
$6.12
$6.10
$5.87
$6.15
$6.37
Total
return
....................................
3.34%
7.39%
(1.33)%
(0.16)%
2.63%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.54%
0.51%
0.49%
0.48%
0.48%
Expenses
net
of
waiver
and
payments
by
affiliates
c
......
0.52%
0.50%
0.48%
0.48%
d
0.48%
d
Net
investment
income
...........................
1.96%
2.74%
2.78%
2.48%
2.49%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$361,791
$573,957
$694,813
$446,174
$624,619
Portfolio
turnover
rate
............................
65.54%
41.34%
44.67%
86.72%
92.18%
Portfolio
turnover
rate
excluding
mortgage
dollar
rolls
e
....
65.54%
41.34%
44.67%
86.72%
92.18%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
e
See
Note
1(i)
regarding
mortgage
dollar
rolls.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
U.S.
Government
Securities
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
95
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$6.10
$5.87
$6.15
$6.37
$6.42
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.11
0.16
0.16
0.15
0.15
Net
realized
and
unrealized
gains
(losses)
...........
0.07
0.26
(0.25)
(0.17)
0.01
Total
from
investment
operations
....................
0.18
0.42
(0.09)
(0.02)
0.16
Less
distributions
from:
Net
investment
income
..........................
(0.17)
(0.19)
(0.19)
(0.20)
(0.21)
Net
asset
value,
end
of
year
.......................
$6.11
$6.10
$5.87
$6.15
$6.37
Total
return
....................................
3.23%
7.08%
(1.45)%
(0.30)%
2.49%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.64%
0.64%
0.61%
0.64%
0.61%
Expenses
net
of
waiver
and
payments
by
affiliates
c
......
0.63%
0.63%
0.61%
d
0.64%
d
0.61%
d
Net
investment
income
...........................
1.84%
2.61%
2.65%
2.32%
2.36%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$743,012
$946,318
$720,281
$854,640
$718,975
Portfolio
turnover
rate
............................
65.54%
41.34%
44.67%
86.72%
92.18%
Portfolio
turnover
rate
excluding
mortgage
dollar
rolls
e
....
65.54%
41.34%
44.67%
86.72%
92.18%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
e
See
Note
1(i)
regarding
mortgage
dollar
rolls.
Franklin
Custodian
Funds
Statement
of
Investments,
September
30,
2020
Franklin
U.S.
Government
Securities
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
96
a
a
Principal
Amount
a
Value
a
a
a
a
a
U.S.
Government
and
Agency
Securities
0.4%
U.S.
Treasury
Bonds,
4.75%,
2/15/37
....................................
$
14,500,000
$
22,851,660
Total
U.S.
Government
and
Agency
Securities
(Cost
$19,005,509)
.................
22,851,660
Mortgage-Backed
Securities
97.0%
Government
National
Mortgage
Association
(GNMA)
Fixed
Rate
97.0%
GNMA
I,
30
Year,
4.5%,
4/15/40
........................................
6,956,443
7,746,420
GNMA
I,
30
Year,
5%,
5/15/33
-
9/15/40
...................................
35,799,144
40,881,516
GNMA
I,
30
Year,
5.5%,
6/15/29
-
8/15/39
.................................
19,259,810
22,502,262
GNMA
I,
30
Year,
6%,
12/15/39
.........................................
90,934,305
108,684,366
GNMA
I,
30
Year,
6.5%,
8/15/37
........................................
26,551,794
32,216,827
GNMA
I,
30
Year,
7%,
12/15/23
-
5/15/32
..................................
6,750,754
8,131,003
GNMA
I,
30
Year,
7.5%,
7/15/26
-
8/15/33
.................................
1,799,561
2,096,847
GNMA
I,
30
Year,
8%,
10/15/29
.........................................
3,146
3,813
GNMA
I,
30
Year,
8.5%,
11/15/24
........................................
882
970
GNMA
I,
30
Year,
10%,
12/15/20
-
2/15/25
.................................
618
619
GNMA
I,
Single-family,
30
Year,
3.5%,
4/15/43
-
5/15/43
......................
19,784,075
21,472,120
GNMA
I,
Single-family,
30
Year,
4%,
10/15/40
-
8/15/46
.......................
67,653,283
73,342,912
GNMA
I,
Single-family,
30
Year,
4.5%,
2/15/39
-
6/15/41
......................
130,983,118
146,127,752
GNMA
I,
Single-family,
30
Year,
5%,
11/15/39
..............................
16,061,763
18,408,377
GNMA
I,
Single-family,
30
Year,
5%,
2/15/33
-
6/15/40
........................
183,946,502
208,753,636
GNMA
I,
Single-family,
30
Year,
5.5%,
5/15/28
-
2/15/40
......................
81,176,019
93,119,929
GNMA
I,
Single-family,
30
Year,
6%,
9/15/32
...............................
4,522
5,026
GNMA
I,
Single-family,
30
Year,
6.5%,
9/15/31
-
8/15/32
......................
3,072
3,360
GNMA
I,
Single-family,
30
Year,
7%,
4/15/22
-
9/15/32
........................
10,950,010
11,802,750
GNMA
I,
Single-family,
30
Year,
7.25%,
12/15/25
-
1/15/26
.....................
57,756
58,921
GNMA
I,
Single-family,
30
Year,
7.5%,
1/15/22
-
7/15/31
......................
2,470,513
2,587,129
GNMA
I,
Single-family,
30
Year,
7.7%,
10/15/21
.............................
3,996
4,010
GNMA
I,
Single-family,
30
Year,
8%,
4/15/21
-
9/15/30
........................
1,198,406
1,228,690
GNMA
I,
Single-family,
30
Year,
8.5%,
4/15/21
-
5/15/25
......................
129,699
131,502
GNMA
I,
Single-family,
30
Year,
9%,
2/15/21
-
1/15/23
........................
55,245
55,718
GNMA
I,
Single-family,
30
Year,
9.5%,
11/15/20
-
8/15/22
......................
24,092
24,179
GNMA
I,
Single-family,
30
Year,
10%,
11/15/20
-
2/15/25
......................
8,671
8,690
GNMA
II,
30
Year,
4.5%,
5/20/34
-
6/20/41
.................................
5,801,764
6,446,624
GNMA
II,
30
Year,
6%,
3/20/34
-
9/20/34
..................................
1,853,910
2,011,517
GNMA
II,
30
Year,
6.5%,
9/20/31
-
3/20/34
.................................
1,705,647
2,031,038
GNMA
II,
30
Year,
7%,
7/20/32
.........................................
467,551
566,457
GNMA
II,
30
Year,
7.5%,
10/20/24
.......................................
38,653
39,242
GNMA
II,
30
Year,
8%,
12/20/28
........................................
90,766
103,259
GNMA
II,
Single-family,
30
Year,
2.5%,
6/20/50
.............................
149,429,765
157,093,972
GNMA
II,
Single-family,
30
Year,
2.5%,
7/20/50
.............................
109,728,494
115,356,455
GNMA
II,
Single-family,
30
Year,
2.5%,
8/20/50
.............................
108,320,889
113,876,689
GNMA
II,
Single-family,
30
Year,
2.5%,
9/20/50
.............................
269,660,000
283,491,101
GNMA
II,
Single-family,
30
Year,
3%,
10/20/44
..............................
35,903,632
38,007,191
GNMA
II,
Single-family,
30
Year,
3%,
12/20/44
..............................
24,473,359
25,809,028
GNMA
II,
Single-family,
30
Year,
3%,
5/20/45
...............................
36,615,830
38,883,149
GNMA
II,
Single-family,
30
Year,
3%,
6/20/45
...............................
14,583,978
15,468,273
GNMA
II,
Single-family,
30
Year,
3%,
4/20/46
...............................
53,183,160
56,316,635
GNMA
II,
Single-family,
30
Year,
3%,
9/20/47
...............................
42,665,790
44,972,802
GNMA
II,
Single-family,
30
Year,
3%,
10/20/47
..............................
72,450,836
76,389,613
GNMA
II,
Single-family,
30
Year,
3%,
2/20/50
...............................
99,939,074
104,670,667
GNMA
II,
Single-family,
30
Year,
3%,
5/20/50
...............................
15,322,247
16,220,970
GNMA
II,
Single-family,
30
Year,
3%,
5/20/50
...............................
406,230,877
427,053,999
GNMA
II,
Single-family,
30
Year,
3%,
6/20/50
...............................
218,944,066
230,639,254
GNMA
II,
Single-family,
30
Year,
3%,
6/20/50
...............................
22,719,581
24,052,167
GNMA
II,
Single-family,
30
Year,
3%,
7/20/50
...............................
280,706,675
296,206,476
GNMA
II,
Single-family,
30
Year,
3%,
2/20/45
-
9/20/50
.......................
111,207,678
117,136,074
GNMA
II,
Single-family,
30
Year,
3.5%,
7/20/42
.............................
61,246,354
66,494,480
GNMA
II,
Single-family,
30
Year,
3.5%,
9/20/42
.............................
76,052,792
82,569,847
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
U.S.
Government
Securities
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
97
a
a
Principal
Amount
a
Value
a
a
a
a
a
Mortgage-Backed
Securities
(continued)
Government
National
Mortgage
Association
(GNMA)
Fixed
Rate
(continued)
GNMA
II,
Single-family,
30
Year,
3.5%,
10/20/42
............................
$
15,849,343
$
17,207,515
GNMA
II,
Single-family,
30
Year,
3.5%,
4/20/43
.............................
16,252,768
17,645,609
GNMA
II,
Single-family,
30
Year,
3.5%,
5/20/43
.............................
22,018,179
23,873,964
GNMA
II,
Single-family,
30
Year,
3.5%,
6/20/43
.............................
25,701,278
27,873,303
GNMA
II,
Single-family,
30
Year,
3.5%,
8/20/43
.............................
17,513,958
18,992,232
GNMA
II,
Single-family,
30
Year,
3.5%,
9/20/47
.............................
401,411,508
428,665,339
GNMA
II,
Single-family,
30
Year,
3.5%,
11/20/47
............................
405,673,099
433,065,145
GNMA
II,
Single-family,
30
Year,
3.5%,
2/20/50
.............................
96,063,066
101,091,014
GNMA
II,
Single-family,
30
Year,
3.5%,
5/20/50
.............................
27,250,742
28,817,706
GNMA
II,
Single-family,
30
Year,
3.5%,
10/20/40
-
1/20/49
.....................
48,591,193
52,863,897
GNMA
II,
Single-family,
30
Year,
4%,
11/20/40
..............................
20,860,305
22,773,815
GNMA
II,
Single-family,
30
Year,
4%,
7/20/41
...............................
16,604,962
18,193,371
GNMA
II,
Single-family,
30
Year,
4%,
9/20/41
...............................
19,973,709
21,967,717
GNMA
II,
Single-family,
30
Year,
4%,
10/20/41
..............................
24,549,708
27,002,899
GNMA
II,
Single-family,
30
Year,
4%,
11/20/41
..............................
22,818,795
25,202,275
GNMA
II,
Single-family,
30
Year,
4%,
2/20/44
...............................
15,178,273
17,006,898
GNMA
II,
Single-family,
30
Year,
4%,
5/20/47
...............................
102,569,501
110,373,776
GNMA
II,
Single-family,
30
Year,
4%,
11/20/49
..............................
53,369,501
56,851,039
GNMA
II,
Single-family,
30
Year,
4%,
12/20/49
..............................
20,172,297
21,833,523
GNMA
II,
Single-family,
30
Year,
4%,
12/20/49
..............................
20,986,984
22,718,131
GNMA
II,
Single-family,
30
Year,
4%,
5/20/40
-
2/20/44
.......................
42,040,965
46,245,530
GNMA
II,
Single-family,
30
Year,
4.5%,
12/20/39
............................
14,266,599
15,874,208
GNMA
II,
Single-family,
30
Year,
4.5%,
5/20/41
.............................
18,254,440
20,272,226
GNMA
II,
Single-family,
30
Year,
4.5%,
6/20/41
.............................
22,046,935
24,481,219
GNMA
II,
Single-family,
30
Year,
4.5%,
7/20/41
.............................
24,396,444
27,097,021
GNMA
II,
Single-family,
30
Year,
4.5%,
9/20/41
.............................
33,353,628
37,046,544
GNMA
II,
Single-family,
30
Year,
4.5%,
10/20/41
............................
24,511,858
27,224,096
GNMA
II,
Single-family,
30
Year,
4.5%,
5/20/33
-
2/20/44
......................
43,100,083
47,858,860
GNMA
II,
Single-family,
30
Year,
5%,
9/20/33
...............................
14,577,814
16,650,753
GNMA
II,
Single-family,
30
Year,
5%,
7/20/33
-
9/20/41
.......................
48,780,566
55,695,370
GNMA
II,
Single-family,
30
Year,
5.5%,
6/20/34
-
4/20/40
......................
55,875,078
66,266,621
GNMA
II,
Single-family,
30
Year,
6%,
10/20/23
-
7/20/39
......................
40,884,969
47,269,803
GNMA
II,
Single-family,
30
Year,
6.5%,
6/20/24
-
1/20/39
......................
12,768,904
14,909,278
GNMA
II,
Single-family,
30
Year,
7%,
2/20/28
-
7/20/33
.......................
3,376,030
4,036,452
GNMA
II,
Single-family,
30
Year,
7.5%,
10/20/22
-
4/20/32
.....................
596,198
681,879
GNMA
II,
Single-family,
30
Year,
8%,
5/20/24
-
6/20/30
.......................
245,715
285,417
GNMA
II,
Single-family,
30
Year,
8.5%,
12/20/21
-
6/20/25
.....................
19,111
19,314
GNMA
II,
Single-family,
30
Year,
9%,
10/20/21
-
11/20/21
......................
4,268
4,319
GNMA
II,
Single-family,
30
Year,
9.5%,
11/20/20
-
1/20/25
.....................
5,717
5,739
GNMA
II,
Single-family,
30
Year,
10%,
1/20/21
-
3/20/21
......................
1,848
1,853
GNMA
II,
Single-family,
30
Year,
10.5%,
12/20/20
-
1/20/21
....................
1,097
1,097
5,087,253,090
Total
Mortgage-Backed
Securities
(Cost
$4,945,080,594)
.........................
5,087,253,090
Total
Long
Term
Investments
(Cost
$4,964,086,103)
.............................
5,110,104,750
a
a
a
a
a
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
U.S.
Government
Securities
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
98
Short
Term
Investments
4.4%
a
a
Shares
a
Value
a
Money
Market
Funds
4.4%
a,b
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
......................
231,583,058
$
231,583,058
Total
Money
Market
Funds
(Cost
$231,583,058)
.................................
231,583,058
Total
Short
Term
Investments
(Cost
$231,583,058
)
...............................
231,583,058
a
Total
Investments
(Cost
$5,195,669,161)
101.8%
................................
$5,341,687,808
Other
Assets,
less
Liabilities
(1.8)%
...........................................
(95,222,645)
Net
Assets
100.0%
...........................................................
$5,246,465,163
See
abbreviations
on
page
146
.
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
a
See
Note
3
(
f
)
regarding
investments
in
affiliated
management
investment
companies.
b
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Utilities
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
99
0
a
Year
Ended
September
30,
Year
Ended
September
30,
2018
a
2020
2019
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
............................................
$22.53
$18.66
$19.16
Income
from
investment
operations
b
:
Net
investment
income
c
..................................................
0.51
0.53
0.02
Net
realized
and
unrealized
gains
(losses)
....................................
(2.43)
4.41
(0.52)
Total
from
investment
operations
.............................................
(1.92)
4.94
(0.50)
Less
distributions
from:
Net
investment
income
...................................................
(0.50)
(0.49)
—
Net
realized
gains
......................................................
(0.35)
(0.58)
—
Total
distributions
........................................................
(0.85)
(1.07)
—
Net
asset
value,
end
of
year
................................................
$19.76
$22.53
$18.66
Total
return
d
............................................................
(8.68)%
27.43%
(2.61)%
Ratios
to
average
net
assets
e
Expenses
f,g
.............................................................
0.83%
0.83%
0.84%
Net
investment
income
....................................................
2.46%
2.51%
2.62%
Supplemental
data
Net
assets,
end
of
year
(000’s)
..............................................
$742,188
$521,782
$3,536
Portfolio
turnover
rate
.....................................................
12.19%
7.90%
4.58%
a
For
the
period
September
10,
2018
(effective
date)
to
September
30,
2018.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Utilities
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
100
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
A1
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.54
$18.66
$19.18
$17.85
$16.08
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.52
0.53
0.50
0.53
0.48
Net
realized
and
unrealized
gains
(losses)
...........
(2.41)
4.44
(0.17)
1.30
2.31
Total
from
investment
operations
....................
(1.89)
4.97
0.33
1.83
2.79
Less
distributions
from:
Net
investment
income
..........................
(0.53)
(0.51)
(0.54)
(0.49)
(0.50)
Net
realized
gains
.............................
(0.35)
(0.58)
(0.31)
(0.01)
(0.52)
Total
distributions
...............................
(0.88)
(1.09)
(0.85)
(0.50)
(1.02)
Net
asset
value,
end
of
year
.......................
$19.77
$22.54
$18.66
$19.18
$17.85
Total
return
c
...................................
(8.59)%
27.61%
1.68%
10.38%
18.23%
Ratios
to
average
net
assets
Expenses
d,e
...................................
0.73%
0.73%
0.74%
0.75%
0.73%
Net
investment
income
...........................
2.50%
2.61%
2.72%
2.86%
2.81%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$3,388,126
$4,176,487
$3,654,795
$4,182,780
$4,180,124
Portfolio
turnover
rate
............................
12.19%
7.90%
4.58%
0.89%
7.17%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Utilities
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
101
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.42
$18.57
$19.09
$17.76
$16.01
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.41
0.42
0.41
0.43
0.39
Net
realized
and
unrealized
gains
(losses)
...........
(2.41)
4.43
(0.18)
1.30
2.30
Total
from
investment
operations
....................
(2.00)
4.85
0.23
1.73
2.69
Less
distributions
from:
Net
investment
income
..........................
(0.42)
(0.42)
(0.44)
(0.39)
(0.42)
Net
realized
gains
.............................
(0.35)
(0.58)
(0.31)
(0.01)
(0.52)
Total
distributions
...............................
(0.77)
(1.00)
(0.75)
(0.40)
(0.94)
Net
asset
value,
end
of
year
.......................
$19.65
$22.42
$18.57
$19.09
$17.76
Total
return
c
...................................
(9.10)%
26.96%
1.18%
9.88%
17.59%
Ratios
to
average
net
assets
Expenses
d,e
....................................
1.23%
1.23%
1.24%
1.25%
1.23%
Net
investment
income
...........................
1.98%
2.11%
2.22%
2.36%
2.31%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$537,808
$767,363
$834,070
$981,515
$1,064,065
Portfolio
turnover
rate
............................
12.19%
7.90%
4.58%
0.89%
7.17%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Utilities
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
102
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.45
$18.59
$19.11
$17.78
$16.02
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.44
0.45
0.44
0.46
0.42
Net
realized
and
unrealized
gains
(losses)
...........
(2.41)
4.44
(0.18)
1.30
2.30
Total
from
investment
operations
....................
(1.97)
4.89
0.26
1.76
2.72
Less
distributions
from:
Net
investment
income
..........................
(0.45)
(0.45)
(0.47)
(0.42)
(0.44)
Net
realized
gains
.............................
(0.35)
(0.58)
(0.31)
(0.01)
(0.52)
Total
distributions
...............................
(0.80)
(1.03)
(0.78)
(0.43)
(0.96)
Net
asset
value,
end
of
year
.......................
$19.68
$22.45
$18.59
$19.11
$17.78
Total
return
....................................
(8.95)%
27.17%
1.33%
10.04%
17.81%
Ratios
to
average
net
assets
Expenses
c,d
....................................
1.08%
1.08%
1.09%
1.10%
1.08%
Net
investment
income
...........................
2.15%
2.26%
2.37%
2.51%
2.46%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$84,488
$103,376
$72,927
$94,465
$103,247
Portfolio
turnover
rate
............................
12.19%
7.90%
4.58%
0.89%
7.17%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Utilities
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
103
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.73
$18.81
$19.32
$17.97
$16.18
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.58
0.56
0.55
0.58
0.53
Net
realized
and
unrealized
gains
(losses)
...........
(2.46)
4.50
(0.17)
1.31
2.32
Total
from
investment
operations
....................
(1.88)
5.06
0.38
1.89
2.85
Less
distributions
from:
Net
investment
income
..........................
(0.57)
(0.56)
(0.58)
(0.53)
(0.54)
Net
realized
gains
.............................
(0.35)
(0.58)
(0.31)
(0.01)
(0.52)
Total
distributions
...............................
(0.92)
(1.14)
(0.89)
(0.54)
(1.06)
Net
asset
value,
end
of
year
.......................
$19.93
$22.73
$18.81
$19.32
$17.97
Total
return
....................................
(8.44)%
27.89%
1.97%
10.70%
18.55%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.56%
0.53%
0.52%
0.48%
0.47%
Expenses
net
of
waiver
and
payments
by
affiliates
c
......
0.50%
0.50%
0.48%
0.48%
d
0.47%
d
Net
investment
income
...........................
2.75%
2.84%
2.98%
3.13%
3.07%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$144,079
$150,244
$230,393
$241,455
$219,587
Portfolio
turnover
rate
............................
12.19%
7.90%
4.58%
0.89%
7.17%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Financial
Highlights
Franklin
Utilities
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
104
a
Year
Ended
September
30,
2020
2019
2018
2017
2016
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.73
$18.81
$19.32
$17.97
$16.19
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.56
0.56
0.54
0.57
0.51
Net
realized
and
unrealized
gains
(losses)
...........
(2.46)
4.48
(0.18)
1.30
2.32
Total
from
investment
operations
....................
(1.90)
5.04
0.36
1.87
2.83
Less
distributions
from:
Net
investment
income
..........................
(0.55)
(0.54)
(0.56)
(0.51)
(0.53)
Net
realized
gains
.............................
(0.35)
(0.58)
(0.31)
(0.01)
(0.52)
Total
distributions
...............................
(0.90)
(1.12)
(0.87)
(0.52)
(1.05)
Net
asset
value,
end
of
year
.......................
$19.93
$22.73
$18.81
$19.32
$17.97
Total
return
....................................
(8.51)%
27.78%
1.82%
10.64%
18.34%
Ratios
to
average
net
assets
Expenses
c,d
....................................
0.58%
0.58%
0.59%
0.60%
0.58%
Net
investment
income
...........................
2.66%
2.76%
2.87%
3.01%
2.96%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$1,179,002
$1,262,883
$927,845
$963,228
$755,484
Portfolio
turnover
rate
............................
12.19%
7.90%
4.58%
0.89%
7.17%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
d
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Custodian
Funds
Statement
of
Investments,
September
30,
2020
Franklin
Utilities
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
105
a
Country
Shares
a
Value
a
Common
Stocks
99.4%
Diversified
Telecommunication
Services
0.6%
a
TELUS
Corp.
........................................
Canada
2,000,000
$
35,188,105
a
Electric
Utilities
57.0%
Alliant
Energy
Corp.
...................................
United
States
3,856,870
199,207,336
American
Electric
Power
Co.,
Inc.
.........................
United
States
3,000,000
245,190,000
Duke
Energy
Corp.
....................................
United
States
2,900,000
256,824,000
Edison
International
...................................
United
States
4,200,000
213,528,000
Emera,
Inc.
..........................................
Canada
2,200,000
90,365,698
Entergy
Corp.
........................................
United
States
2,200,000
216,766,000
Evergy
,
Inc.
..........................................
United
States
2,700,000
137,214,000
Eversource
Energy
....................................
United
States
2,500,000
208,875,000
Exelon
Corp.
.........................................
United
States
6,800,000
243,168,000
FirstEnergy
Corp.
.....................................
United
States
4,000,000
114,840,000
NextEra
Energy,
Inc.
...................................
United
States
2,500,000
693,899,999
OGE
Energy
Corp.
....................................
United
States
1,400,000
41,986,000
a
PG&E
Corp.
.........................................
United
States
5,000,000
46,950,000
Pinnacle
West
Capital
Corp.
.............................
United
States
2,400,000
178,920,000
PNM
Resources,
Inc.
..................................
United
States
2,600,070
107,460,893
PPL
Corp.
...........................................
United
States
2,200,000
59,862,000
Southern
Co.
(The)
....................................
United
States
4,100,000
222,302,000
Xcel
Energy,
Inc.
......................................
United
States
2,700,000
186,327,000
3,463,685,926
Gas
Utilities
2.8%
Atmos
Energy
Corp.
...................................
United
States
250,000
23,897,500
New
Jersey
Resources
Corp.
............................
United
States
1,000,000
27,020,000
Southwest
Gas
Holdings,
Inc.
............................
United
States
1,000,000
63,100,000
Spire,
Inc.
...........................................
United
States
1,000,000
53,200,000
167,217,500
Independent
Power
and
Renewable
Electricity
Producers
1.1%
Clearway
Energy,
Inc.,
C
................................
United
States
2,537,458
68,409,868
Multi-Utilities
32.3%
Ameren
Corp.
........................................
United
States
1,668,250
131,925,210
Black
Hills
Corp.
......................................
United
States
784,393
41,957,181
CenterPoint
Energy,
Inc.
................................
United
States
6,500,000
125,775,000
CMS
Energy
Corp.
....................................
United
States
5,000,000
307,050,000
Consolidated
Edison,
Inc.
...............................
United
States
1,100,000
85,580,000
Dominion
Energy,
Inc.
..................................
United
States
4,000,000
315,720,000
DTE
Energy
Co.
......................................
United
States
1,900,000
218,576,000
E.ON
SE
............................................
Germany
8,000,000
88,160,532
National
Grid
plc
......................................
United
Kingdom
5,999,933
68,918,853
NiSource,
Inc.
........................................
United
States
4,065,416
89,439,152
NorthWestern
Corp.
...................................
United
States
1,000,000
48,640,000
Public
Service
Enterprise
Group,
Inc.
......................
United
States
2,000,000
109,820,000
Sempra
Energy
.......................................
United
States
1,988,900
235,406,204
WEC
Energy
Group,
Inc.
................................
United
States
1,000,000
96,900,000
1,963,868,132
Oil,
Gas
&
Consumable
Fuels
2.7%
a
Cheniere
Energy,
Inc.
..................................
United
States
1,200,000
55,524,000
Origin
Energy
Ltd.
.....................................
Australia
7,000,000
21,669,327
Williams
Cos.,
Inc.
(The)
................................
United
States
4,400,000
86,460,000
163,653,327
Water
Utilities
2.9%
American
Water
Works
Co.,
Inc.
..........................
United
States
506,063
73,318,407
Essential
Utilities,
Inc.
..................................
United
States
1,750,000
70,437,500
Franklin
Custodian
Funds
Statement
of
Investments
Franklin
Utilities
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
106
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
Water
Utilities
(continued)
United
Utilities
Group
plc
................................
United
Kingdom
3,000,000
$
33,140,433
176,896,340
Total
Common
Stocks
(Cost
$3,416,943,332)
....................................
6,038,919,198
a
Principal
Amount
*
a
a
a
a
a
Corporate
Bonds
0.1%
Electric
Utilities
0.1%
Evergy
Missouri
West,
Inc.
,
Senior
Bond
,
8.27
%
,
11/15/21
.......
United
States
6,100,000
6,582,622
Total
Corporate
Bonds
(Cost
$6,092,659)
.......................................
6,582,622
Total
Long
Term
Investments
(Cost
$3,423,035,991)
.............................
6,045,501,820
a
Short
Term
Investments
0.1%
a
a
Country
Shares
a
Value
a
Money
Market
Funds
0.1%
b,c
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
........
United
States
5,118,759
5,118,759
Total
Money
Market
Funds
(Cost
$5,118,759)
...................................
5,118,759
Total
Short
Term
Investments
(Cost
$5,118,759
)
.................................
5,118,759
a
Total
Investments
(Cost
$3,428,154,750)
99.6%
..................................
$6,050,620,579
Other
Assets,
less
Liabilities
0.4%
.............................................
25,070,338
Net
Assets
100.0%
...........................................................
$6,075,690,917
See
abbreviations
on
page
146
.
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
a
Non-income
producing.
b
See
Note
3(f)
regarding
investments
in
affiliated
management
investment
companies.
c
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Assets
and
Liabilities
September
30,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
107
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
.................................
$9,325,104,406
$36,726,776
$5,746,666,867
Cost
-
Non-controlled
affiliates
(Note
3
f
and
10
)
.................
396,168,348
2,346,648
141,078,855
Cost
-
Unaffiliated
repurchase
agreements
....................
18,826,755
—
11,718,922
Value
-
Unaffiliated
issuers
(Includes
securities
loaned
$121,909,299,
$—
and
$65,457,148
,
respectively)
..........................
$18,128,548,672
$45,377,217
$18,527,076,798
Value
-
Non-controlled
affiliates
(Note
3
f
and
10
)
................
396,168,348
2,346,648
141,078,855
Value
-
Unaffiliated
repurchase
agreements
....................
18,826,755
—
11,718,922
Cash
..................................................
—
—
798,841
Foreign
currency,
at
value
(cost
$–,
$–
and
$356,134
,
respectively)
...
—
—
356,134
Receivables:
Investment
securities
sold
.................................
65,206,362
20,697
222,047,709
Capital
shares
sold
......................................
93,320,363
591,437
21,217,918
Dividends
and
interest
...................................
2,684,273
1,149
8,630,045
Affiliates
..............................................
—
70,410
—
Offering
costs
...........................................
—
44,051
—
Other
assets
............................................
4,943
12,496
7,992
Total
assets
........................................
18,704,759,716
48,464,105
18,932,933,214
Liabilities:
Payables:
Investment
securities
purchased
............................
168,219,626
—
150,142,656
Capital
shares
redeemed
.................................
36,361,420
199,472
23,873,588
Management
fees
.......................................
6,585,059
25,262
6,716,964
Distribution
fees
........................................
2,621,908
8,077
3,018,819
Transfer
agent
fees
......................................
2,212,360
4,265
3,478,596
Professional
fees
.......................................
78,890
42,915
85,406
Payable
upon
return
of
securities
loaned
.......................
91,063,755
—
58,589,922
Accrued
expenses
and
other
liabilities
.........................
782,488
5,745
772,822
Total
liabilities
.......................................
307,925,506
285,736
246,678,773
Net
assets,
at
value
...............................
$18,396,834,210
$48,178,369
$18,686,254,441
Net
assets
consist
of:
Paid-in
capital
...........................................
$9,644,525,290
$39,095,550
$4,574,230,839
Total
distributable
earnings
(losses)
...........................
8,752,308,920
9,082,819
14,112,023,602
Net
assets,
at
value
...............................
$18,396,834,210
$48,178,369
$18,686,254,441
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Assets
and
Liabilities
(continued)
September
30,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
108
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Class
A:
Net
assets,
at
value
.....................................
$8,378,574,173
$26,792,954
$10,990,296,882
Shares
outstanding
......................................
69,109,172
1,069,617
84,600,948
Net
asset
value
per
share
a
................................
$121.24
$25.05
$129.91
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%,
94.50%
and
94.50%,
respectively)
..........................
$128.30
$26.51
$137.47
Class
C:
Net
assets,
at
value
.....................................
$1,095,701,878
$3,930,766
$727,093,322
Shares
outstanding
......................................
11,013,222
157,588
6,200,182
Net
asset
value
and
maximum
offering
price
per
share
a
...........
$99.49
$24.94
$117.27
Class
R:
Net
assets,
at
value
.....................................
$221,040,983
$643,028
$420,082,458
Shares
outstanding
......................................
1,887,193
25,661
3,249,455
Net
asset
value
and
maximum
offering
price
per
share
...........
$117.13
$25.06
$129.28
Class
R6:
Net
assets,
at
value
.....................................
$5,817,028,409
$65,049
$2,999,369,748
Shares
outstanding
......................................
45,799,356
2,591
23,017,984
Net
asset
value
and
maximum
offering
price
per
share
...........
$127.01
$25.10
$130.31
Advisor
Class:
Net
assets,
at
value
.....................................
$2,884,488,767
$16,746,572
$3,549,412,031
Shares
outstanding
......................................
22,968,560
667,222
27,222,980
Net
asset
value
and
maximum
offering
price
per
share
...........
$125.58
$25.10
$130.38
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Assets
and
Liabilities
(continued)
September
30,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
109
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
.................................
$63,985,112,462
$4,964,086,103
$3,423,035,991
Cost
-
Non-controlled
affiliates
(Note
3
f
and
10
)
.................
985,522,035
231,583,058
5,118,759
Cost
-
Unaffiliated
repurchase
agreements
....................
11,734,630
—
—
Value
-
Unaffiliated
issuers
(Includes
securities
loaned
$36,333,352,
$—
and
$—
,
respectively)
.................................
$62,520,389,268
$5,110,104,750
$6,045,501,820
Value
-
Non-controlled
affiliates
(Note
3
f
and
10
)
................
690,787,040
231,583,058
5,118,759
Value
-
Unaffiliated
repurchase
agreements
....................
11,734,630
—
—
Cash
..................................................
10,151,388
—
—
Receivables:
Investment
securities
sold
.................................
208,617,047
—
35,018,924
Capital
shares
sold
......................................
48,444,639
17,725,167
4,040,641
Dividends
and
interest
...................................
469,328,734
13,957,373
10,701,518
Other
assets
............................................
34,537
2,250
3,443
Total
assets
........................................
63,959,487,283
5,373,372,598
6,100,385,105
Liabilities:
Payables:
Investment
securities
purchased
............................
126,711,248
112,240,091
10,479,720
Capital
shares
redeemed
.................................
85,063,350
8,856,044
9,461,365
Management
fees
.......................................
20,035,125
1,956,834
2,299,233
Distribution
fees
........................................
11,332,781
743,016
892,387
Transfer
agent
fees
......................................
9,855,134
1,017,179
1,157,553
Distributions
to
shareholders
...............................
681
1,217,543
—
Options
written,
at
value
(premiums
received
$13,413,252,
$–
and
$–
,
respectively)
............................................
2,942,000
—
—
Payable
upon
return
of
securities
loaned
.......................
34,856,630
—
—
Accrued
expenses
and
other
liabilities
.........................
3,396,507
876,728
403,930
Total
liabilities
.......................................
294,193,456
126,907,435
24,694,188
Net
assets,
at
value
...............................
$63,665,293,827
$5,246,465,163
$6,075,690,917
Net
assets
consist
of:
Paid-in
capital
...........................................
$71,265,092,155
$5,685,6
55,517
$3,084,050,978
Total
distributable
earnings
(losses)
...........................
(7,599,798,328)
(439,190,354)
2,991,639,939
Net
assets,
at
value
...............................
$63,665,293,827
$5,246,465,163
$6,075,690,917
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Assets
and
Liabilities
(continued)
September
30,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
110
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Class
A:
Net
assets,
at
value
.....................................
$10,072,436,740
$1,097,545,096
$742,188,106
Shares
outstanding
......................................
4,843,546,188
180,254,306
37,561,848
Net
asset
value
per
share
a
................................
$2.08
$6.09
$19.76
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
96.25%,
96.25%
and
96.25%,
respectively)
..........................
$2.16
$6.33
$20.53
Class
A1:
Net
assets,
at
value
.....................................
$32,693,224,141
$2,661,888,043
$3,388,125,736
Shares
outstanding
......................................
15,681,631,221
436,986,157
171,411,947
Net
asset
value
per
share
a
................................
$2.08
$6.09
$19.77
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
96.25%,
96.25%
and
96.25%,
respectively)
..........................
$2.16
$6.33
$20.54
Class
C:
Net
assets,
at
value
.....................................
$9,339,237,524
$354,483,147
$537,808,015
Shares
outstanding
......................................
4,411,570,379
58,649,375
27,362,725
Net
asset
value
and
maximum
offering
price
per
share
a
...........
$2.12
$6.04
$19.65
Class
R:
Net
assets,
at
value
.....................................
$221,584,246
$27,745,966
$84,487,843
Shares
outstanding
......................................
108,485,362
4,557,092
4,292,396
Net
asset
value
and
maximum
offering
price
per
share
...........
$2.04
$6.09
$19.68
Class
R6:
Net
assets,
at
value
.....................................
$1,626,735,376
$361,791,287
$144,079,176
Shares
outstanding
......................................
786,272,908
59,136,441
7,228,014
Net
asset
value
and
maximum
offering
price
per
share
...........
$2.07
$6.12
$19.93
Advisor
Class:
Net
assets,
at
value
.....................................
$9,712,075,800
$743,011,624
$1,179,002,041
Shares
outstanding
......................................
4,698,856,646
121,576,062
59,146,336
Net
asset
value
and
maximum
offering
price
per
share
...........
$2.07
$6.11
$19.93
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Operations
for
the
year
ended
September
30,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
111
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$836,614,
$92
and
$357,070,
respectively)
Unaffiliated
issuers
......................................
$49,102,314
$66,921
$183,773,855
Non-controlled
affiliates
(Note
3
f
and
10
)
......................
1,899,434
855
1,295,767
Interest:
Unaffiliated
issuers
......................................
1,952,832
882
1,869,772
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
...................
2,364,050
—
—
Non-controlled
affiliates
(Note
3
f
)
...........................
167,998
—
40,951
Total
investment
income
.................................
55,486,628
68,658
186,980,345
Expenses:
Management
fees
(Note
3
a
)
.................................
56,424,120
115,522
74,324,785
Distribution
fees:
(Note
3c
)
Class
A
..............................................
14,778,974
14,900
24,379,395
Class
C
..............................................
7,900,197
8,862
7,098,231
Class
R
..............................................
807,619
167
2,045,971
Transfer
agent
fees:
(Note
3e
)
Class
A
..............................................
7,173,022
8,637
11,441,828
Class
C
..............................................
958,704
1,284
835,064
Class
R
..............................................
196,226
115
481,858
Class
R6
.............................................
873,757
128
780,408
Advisor
Class
..........................................
2,160,525
13,357
3,899,751
Custodian
fees
(Note
4
)
....................................
136,846
149
124,324
Reports
to
shareholders
....................................
1,202,916
6,777
1,033,186
Registration
and
filing
fees
..................................
820,408
13,032
224,078
Professional
fees
.........................................
92,147
67,987
123,100
Trustees'
fees
and
expenses
................................
45,716
—
72,933
Amortization
of
offering
costs
(Not
e
1m)
........................
—
74,499
—
Other
..................................................
213,416
8,181
334,926
Total
expenses
.......................................
93,784,593
333,597
127,199,838
Expense
reductions
(Note
4
)
.............................
(153)
—
(2,607)
Expenses
waived/paid
by
affiliates
(Note
3f
and
3g)
............
(990,549)
(168,844)
(665,463)
Net
expenses
.......................................
92,793,891
164,753
126,531,768
Net
investment
income
(loss)
..........................
(37,307,263)
(96,095)
60,448,577
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
....................................
(11,499,773)
618,051
1,577,892,093
Foreign
currency
transactions
..............................
(282,842)
(1,094)
(8,217)
Net
realized
gain
(loss)
................................
(11,782,615)
616,957
1,577,883,876
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
....................................
5,214,811,970
6,946,877
2,276,523,846
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
...........................................
3,029
—
816
Net
change
in
unrealized
appreciation
(depreciation)
..........
5,214,814,999
6,946,877
2,276,524,662
Net
realized
and
unrealized
gain
(loss)
..........................
5,203,032,384
7,563,834
3,854,408,538
Net
increase
(decrease)
in
net
assets
resulting
from
operations
........
$5,165,725,121
$7,467,739
$3,914,857,115
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Operations
(continued)
for
the
year
ended
September
30,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
112
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$1,523,390,
$–
and
$16,460,904,
respectively)
Unaffiliated
issuers
......................................
$1,012,602,840
$—
$209,301,693
Non-controlled
affiliates
(Note
3
f
and
10
)
......................
21,919,300
887,176
172,868
Interest:
Unaffiliated
issuers:
Paydown
gain
(loss)
...................................
(12,767,437)
(48,826,739)
—
Paid
in
cash
b
.........................................
1,906,019,158
170,849,531
679,721
Non-controlled
affiliates
(Note
3
f
and
10
)
......................
49,120,311
—
—
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
...................
243,173
—
1,519
Non-controlled
affiliates
(Note
3
f
)
...........................
81,781
—
—
Total
investment
income
.................................
2,977,219,126
122,909,968
210,155,801
Expenses:
Management
fees
(Note
3
a
)
.................................
256,327,957
22,711,804
29,399,572
Distribution
fees:
(Note
3c
)
Class
A
..............................................
21,184,967
1,662,472
1,616,076
Class
A1
.............................................
53,627,542
4,059,412
5,592,577
Class
C
..............................................
75,628,455
2,428,696
4,324,492
Class
R
..............................................
1,204,888
161,673
470,333
Transfer
agent
fees:
(Note
3e
)
Class
A
..............................................
7,425,332
910,041
719,461
Class
A1
.............................................
31,276,142
3,827,827
4,130,086
Class
C
..............................................
10,172,618
516,987
736,086
Class
R
..............................................
211,863
45,132
104,362
Class
R6
.............................................
516,373
118,507
150,898
Advisor
Class
..........................................
9,421,059
1,148,235
1,356,576
Custodian
fees
(Note
4
)
....................................
651,052
30,815
57,896
Reports
to
shareholders
....................................
3,695,364
472,051
397,536
Registration
and
filing
fees
..................................
1,016,837
320,159
246,026
Professional
fees
.........................................
(5,733,289)
a
118,752
67,122
Trustees'
fees
and
expenses
................................
317,239
22,589
29,317
Other
..................................................
857,364
1,220,003
175,207
Total
expenses
.......................................
467,801,763
39,775,155
49,573,623
Expense
reductions
(Note
4
)
.............................
(1,221,452)
(36,364)
(504)
Expenses
waived/paid
by
affiliates
(Note
3f
and
3g)
............
(7,094,971)
(479,932)
(166,873)
Net
expenses
.......................................
459,485,340
39,258,859
49,406,246
Net
investment
income
..............................
2,517,733,786
83,651,109
160,749,555
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Operations
(continued)
for
the
year
ended
September
30,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
113
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
....................................
(1,462,974,153)
28,608,372
407,752,276
Non-controlled
affiliates
(Note
3
f
and
10
)
....................
(437,392,000)
—
—
Written
options
.........................................
193,685,377
—
—
Foreign
currency
transactions
..............................
3,531,427
—
496,968
Futures
contracts
.......................................
(57,189,500)
—
—
Swap
contracts
.........................................
14,683,611
—
—
Net
realized
gain
(loss)
................................
(1,745,655,238)
28,608,372
408,249,244
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
....................................
(3,879,829,865)
36,591,677
(1,191,741,582)
Non-controlled
affiliates
(Note
3
f
and
10
)
....................
(262,000,939)
—
—
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
...........................................
513,331
—
(7,764)
Written
options
.........................................
(26,586,719)
—
—
Futures
contracts
.......................................
(15,254,808)
—
—
Net
change
in
unrealized
appreciation
(depreciation)
..........
(4,183,159,000)
36,591,677
(1,191,749,346)
Net
realized
and
unrealized
gain
(loss)
..........................
(5,928,814,238)
65,200,049
(783,500,102)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
........
$(3,411,080,452)
$148,851,158
$(622,750,547)
a
Includes
unaffiliated
reimbursement
of
legal
fees
incurred
in
connection
with
certain
Fund
holdings.
b
Includes
amortization
of
premium
and
accretion
of
discount
.
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
114
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Year
Ended
September
30,
2020
Year
Ended
September
30,
2019
Year
Ended
September
30,
2020
Year
Ended
September
30,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
(loss)
.......
$(37,307,263)
$(14,718,658)
$(96,095)
$(15,013)
Net
realized
gain
(loss)
............
(11,782,615)
70,729,834
616,957
242,621
Net
change
in
unrealized
appreciation
(depreciation)
.................
5,214,814,999
345,441,488
6,946,877
(112,364)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.
5,165,725,121
401,452,664
7,467,739
115,244
Distributions
to
shareholders:
Class
A
........................
(36,593,390)
(92,155,284)
—
—
Class
C
........................
(5,870,103)
(14,892,611)
—
—
Class
R
........................
(1,018,472)
(2,378,516)
—
—
Class
R6
.......................
(18,942,625)
(41,995,760)
—
—
Advisor
Class
...................
(9,227,766)
(16,868,687)
(271,450)
(21,000)
Total
distributions
to
shareholders
.....
(71,652,356)
(168,290,858)
(271,450)
(21,000)
Capital
share
transactions:
(Note
2
)
Class
A
........................
1,454,891,535
650,491,224
23,681,349
—
Class
C
........................
180,005,579
(11,971,946)
3,472,386
—
Class
R
........................
31,793,316
24,484,953
636,164
—
Class
R6
.......................
1,809,661,791
696,883,004
54,504
—
Advisor
Class
...................
971,781,641
444,209,154
8,733,501
—
Total
capital
share
transactions
.......
4,448,133,862
1,804,096,389
36,577,904
—
Net
increase
(decrease)
in
net
assets
.....................
9,542,206,627
2,037,258,195
43,774,193
94,244
Net
assets:
Beginning
of
year
..................
8,854,627,583
6,817,369,388
4,404,176
4,309,932
End
of
year
......................
$18,396,834,210
$8,854,627,583
$48,178,369
$4,404,176
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
115
Franklin
Growth
Fund
Franklin
Income
Fund
Year
Ended
September
30,
2020
Year
Ended
September
30,
2019
Year
Ended
September
30,
2020
Year
Ended
September
30,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
............
$60,448,577
$79,438,413
$2,517,733,786
$2,914,704,511
Net
realized
gain
(loss)
............
1,577,883,876
840,085,967
(1,745,655,238)
215,579,716
Net
change
in
unrealized
appreciation
(depreciation)
.................
2,276,524,662
(346,522,216)
(4,183,159,000)
52,766,661
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.
3,914,857,115
573,002,164
(3,411,080,452)
3,183,050,888
Distributions
to
shareholders:
Class
A
........................
(533,975,512)
(127,214,618)
(456,846,261)
(238,921,964)
Class
A1
.......................
—
—
(1,983,784,425)
(2,139,823,753)
Class
C
........................
(41,241,305)
(8,201,337)
(576,464,046)
(713,887,824)
Class
R
........................
(23,492,106)
(5,605,930)
(12,776,908)
(13,702,246)
Class
R6
.......................
(159,258,755)
(45,185,076)
(102,305,422)
(105,925,119)
Advisor
Class
...................
(191,436,704)
(50,860,743)
(614,533,098)
(609,231,978)
Total
distributions
to
shareholders
.....
(949,404,382)
(237,067,704)
(3,746,710,160)
(3,821,492,884)
Capital
share
transactions:
(Note
2
)
Class
A
........................
97,946,521
(100,470,621)
3,477,926,943
7,250,036,688
Class
A1
.......................
—
—
(3,211,657,147)
(2,920,848,622)
Class
C
........................
(92,577,459)
(348,123,281)
(2,917,320,022)
(6,197,626,508)
Class
R
........................
(82,247,248)
(95,495,550)
(18,625,701)
(27,415,311)
Class
R6
.......................
(26,354,084)
(144,735,583)
(89,580,554)
(140,374,274)
Advisor
Class
...................
(172,809,996)
(53,980,770)
(943,560,671)
581,307,127
Total
capital
share
transactions
.......
(276,042,266)
(742,805,805)
(3,702,817,152)
(1,454,920,900)
Net
increase
(decrease)
in
net
assets
.....................
2,689,410,467
(406,871,345)
(10,860,607,764)
(2,093,362,896)
Net
assets:
Beginning
of
year
..................
15,996,843,974
16,403,715,319
74,525,901,591
76,619,264,487
End
of
year
......................
$18,686,254,441
$15,996,843,974
$63,665,293,827
$74,525,901,591
Franklin
Custodian
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
116
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Year
Ended
September
30,
2020
Year
Ended
September
30,
2019
Year
Ended
September
30,
2020
Year
Ended
September
30,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
............
$83,651,109
$129,091,071
$160,749,555
$160,830,310
Net
realized
gain
(loss)
............
28,608,372
16,617,504
408,249,244
124,025,551
Net
change
in
unrealized
appreciation
(depreciation)
.................
36,591,677
206,765,016
(1,191,749,346)
1,246,304,369
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.
148,851,158
352,473,591
(622,750,547)
1,531,160,230
Distributions
to
shareholders:
Class
A
........................
(18,115,363)
(5,700,515)
(25,093,089)
(12,003,162)
Class
A1
.......................
(74,781,123)
(88,940,105)
(156,995,208)
(210,886,943)
Class
C
........................
(8,281,370)
(10,975,833)
(25,054,946)
(36,435,738)
Class
R
........................
(763,817)
(832,535)
(3,626,631)
(4,121,777)
Class
R6
.......................
(9,736,779)
(24,763,152)
(7,024,821)
(12,677,551)
Advisor
Class
...................
(23,389,929)
(26,064,423)
(51,729,682)
(56,945,571)
Total
distributions
to
shareholders
.....
(135,068,381)
(157,276,563)
(269,524,377)
(333,070,742)
Capital
share
transactions:
(Note
2
)
Class
A
........................
763,086,030
324,210,864
305,811,426
460,752,617
Class
A1
.......................
(231,496,873)
(323,855,335)
(279,454,687)
(216,801,580)
Class
C
........................
(35,370,433)
(197,618,270)
(137,173,801)
(211,431,033)
Class
R
........................
(5,296,773)
615,002
(5,101,327)
13,908,640
Class
R6
.......................
(213,464,773)
(150,358,443)
16,015,666
(118,348,388)
Advisor
Class
...................
(208,817,347)
194,243,684
85,734,447
132,397,828
Total
capital
share
transactions
.......
68,639,831
(152,762,498)
(14,168,276)
60,478,084
Net
increase
(decrease)
in
net
assets
.....................
82,422,608
42,434,530
(906,443,200)
1,258,567,572
Net
assets:
Beginning
of
year
..................
5,164,042,555
5,121,608,025
6,982,134,117
5,723,566,545
End
of
year
......................
$5,246,465,163
$5,164,042,555
$6,075,690,917
$6,982,134,117
Franklin
Custodian
Funds
117
franklintempleton.com
Annual
Report
Notes
to
Financial
Statements
1.
Organization
and
Significant
Accounting
Policies
Franklin
Custodian
Funds (Trust)
is
registered
under
the
Investment
Company
Act
of
1940
(1940
Act)
as
an
open-end
management
investment
company,
consisting
of
six
separate
funds
(Funds)
and
applies
the
specialized
accounting
and
reporting
guidance
in
U.S.
Generally
Accepted
Accounting
Principles
(U.S.
GAAP).
The
classes
of
shares
offered
within
each
of
the
Funds
are
indicated
below.
Class
C
shares
automatically
convert
to
Class
A
shares
after
they
have
been
held
for
10
years.
Each
class
of
shares
may
differ
by
its
initial
sales
load,
contingent
deferred
sales
charges,
voting
rights
on
matters
affecting
a
single
class,
its
exchange
privilege
and
fees
due
to
differing
arrangements
for
distribution
and
transfer
agent
fees.
Class
A,
Class
C,
Class
R,
Class
R6,
&
Advisor
Class
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Class
A,
Class
A1,
Class
C,
Class
R,
Class
R6,
&
Advisor
Class
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Effective
February
14,
2020,
the
Franklin
Focused
Growth
Fund
commenced
the
public
offering
of
all
share
classes.
The
Fund
previously
only
operated
with
one
class
of
shares,
Advisor
Class.
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
each
business
day
as
of
4
p.m.
Eastern
time
or
the
regularly
scheduled
close
of
the
New
York
Stock
Exchange
(NYSE),
whichever
is
earlier.
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
Committee
(VC).
The
Funds
may
utilize
independent
pricing
services,
quotations
from
securities
and
financial
instrument
dealers,
and
other
market
sources
to
determine
fair
value.
Equity
securities
and
derivative
financial
instruments
listed
on
an
exchange
or
on
the
NASDAQ
National
Market
System
are
valued
at
the
last
quoted
sale
price
or
the
official
closing
price of
the
day,
respectively.
Foreign
equity
securities
are
valued
as
of
the
close
of
trading
on
the
foreign
stock
exchange
on
which
the
security
is
primarily
traded,
or
as
of
4
p.m.
Eastern
time.
The
value
is
then
converted
into
its
U.S.
dollar
equivalent
at
the
foreign
exchange
rate
in
effect
at
4
p.m.
Eastern
time
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.
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
4
p.m.
Eastern
time
on
the
date
that
the
values
of
the
foreign
debt
securities
are
determined.
Investments
in
open-end
mutual
funds
are
valued
at
the
closing
NAV.
Investments
in
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
Funds
primarily
employ
a
market-based
approach
which
may
use
related
or
comparable
assets
or
liabilities,
recent
Franklin
Custodian
Funds
Notes
to
Financial
Statements
118
franklintempleton.com
Annual
Report
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.
Trading
in
securities
on
foreign
securities
stock
exchanges
and
OTC
markets
may
be
completed
before 4
p.m.
Eastern
time.
In
addition,
trading
in
certain
foreign
markets
may
not
take
place
on
every Funds'
business
day. Occasionally,
events
occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Funds'
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time.
In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Funds'
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
September
30,
2020,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy.
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Funds'
NAV
is
not
calculated,
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
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
or
all
Funds
enter
into
a
joint
repurchase
agreement
whereby
their
uninvested
cash
balance
is
deposited
into
a
joint
cash
account
with
other
funds
managed
by
the
investment
manager
or
an
affiliate
of
the
investment
manager
and
is
used
to
invest
in
one
or
more
repurchase
agreements.
The
value
and
face
amount
of
the
joint
repurchase
agreement
are
allocated
to
the
funds
based
on
their
pro-rata
interest.
A
repurchase
agreement
is
accounted
for
as
a
loan
by
the
Fund
to
the
seller,
collateralized
by
securities
which
are
delivered
to
the
Funds'
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
119
franklintempleton.com
Annual
Report
(MRAs)
with
approved
counterparties
(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
Funds,
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
Funds
in
the
event
of
default
by
the
seller.
This
could
involve
costs
or
delays
in
addition
to
a
loss
on
the
securities
if
their
value
falls
below
the
repurchase
price
owed
by
the
seller.
The
joint
repurchase
agreement
held
by
the
Funds
at
year
end,
as
indicated
in
the
Statements
of
Investments,
had
been
entered
into
on
September
30,
2020.
d.
Securities
Purchased
on
a
Delayed
Delivery
Basis
Franklin
Income
Fund
purchases
securities
on
a
delayed
delivery
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
Fund
will
generally
purchase
these
securities
with
the
intention
of
holding
the
securities,
it
may
sell
the
securities
before
the
settlement
date.
e.
Derivative
Financial
Instruments
Certain
or
all
Funds
invested
in
derivative
financial
instruments
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
counterparty
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.
Derivative
counterparty
credit
risk
is
managed
through
a
formal
evaluation
of
the
creditworthiness
of
all
potential
counterparties.
Certain
or
all
Funds
attempt
to
reduce
their exposure
to
counterparty
credit
risk
on
OTC
derivatives,
whenever
possible,
by
entering
into
International
Swaps
and
Derivatives
Association
(ISDA)
master
agreements
with
certain
counterparties.
These
agreements
contain
various
provisions,
including
but
not
limited
to
collateral
requirements,
events
of
default,
or
early
termination.
Termination
events
applicable
to
the
counterparty
include
certain
deteriorations
in
the
credit
quality
of
the
counterparty.
Termination
events
applicable
to
the
Funds
include
failure
of
the
Funds
to
maintain
certain
net
asset
levels
and/
or
limit
the
decline
in
net
assets
over
various
periods
of
time.
In
the
event
of
default
or
early
termination,
the
ISDA
master
agreement
gives
the
non-defaulting
party
the
right
to
net
and
close-out
all
transactions
traded,
whether
or
not
arising
under
the
ISDA
agreement,
to
one
net
amount
payable
by
one
counterparty
to
the
other.
However,
absent
an
event
of
default
or
early
termination,
OTC
derivative
assets
and
liabilities
are
presented
gross
and
not
offset
in
the
Statements
of
Assets
and
Liabilities.
Early
termination
by
the
counterparty
may
result
in
an
immediate
payment
by
the Funds
of
any
net
liability
owed
to
that
counterparty
under
the
ISDA
agreement.
Collateral
requirements
differ
by
type
of
derivative.
Collateral
terms
are
contract
specific
for
OTC
derivatives.
For
OTC
derivatives
traded
under
an
ISDA
master
agreement,
posting
of
collateral
is
required
by
either
the
Fund
or
the
applicable
counterparty
if
the
total
net
exposure
of
all
OTC
derivatives
with
the
applicable
counterparty
exceeds
the
minimum
transfer
amount,
which
typically
ranges
from
$100,000
to
$250,000,
and
can
vary
depending
on
the
counterparty
and
the
type
of
the
agreement.
Generally,
collateral
is
determined
at
the
close
of
Fund
business
each
day
and
any
additional
collateral
required
due
to
changes
in
derivative
values
may
be
delivered
by
the
Fund
or
the
counterparty
the
next
business
day,
or
within
a
few
business
days.
Collateral
pledged
and/or
received
by
the
Fund,
if
any,
is
held
in
segregated
accounts
with
the
Fund’s
custodian/counterparty
broker
and
can
be
in
the
form
of
cash
and/or
securities.
Unrestricted
cash
may
be
invested
according
to
the
Funds' investment
objectives.
To
the
extent
that
the
amounts
due
to
the
Fund
from
its
counterparties
are
not
subject
to
collateralization
or
are
not
fully
collateralized,
the
Fund
bears
the
risk
of
loss
from
counterparty
non-performance.
1.
Organization
and
Significant
Accounting
Policies
(continued)
c.
Joint
Repurchase
Agreement
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
120
franklintempleton.com
Annual
Report
Certain
or
all
Funds
entered
into
exchange
traded
futures
contracts
primarily
to
manage
exposure
to
interest
rate
risk.
A
futures
contract
is
an
agreement
between
the
Fund
and
a
counterparty
to
buy
or
sell
an
asset
at
a
specified
price
on
a
future
date.
Required
initial
margins
are
pledged
by
the
Fund,
and
the
daily
change
in
fair
value
is
accounted
for
as
a
variation
margin
payable
or
receivable
in
the
Statements
of
Assets
and
Liabilities.
Certain
or
all
Funds
entered
into
credit
default
swap
contracts
primarily
to
manage
and/or
gain
exposure
to
credit
risk.
A
credit
default
swap
is
an
agreement
between
the
Fund
and
a
counterparty
whereby
the
buyer
of
the
contract
receives
credit
protection
and
the
seller
of
the
contract
guarantees
the
credit
worthiness
of
a
referenced
debt
obligation.
These
agreements
may
be
privately
negotiated
in
the
over-the-counter
market
(OTC
credit
default
swaps)
or
may
be
executed
in
a
multilateral
trade
facility
platform,
such
as
a
registered
exchange
(centrally
cleared
credit
default
swaps).
The
underlying
referenced
debt
obligation
may
be
a
single
issuer
of
corporate
or
sovereign
debt,
a
credit
index,
a
basket
of
issuers
or
indices,
or
a
tranche
of
a
credit
index
or
basket
of
issuers
or
indices.
In
the
event
of
a
default
of
the
underlying
referenced
debt
obligation,
the
buyer
is
entitled
to
receive
the
notional
amount
of
the
credit
default
swap
contract
from
the
seller
in
exchange
for
the
referenced
debt
obligation,
a
net
settlement
amount
equal
to
the
notional
amount
of
the
credit
default
swap
less
the
recovery
value
of
the
referenced
debt
obligation,
or
other
agreed
upon
amount.
For
centrally
cleared
credit
default
swaps,
required
initial
margins
are
pledged
by
the
Fund,
and
the
daily
change
in
fair
value
is
accounted
for
as
a
variation
margin
payable
or
receivable
in
the
Statements
of
Assets
and
Liabilities.
Over
the
term
of
the
contract,
the
buyer
pays
the
seller
a
periodic
stream
of
payments,
provided
that
no
event
of
default
has
occurred.
Such
periodic
payments
are
accrued
daily
as
an
unrealized
appreciation
or
depreciation
until
the
payments
are
made,
at
which
time
they
are
realized.
Upfront
payments
and
receipts
are
reflected
in
the Statements
of
Assets
and
Liabilities
and
represent
compensating
factors
between
stated
terms
of
the
credit
default
swap
agreement
and
prevailing
market
conditions
(credit
spreads
and
other
relevant
factors).
These
upfront
payments
and
receipts
are
amortized
over
the
term
of
the
contract
as
a
realized
gain
or
loss
in
the
Statements
of
Operations.
Certain
or
all
Funds
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.
When
an
option
is
purchased
or
written,
an
amount
equal
to
the
premium
paid
or
received
is
recorded
as
an
asset
or
liability,
respectively.
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
received
or
paid
and
the
cost
to
close
the
position
is
recorded
as
a
realized
gain
or
loss.
See
Note
9 regarding
other
derivative
information.
f.
Index-Linked
Notes
Certain
or
all
Funds
invest
in
index-linked
notes.
Index-linked
notes
are
senior,
unsecured,
subordinated
debt
securities
issued
by
a
financial
institution,
and
the
value
is
based
on
the
price
movements
of
the
underlying
index.
Index-linked
notes
are
designed
to
provide
investors
access
to
the
returns
of
various
market
benchmarks
and
intended
to
replicate
the
economic
effects
that
would
apply
had
the
Fund
directly
purchased
the
underlying
referenced
asset
or
basket
of
assets.
The
risks
of
investing
in
index-linked
notes
include
unfavorable
price
movements
in
the
underlying
index
and
the
credit
risk
of
the
issuing
financial
institution.
There
may
be
no
guarantee
of
a
return
of
principal
with
index-linked
notes
and
the
appreciation
potential
may
be
limited.
Index-linked
notes
may
be
more
volatile
and
less
liquid
than
other
investments
held
by
the
Funds.
g.
Equity-Linked
Securities
Certain
or
all
Funds
invest in
equity-linked
securities.
Equity-linked
securities
are
hybrid
financial
instruments
that
generally
combine
both
debt
and
equity
characteristics
into
a
single
note
form.
Income
received
from
equity-linked
securities
is
recorded
as
realized
gains
in
the
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
e.
Derivative
Financial
Instruments
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
121
franklintempleton.com
Annual
Report
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
Funds.
h.
Securities
Lending
Certain
or
all
Funds
participate
in
an
agency
based
securities
lending
program
to
earn
additional
income.
The
Fund
receives
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
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
Fund
on
the
next
business
day.
Any
cash
collateral
received
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
Funds,
and/or
a
joint
repurchase
agreement
in
the
Statements
of
Assets
and
Liabilities.
Additionally,
the
Franklin
DynaTech
Fund,
Franklin
Growth
Fund,
and
Franklin
Income
Fund
received
$33,705,135,
$8,202,736,
and
$2,290,599,
respectively,
in
U.S.
Government
and
Agency
securities
as
collateral.
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,
net
of
fees
paid
to
the
securities
lending
agent
and/or
third-party
vendor,
is
reported
separately
in
the
Statements
of
Operations.
The
Fund
bears
the
market
risk
with
respect
to any
cash 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.
The
securities
lending
agent
has
agreed
to
indemnify
the
Fund
in
the
event
of
default
by
a
third
party
borrower.
i.
Mortgage
Dollar
Rolls
Certain
or
all
Funds
enter
into
mortgage
dollar
rolls,
typically
on
a
TBA
basis.
Mortgage
dollar
rolls
are
agreements
between
the
Fund
and
a
financial
institution
where
the
Fund
sells
(or
buys)
mortgage-backed
securities
for
delivery
on
a
specified
date
and
simultaneously
contracts
to
repurchase
(or
sell)
substantially
similar
(same
type,
coupon,
and
maturity)
securities
at
a
future
date
and
at
a
predetermined
price.
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.
Transactions
in
mortgage
dollar
rolls
are
accounted
for
as
purchases
and
sales
and
may
result
in
an
increase
to
the
Fund's
portfolio
turnover
rate.
The
risks
of
mortgage
dollar
roll
transactions
include
the
potential
inability
of
the
counterparty
to
fulfill
its
obligations.
j.
Senior
Floating
Rate
Interests
Certain
or
all
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.
On
July
27,
2017,
the
United
Kingdom's
Financial
Conduct
Authority
announced
its
intention
to
cease
sustaining
LIBOR
after
2021.
There
remains
uncertainty
regarding
the
future
utilization
of
LIBOR
and
the
nature
of
any
replacement
rate.
As
such,
the
potential
effect
of
a
transition
away
from
LIBOR
on
the
Fund
or
the
Fund's
investments
that
use
or
may
use
a
floating
rate
based
on
LIBOR
cannot
yet
be
determined.
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
g.
Equity-Linked
Securities
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
122
franklintempleton.com
Annual
Report
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,
certain
or
all
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,
certain
or
all
Funds
filed
additional
tax
reclaims
for
previously
withheld
taxes
on
dividends
earned
in
those
countries
(EU
reclaims).
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.
Income
recognized,
if
any,
for
EU
reclaims
is
reflected
as
other
income
in
the
Statements of
Operations
and
any
related
receivable,
if
any,
is
reflected
as
European
Union
tax
reclaims
in
the
Statements
of
Assets
and
Liabilities.
When
uncertainty
exists
as
to
the
ultimate
resolution
of
these
proceedings,
the
likelihood
of
receipt
of
these
EU
reclaims,
and
the
potential
timing
of
payment,
no
amounts
are
reflected
in
the
financial
statements.
For
U.S.
income
tax
purposes,
EU
reclaims
received
by
the
Funds,
if
any,
reduce
the
amounts
of
foreign
taxes
Fund
shareholders
can
use
as
tax
credits
in
their
individual
income
tax
returns.
Each
Fund
may
recognize
an
income
tax
liability
related
to
its
uncertain
tax
positions
under
U.S.
GAAP
when
the
uncertain
tax
position
has
a
less
than
50%
probability
that
it
will
be
sustained
upon
examination
by
the
tax
authorities
based
on
its
technical
merits.
As
of
September
30,
2020, each
Fund
has
determined
that
no
tax
liability
is
required
in
its
financial
statements
related
to
uncertain
tax
positions
for
any
open
tax
years
(or
expected
to
be
taken
in
future
tax
years).
Open
tax
years
are
those
that
remain
subject
to
examination
and
are
based
on
the
statute
of
limitations
in
each
jurisdiction
in
which
the
Fund
invests.
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
on
the Statements
of
Operations.
Facility
fees
are
recognized
as
income
over
the
expected
term
of
the
loan.
Dividend
income
is
recorded
on
the
ex-
dividend
date
except
for
certain
dividends
from
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.
Distributable
earnings
are
determined
according
to
income
tax
regulations
(tax
basis)
and
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
or
based
on
the
ratio
of
number
of
shareholders
of
each
Fund
to
the
combined
number
of
shareholders
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,
excluding
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.
Offering
Costs
Offering
costs
are
amortized
on
a
straight
line
basis
over
the
first
twelve
months
of
operations.
n.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
k.
Income
and
Deferred
Taxes
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
123
franklintempleton.com
Annual
Report
o.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
124
franklintempleton.com
Annual
Report
2.
Shares
of
Beneficial
Interest
At
September
30,
2020,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Funds'
shares
were
as
follows:
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Shares
Amount
Shares
Amount
Class
A
Class
A
Shares:
Year
ended
September
30,
2020
a
Shares
sold
b
...................................
28,364,638
$2,769,255,113
1,189,714
$26,508,969
Shares
issued
in
reinvestment
of
distributions
..........
402,761
34,512,576
—
—
Shares
redeemed
...............................
(14,031,050)
(1,348,876,154)
(120,097)
(2,827,620)
Net
increase
(decrease)
..........................
14,736,349
$1,454,891,535
1,069,617
$23,681,349
Year
ended
September
30,
2019
Shares
sold
...................................
18,045,630
$1,406,354,947
—
$—
Shares
issued
in
reinvestment
of
distributions
..........
1,181,936
85,513,056
—
—
Shares
redeemed
...............................
(10,956,984)
(841,376,779)
—
—
Net
increase
(decrease)
..........................
8,270,582
$650,491,224
—
$—
Class
C
Class
C
Shares:
Year
ended
September
30,
2020
a
Shares
sold
...................................
5,052,306
$403,013,647
166,260
$3,673,808
Shares
issued
in
reinvestment
of
distributions
..........
80,045
5,663,940
—
—
Shares
redeemed
b
..............................
(2,834,712)
(228,672,008)
(8,672)
(201,422)
Net
increase
(decrease)
..........................
2,297,639
$180,005,579
157,588
$3,472,386
Year
ended
September
30,
2019
Shares
sold
...................................
3,070,856
$199,977,771
—
$—
Shares
issued
in
reinvestment
of
distributions
..........
239,761
14,455,228
—
—
Shares
redeemed
...............................
(3,574,686)
(226,404,945)
—
—
Net
increase
(decrease)
..........................
(264,069)
$(11,971,946)
—
$—
Class
R
Franklin
Custodian
Funds
Notes
to
Financial
Statements
125
franklintempleton.com
Annual
Report
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Shares
Amount
Shares
Amount
Class
R
Shares:
Year
ended
September
30,
2020
a
Shares
sold
...................................
796,616
$73,704,539
26,436
$655,110
Shares
issued
in
reinvestment
of
distributions
..........
12,155
1,008,426
—
—
Shares
redeemed
...............................
(463,145)
(42,919,649)
(775)
(18,946)
Net
increase
(decrease)
..........................
345,626
$31,793,316
25,661
$636,164
Year
ended
September
30,
2019
Shares
sold
...................................
718,232
$54,816,432
—
$—
Shares
issued
in
reinvestment
of
distributions
..........
33,480
2,351,628
—
—
Shares
redeemed
...............................
(426,266)
(32,683,107)
—
—
Net
increase
(decrease)
..........................
325,446
$24,484,953
—
$—
Class
R6
Shares:
Year
ended
September
30,
2020
a
Shares
sold
...................................
26,515,105
$2,733,712,541
2,591
$54,504
Shares
issued
in
reinvestment
of
distributions
..........
210,608
18,853,620
—
—
Shares
redeemed
...............................
(9,539,958)
(942,904,370)
—
—
Net
increase
(decrease)
..........................
17,185,755
$1,809,661,791
2,591
$54,504
Year
ended
September
30,
2019
Shares
sold
...................................
14,600,444
$1,197,778,037
—
$—
Shares
issued
in
reinvestment
of
distributions
..........
557,220
41,953,067
—
—
Shares
redeemed
...............................
(6,571,287)
(542,848,100)
—
—
Net
increase
(decrease)
..........................
8,586,377
$696,883,004
—
$—
Advisor
Class
Advisor
Class
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
16,461,840
$1,663,036,037
422,071
$8,849,438
Shares
issued
in
reinvestment
of
distributions
..........
95,164
8,429,619
—
—
Shares
redeemed
...............................
(7,080,222)
(699,684,015)
(4,849)
(115,937)
Net
increase
(decrease)
..........................
9,476,782
$971,781,641
417,222
$8,733,501
Year
ended
September
30,
2019
c
Shares
sold
...................................
8,540,729
$696,364,989
—
$—
Shares
issued
in
reinvestment
of
distributions
..........
208,740
15,569,915
—
—
Shares
redeemed
...............................
(3,396,410)
(267,725,750)
—
—
Net
increase
(decrease)
..........................
5,353,059
$444,209,154
—
$—
2.
Shares
of
Beneficial
Interest
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
126
franklintempleton.com
Annual
Report
Franklin
Growth
Fund
Franklin
Income
Fund
Shares
Amount
Shares
Amount
Class
A
Class
A
Shares:
Year
ended
September
30,
2020
Shares
sold
b
...................................
13,572,097
$1,499,164,158
2,231,805,325
$4,788,946,529
Shares
issued
in
reinvestment
of
distributions
..........
4,607,922
498,807,566
200,674,952
428,721,746
Shares
issued
on
reorganization
(See
Note
11)
.........
681,606
54,922,873
—
—
Shares
redeemed
...............................
(17,479,810)
(1,954,948,076)
(820,875,107)
(1,739,741,332)
Net
increase
(decrease)
..........................
1,381,815
$97,946,521
1,611,605,170
$3,477,926,943
Year
ended
September
30,
2019
Shares
sold
...................................
12,734,660
$1,294,982,995
3,539,972,556
$8,051,972,021
Shares
issued
in
reinvestment
of
distributions
..........
1,182,058
118,489,471
101,099,391
229,215,481
Shares
redeemed
...............................
(14,767,957)
(1,513,943,087)
(455,241,055)
(1,031,150,814)
Net
increase
(decrease)
..........................
(851,239)
$(100,470,621)
3,185,830,892
$7,250,036,688
Class
A1
Class
A1
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
—
$—
605,114,189
$1,309,458,300
Shares
issued
in
reinvestment
of
distributions
..........
—
—
841,814,378
1,814,735,049
Shares
redeemed
...............................
—
—
(2,964,479,957)
(6,335,850,496)
Net
increase
(decrease)
..........................
—
$—
(1,517,551,390)
$(3,211,657,147)
Year
ended
September
30,
2019
Shares
sold
...................................
—
$—
734,292,978
$1,667,920,670
Shares
issued
in
reinvestment
of
distributions
..........
—
—
861,324,178
1,956,731,362
Shares
redeemed
...............................
—
—
(2,886,028,051)
(6,545,500,654)
Net
increase
(decrease)
..........................
—
$—
(1,290,410,895)
$(2,920,848,622)
Class
C
Class
C
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
1,134,871
$114,930,143
480,482,839
$1,065,708,701
Shares
issued
in
reinvestment
of
distributions
..........
395,742
38,913,324
240,566,813
526,881,379
Shares
issued
on
reorganization
(See
Note
11)
.........
131,927
9,642,973
—
—
Shares
redeemed
b
..............................
(2,489,823)
(256,063,899)
(2,081,765,774)
(4,509,910,102)
Net
increase
(decrease)
..........................
(827,283)
$(92,577,459)
(1,360,716,122)
$(2,917,320,022)
Year
ended
September
30,
2019
Shares
sold
...................................
1,283,911
$119,568,065
604,815,133
$1,395,555,258
Shares
issued
in
reinvestment
of
distributions
..........
84,225
7,736,874
282,624,044
650,966,785
Shares
redeemed
...............................
(5,118,036)
(475,428,220)
(3,568,750,502)
(8,244,148,551)
Net
increase
(decrease)
..........................
(3,749,900)
$(348,123,281)
(2,681,311,325)
$(6,197,626,508)
Class
R
2.
Shares
of
Beneficial
Interest
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
127
franklintempleton.com
Annual
Report
Franklin
Growth
Fund
Franklin
Income
Fund
Shares
Amount
Shares
Amount
Class
R
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
438,763
$49,058,513
25,335,822
$53,679,732
Shares
issued
in
reinvestment
of
distributions
..........
215,326
23,244,460
5,933,815
12,525,310
Shares
issued
on
reorganization
(See
Note
11)
.........
1,379
110,728
—
—
Shares
redeemed
...............................
(1,382,098)
(154,660,949)
(40,320,807)
(84,830,743)
Net
increase
(decrease)
..........................
(726,630)
$(82,247,248)
(9,051,170)
$(18,625,701)
Year
ended
September
30,
2019
Shares
sold
...................................
386,516
$39,100,757
22,136,825
$49,568,022
Shares
issued
in
reinvestment
of
distributions
..........
54,920
5,489,301
5,857,339
13,054,171
Shares
redeemed
...............................
(1,371,370)
(140,085,608)
(40,417,255)
(90,037,504)
Net
increase
(decrease)
..........................
(929,934)
$(95,495,550)
(12,423,091)
$(27,415,311)
Class
R6
Class
R6
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
5,630,222
$626,797,874
105,804,359
$227,268,477
Shares
issued
in
reinvestment
of
distributions
..........
1,355,970
146,824,455
44,557,746
95,237,499
Shares
issued
on
reorganization
(See
Note
11)
.........
8,606
694,117
—
—
Shares
redeemed
...............................
(7,043,737)
(800,670,530)
(195,996,222)
(412,086,530)
Net
increase
(decrease)
..........................
(48,939)
$(26,354,084)
(45,634,117)
$(89,580,554)
Year
ended
September
30,
2019
Shares
sold
...................................
5,242,855
$533,528,077
83,989,939
$189,707,762
Shares
issued
in
reinvestment
of
distributions
..........
416,642
41,768,390
44,158,383
99,481,277
Shares
redeemed
...............................
(7,008,411)
(720,032,050)
(191,415,233)
(429,563,313)
Net
increase
(decrease)
..........................
(1,348,914)
$(144,735,583)
(63,266,911)
$(140,374,274)
Advisor
Class
Advisor
Class
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
5,569,885
$622,207,744
1,042,609,514
$2,237,381,151
Shares
issued
in
reinvestment
of
distributions
..........
1,537,666
166,713,686
258,698,629
552,732,715
Shares
issued
on
reorganization
(See
Note
11)
.........
110,569
8,927,640
—
—
Shares
redeemed
...............................
(8,564,088)
(970,659,066)
(1,775,265,615)
(3,733,674,537)
Net
increase
(decrease)
..........................
(1,345,968)
$(172,809,996)
(473,957,472)
$(943,560,671)
Year
ended
September
30,
2019
Shares
sold
...................................
8,275,911
$843,459,997
1,215,772,185
$2,742,135,489
Shares
issued
in
reinvestment
of
distributions
..........
463,663
46,542,484
241,618,818
544,234,079
Shares
redeemed
in-kind
(Note
13
)
..................
(956,267)
(87,335,163)
—
—
Shares
redeemed
...............................
(8,294,264)
(856,648,088)
(1,205,298,748)
(2,705,062,441)
Net
increase
(decrease)
..........................
(510,957)
$(53,980,770)
252,092,255
$581,307,127
2.
Shares
of
Beneficial
Interest
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
128
franklintempleton.com
Annual
Report
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Shares
Amount
Shares
Amount
Class
A
Class
A
Shares:
Year
ended
September
30,
2020
Shares
sold
b
...................................
165,446,175
$1,011,564,347
26,610,660
$556,423,424
Shares
issued
in
reinvestment
of
distributions
..........
2,856,704
17,452,362
1,023,288
21,318,732
Shares
redeemed
...............................
(43,482,356)
(265,930,679)
(13,227,827)
(271,930,730)
Net
increase
(decrease)
..........................
124,820,523
$763,086,030
14,406,121
$305,811,426
Year
ended
September
30,
2019
Shares
sold
...................................
63,345,656
$375,877,932
27,331,039
$549,681,782
Shares
issued
in
reinvestment
of
distributions
..........
921,344
5,509,871
567,087
11,254,351
Shares
redeemed
...............................
(9,596,929)
(57,176,939)
(4,931,903)
(100,183,516)
Net
increase
(decrease)
..........................
54,670,071
$324,210,864
22,966,223
$460,752,617
Class
A1
Class
A1
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
52,130,054
$317,814,590
8,112,628
$168,512,761
Shares
issued
in
reinvestment
of
distributions
..........
10,091,453
61,577,188
6,824,409
142,669,167
Shares
redeemed
...............................
(100,228,230)
(610,888,651)
(28,792,932)
(590,636,615)
Net
increase
(decrease)
..........................
(38,006,723)
$(231,496,873)
(13,855,895)
$(279,454,687)
Year
ended
September
30,
2019
Shares
sold
...................................
31,667,964
$188,180,745
12,428,032
$244,772,010
Shares
issued
in
reinvestment
of
distributions
..........
12,257,776
72,888,073
9,723,812
190,596,017
Shares
redeemed
...............................
(98,666,952)
(584,924,153)
(32,697,882)
(652,169,607)
Net
increase
(decrease)
..........................
(54,741,212)
$(323,855,335)
(10,546,038)
$(216,801,580)
Class
C
Class
C
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
29,895,894
$181,312,974
4,039,119
$84,267,016
Shares
issued
in
reinvestment
of
distributions
..........
1,257,443
7,616,309
1,125,133
23,428,018
Shares
redeemed
b
..............................
(37,031,228)
(224,299,716)
(12,031,826)
(244,868,835)
Net
increase
(decrease)
..........................
(5,877,891)
$(35,370,433)
(6,867,574)
$(137,173,801)
Year
ended
September
30,
2019
Shares
sold
...................................
9,900,368
$58,656,797
4,737,482
$94,764,608
Shares
issued
in
reinvestment
of
distributions
..........
1,677,007
9,894,309
1,745,793
33,948,245
Shares
redeemed
...............................
(45,441,898)
(266,169,376)
(17,173,602)
(340,143,886)
Net
increase
(decrease)
..........................
(33,864,523)
$(197,618,270)
(10,690,327)
$(211,431,033)
Class
R
2.
Shares
of
Beneficial
Interest
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
129
franklintempleton.com
Annual
Report
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Shares
Amount
Shares
Amount
Class
R
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
2,655,852
$16,194,708
1,826,488
$38,608,635
Shares
issued
in
reinvestment
of
distributions
..........
122,169
745,216
172,297
3,588,892
Shares
redeemed
...............................
(3,641,431)
(22,236,697)
(2,311,257)
(47,298,854)
Net
increase
(decrease)
..........................
(863,410)
$(5,296,773)
(312,472)
$(5,101,327)
Year
ended
September
30,
2019
Shares
sold
...................................
1,880,919
$11,250,749
2,089,705
$41,924,174
Shares
issued
in
reinvestment
of
distributions
..........
133,133
792,020
204,895
4,003,694
Shares
redeemed
...............................
(1,919,391)
(11,427,767)
(1,612,008)
(32,019,228)
Net
increase
(decrease)
..........................
94,661
$615,002
682,592
$13,908,640
Class
R6
Class
R6
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
25,475,895
$156,361,081
4,191,939
$89,390,985
Shares
issued
in
reinvestment
of
distributions
..........
1,576,631
9,666,706
332,307
7,001,051
Shares
redeemed
...............................
(62,059,954)
(379,492,560)
(3,907,293)
(80,376,370)
Net
increase
(decrease)
..........................
(35,007,428)
$(213,464,773)
616,953
$16,015,666
Year
ended
September
30,
2019
Shares
sold
...................................
59,439,310
$354,899,398
3,594,861
$72,892,164
Shares
issued
in
reinvestment
of
distributions
..........
4,115,777
24,590,060
643,860
12,661,539
Shares
redeemed
...............................
(87,769,171)
(529,847,901)
(9,878,250)
(203,902,091)
Net
increase
(decrease)
..........................
(24,214,084)
$(150,358,443)
(5,639,529)
$(118,348,388)
Advisor
Class
Advisor
Class
Shares:
Year
ended
September
30,
2020
Shares
sold
...................................
88,283,587
$542,055,380
20,381,545
$427,808,668
Shares
issued
in
reinvestment
of
distributions
..........
3,609,760
22,075,398
2,288,051
48,162,900
Shares
redeemed
...............................
(125,578,345)
(772,948,125)
(19,091,448)
(390,237,121)
Net
increase
(decrease)
..........................
(33,684,998)
$(208,817,347)
3,578,148
$85,734,447
Year
ended
September
30,
2019
Shares
sold
...................................
86,539,808
$515,721,436
21,320,610
$434,204,062
Shares
issued
in
reinvestment
of
distributions
..........
4,124,300
24,667,003
2,659,178
52,686,480
Shares
redeemed
...............................
(58,081,812)
(346,144,755)
(17,744,082)
(354,492,714)
Net
increase
(decrease)
..........................
32,582,296
$194,243,684
6,235,706
$132,397,828
a
For
the
period
February
14,
2020
(effective
date)
to
September
30,
2020
for
Classes
A,
C,
R
and
R6
of
Franklin
Focused
Growth
Fund.
b
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
c
During
the
year
ended
September
30,
2019,
Franklin
Focused
Growth
Fund
Advisor
Class
did
not
report
any
share
transactions.
2.
Shares
of
Beneficial
Interest
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
130
franklintempleton.com
Annual
Report
3.
Transactions
with
Affiliates
Franklin
Resources,
Inc.
is
the
holding
company
for
various
subsidiaries
that
together
are
referred
to
as
Franklin
Templeton.
Certain
officers
and
trustees
of
the
Trust
are
also
officers
and/or
directors
of
the
following
subsidiaries:
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:
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:
Subsidiary
Affiliation
Franklin
Advisers,
Inc.
(Advisers)
Investment
manager
Franklin
Templeton
Institutional,
LLC
(FT
Institutional)
Investment
manager
Franklin
Templeton
Services,
LLC
(FT
Services)
Administrative
manager
Franklin
Templeton
Distributors,
Inc.
(Distributors)
Principal
underwriter
Franklin
Templeton
Investor
Services,
LLC
(Investor
Services)
Transfer
agent
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
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
Franklin
Custodian
Funds
Notes
to
Financial
Statements
131
franklintempleton.com
Annual
Report
Effective
February
1,
2020,
the
Franklin
Focused
Growth
Fund
pays
an
investment
management
fee
to
Advisers
based
on
the
average
daily
net
assets
of
the
Fund as
follows:
Prior
to
February
1,
2020,
Franklin
Focused
Growth
Fund
paid
fees
to
Advisers
based
on
the
average
daily
net
assets
of
the
Fund
as
follows:
For
the
year
ended
September
30,
2020,
each
Fund's
gross
effective
investment
management
fee
rate
based
on
average
daily
net
assets
was
as
follows:
Effective
October
24,
2019,
under
a
subadvisory
agreement,
FT
Institutional,
an
affiliate
of
Advisers,
provides
subadvisory
services
to
Franklin
U.S.
Government
Securities
Fund.
The
subadvisory
fee
is
paid
by
Advisers
based
on
the
Fund’s
average
daily
net
assets,
and
is
not
an
additional
expense
of
the
Fund.
Effective
March
27,
2020,
the
subadvisory
agreement
was
terminated
for
Franklin
U.S.
Government
Securities
Fund.
b.
Administrative
Fees
Under
an
agreement
with
Advisers,
FT
Services
provides
administrative
services
to
the
Funds.
The
fee
is
paid
by
Advisers
based
on
each
of
the
Funds'
average
daily
net
assets,
and
is
not
an
additional
expense
of
the
Funds.
Annualized
Fee
Rate
Net
Assets
0.700%
Up
to
and
including
$500
million
0.600%
Over
$500
million,
up
to
and
including
$1
billion
0.550%
Over
$1
billion,
up
to
and
including
$3
billion
0.500%
Over
$3
billion,
up
to
and
including
$5
billion
0.450%
In
excess
of
$5
billion
Annualized
Fee
Rate
Net
Assets
0.850%
Up
to
and
including
$500
million
0.800%
Over
$500
million,
up
to
and
including
$1
billion
0.750%
Over
$1
billion,
up
to
and
including
$3
billion
0.730%
Over
$3
billion,
up
to
and
including
$5
billion
0.700%
In
excess
of
$5
billion
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Gross
effective
investment
management
fee
rate
........
0.460%
0.708%
0.439%
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Gross
effective
investment
management
fee
rate
........
0.374%
0.455%
0.452%
3.
Transactions
with
Affiliates
(continued)
a.
Management
Fees
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
132
franklintempleton.com
Annual
Report
c.
Distribution
Fees
The
Board
has
adopted
distribution
plans
for
each
share
class,
with
the
exception
of
Class
R6
and
Advisor
Class
shares,
pursuant
to
Rule
12b-1
under
the
1940
Act.
Under
the
Funds’
Class
A
and
A1
reimbursement
distribution
plans,
the
Funds
reimburse
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of each
Fund's
shares
up
to
the
maximum
annual
plan
rate
for
each
class.
Under
the
Class
A
and
A1
reimbursement
distribution
plans,
costs
exceeding
the
maximum
for
the
current
plan
year
cannot
be
reimbursed
in
subsequent
periods.
In
addition,
under
the
Funds’
Class
C
and
R
compensation
distribution
plans,
the
Funds
pay
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of
each
Fund's
shares
up
to
the
maximum
annual
plan
rate
for
each
class.
The
plan
year,
for
purposes
of
monitoring
compliance
with
the
maximum
annual
plan
rates,
is
February
1
through
January
31
for
each
Fund.
The
maximum
annual
plan
rates,
based
on
the
average
daily
net
assets,
for
each
class,
are
as
follows:
d.
Sales
Charges/Underwriting
Agreements
Front-end
sales
charges
and
contingent
deferred
sales
charges
(CDSC)
do
not
represent
expenses
of
the
Funds.
These
charges
are
deducted
from
the
proceeds
of
sales
of
Fund
shares
prior
to
investment
or
from
redemption
proceeds
prior
to
remittance,
as
applicable.
Distributors
has
advised
the
Funds
of
the
following
commission
transactions
related
to
the
sales
and
redemptions
of
the
Funds'
shares
for
the
year:
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Reimbursement
Plans:
Class
A
...............................
0.25%
0.25%
0.25%
Compensation
Plans:
Class
C
...............................
1.00%
1.00%
1.00%
Class
R
...............................
0.50%
0.50%
0.50%
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Reimbursement
Plans:
Class
A
...............................
0.25%
0.25%
0.25%
Class
A1
..............................
0.15%
0.15%
0.15%
Compensation
Plans:
Class
C
...............................
0.65%
0.65%
0.65%
Class
R
...............................
0.50%
0.50%
0.50%
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..................
$3,630,603
$13,265
$1,440,995
CDSC
retained
...........................
$215,781
$(52)
$75,447
3.
Transactions
with
Affiliates
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
133
franklintempleton.com
Annual
Report
e.
Transfer
Agent
Fees
Each
class
of
shares
pays
transfer
agent
fees
to
Investor
Services
for
its
performance
of
shareholder
servicing
obligations.
The
fees
are
based
on
an
annualized
asset
based
fee
of
0.02%
plus
a
transaction
based
fee.
In
addition,
each
class
reimburses
Investor
Services
for
out
of
pocket
expenses
incurred
and,
except
for
Class
R6,
reimburses
shareholder
servicing
fees
paid
to
third
parties.
These
fees
are
allocated
daily
based
upon
their
relative
proportion
of
such
classes'
aggregate
net
assets.
Class
R6
pays
Investor
Services
transfer
agent
fees
specific
to
that
class.
For
the
year
ended
September
30,
2020,
the
Funds
paid
transfer
agent
fees
as
noted
in
the
Statements
of
Operations
of
which
the
following
amounts
were
retained
by
Investor
Services:
f.
Investments
in
Affiliated
Management
Investment
Companies
Certain
or
all
Funds
invest
in
one
or
more
affiliated
management
investment
companies
for
purposes
other
than
exercising
a
controlling
influence
over
the
management
or
policies.
Management
fees
paid
by
the
Funds
are
waived
on
assets
invested
in
the
affiliated
management
investment
companies,
as
noted
in
the
Statements
of
Operations,
in
an
amount
not
to
exceed
the
management
and
administrative
fees
paid
directly
or
indirectly
by
each
affiliate.
During
the
year
ended
September
30,
2020,
investments
in
affiliated
management
investment
companies
were
as
follows:
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..................
$2,880,782
$158,442
$221,708
CDSC
retained
...........................
$1,195,899
$99,019
$56,740
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Transfer
agent
fees
........................
$4,707,009
$22,513
$6,972,114
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Transfer
agent
fees
........................
$24,904,119
$3,196,014
$3,048,841
3.
Transactions
with
Affiliates
(continued)
d.
Sales
Charges/Underwriting
Agreements
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
134
franklintempleton.com
Annual
Report
a
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares
Held
at
End
of
Year
Investment
Income
a
a
a
a
a
a
a
a
a
Franklin
DynaTech
Fund
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$439,351,721
$2,804,320,685
$(2,919,741,058)
$
—
$
—
$
323,931,348
323,931,348
$
1,899,434
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$—
$479,726,000
$(407,489,000)
$
—
$
—
$
72,237,000
72,237,000
$
167,998
Total
Affiliated
Securities
....
$439,351,721
$3,284,046,685
$(3,327,230,058)
$—
$—
$396,168,348
$2,067,432
Franklin
Focused
Growth
Fund
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$116,522
$28,953,765
$(26,723,639)
—
—
$
2,346,648
2,346,648
$
855
Total
Affiliated
Securities
....
$116,522
$28,953,765
$(26,723,639)
$—
$—
$2,346,648
$855
Franklin
Growth
Fund
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$195,726,982
$1,777,586,463
$(1,879,105,590)
—
—
$
94,207,855
94,207,855
$
1,295,767
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$—
$272,671,000
$(225,800,000)
—
—
$
46,871,000
46,871,000
$
40,951
Total
Affiliated
Securities
....
$195,726,982
$2,050,257,463
$(2,104,905,590)
$—
$—
$141,078,855
$1,336,718
Franklin
Income
Fund
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$1,386,045,053
$28,382,059,180
$(29,129,104,193)
—
—
$
639,000,040
639,000,040
$
18,671,125
3.
Transactions
with
Affiliates
(continued)
f.
Investments
in
Affiliated
Management
Investment
Companies
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
135
franklintempleton.com
Annual
Report
g.
Waiver
and
Expense
Reimbursements
For
Franklin
Income
Fund,
Investor
Services
has
contractually
agreed
in
advance
to
waive
or
limit
its
fees
so
that
the
Class
R6
transfer
agent
fees
do
not
exceed
0.02%
based
on
the
average
net
assets
of
the
class
until
January
31,
2021.
For
Franklin
DynaTech
Fund,
Franklin
Growth
Fund,
Franklin
U.S.
Government
Securities
Fund
and
Franklin
Utilities
Fund,
Investor
Services
has
voluntarily
agreed
in
advance
to
waive
or
limit
its
fees
so
that
the
Class
R6
transfer
agent
fees
do
not
exceed
0.03%
based
on
the
average
net
assets
of
the
class
until
January
31,
2021.
For
Franklin
Focused
Growth
Fund,
Advisers
has
contractually
agreed
in
advance
to
waive
or
limit
its
fees
and
to
assume
as
its
own
expense
certain
expenses
otherwise
payable
by
the
Fund
so
that
the
expenses
(excluding
distribution
fees,
acquired
fund
fees
and
expenses
and
certain
non-routine
expenses
or
costs,
including
those
relating
to
litigation,
indemnification,
reorganizations,
and
liquidations)
for
each
class
of
the
Fund
do
not
exceed
0.85%
based
on
the
average
net
assets
of
each
class
until
January
31,
2021.
Total
expenses
waived
or
paid
are
not
subject
to
recapture
subsequent
to
the
Fund's
fiscal
year
end.
Prior
to
February
1,
2020,
expenses
(excluding
certain
fees
and
expenses
as
previously
disclosed)
for
the
Fund
were
limited
to
1.00%
based
on
the
average
net
assets
of
each
class.
a
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares
Held
at
End
of
Year
Investment
Income
Franklin
Income
Fund
(continued)
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$23,902,000
$54,048,000
$(54,828,000)
$
—
$
—
$
23,122,000
23,122,000
$
81,781
Total
Affiliated
Securities
....
$1,409,947,053
$28,436,107,180
$(29,183,932,193)
$—
$—
$662,122,040
$18,752,906
Franklin
U.S.
Government
Securities
Fund
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$86,808,469
$1,264,991,976
$(1,120,217,387)
—
—
$
231,583,058
231,583,058
$
887,176
Total
Affiliated
Securities
....
$86,808,469
$1,264,991,976
$(1,120,217,387)
$—
$—
$231,583,058
$887,176
Franklin
Utilities
Fund
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$35,371,057
$722,739,214
$(752,991,512)
—
—
$
5,118,759
5,118,759
$
172,868
Total
Affiliated
Securities
....
$35,371,057
$722,739,214
$(752,991,512)
$—
$—
$5,118,759
$172,868
3.
Transactions
with
Affiliates
(continued)
f.
Investments
in
Affiliated
Management
Investment
Companies
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
136
franklintempleton.com
Annual
Report
h.
Interfund
Transactions
Certain
or
all
Funds
engaged
in
purchases
and
sales
of
investments
with
funds
or
other
accounts
that
have
common
investment
managers
(or
affiliated
investment
managers),
directors,
trustees
or
officers.
These
purchases
and
sales
for
the
year
ended
September
30,
2020,
were
as
follows:
4.
Expense
Offset
Arrangement
The
Funds
have entered
into
an
arrangement
with
their
custodian
whereby
credits
realized
as
a
result
of
uninvested
cash
balances
are
used
to
reduce
a
portion
of
the
Funds'
custodian
expenses.
During
the year
ended
September
30,
2020, the
custodian
fees
were
reduced
as
noted
in
the
Statements
of
Operations.
5.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
September
30,
2020,
the
capital
loss
carryforwards
were
as
follows:
During
the
year
ended
September
30,
2020,
the
following
Funds
utilized
capital
loss
carryforwards
as
follows:
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,
2020,
Franklin
DynaTechFund
deferred
late-year
ordinary
losses
of
$32,663,254.
Franklin
Utilities
Fund
deferred
post-October
capital
losses
of
$2,687,886.
The
tax
character
of
distributions
paid
during
the
years
ended
September
30,
2020
and
2019,
was
as
follows:
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Purchases
..............................
$13,406,250
—
Sales
..................................
—
$1,252,875
Franklin
DynaTech
Fund
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
1
1
1
1
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
.............................
$
11,206,556
$
3,088,1
82
,
791
$
216,439,565
Long
term
.............................
—
2,3
4
0
,556,
642
368,0
57
,
078
Total
capital
loss
carryforwards
............
$11,206,556
$5,428,739,433
$584,496,643
Franklin
Growth
Fund
Capital
loss
utilized
carryforwards
....
$354,068
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
2020
2019
2020
2019
Distributions
paid
from:
Ordinary
income
........................
$—
$—
$5,450
$2,725
Long
term
capital
gain
....................
71,650,551
168,290,858
266,000
18,275
$71,650,551
$168,290,858
$271,450
$21,000
3.
Transactions
with
Affiliates
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
137
franklintempleton.com
Annual
Report
At
September
30,
2020,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation),
undistributed
ordinary
income
and
undistributed
long
term
capital
gains
for
income
tax
purposes
were
as
follows:
Franklin
Growth
Fund
Franklin
Income
Fund
2020
2019
2020
2019
Distributions
paid
from:
Ordinary
income
........................
$78,550,080
$77,950,588
$3,746,710,160
$3,821,492,884
Long
term
capital
gain
....................
870,854,302
159,117,116
—
—
$949,404,382
$237,067,704
$3,746,710,160
$3,821,492,884
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
2020
2019
2020
2019
Distributions
paid
from:
Ordinary
income
........................
$135,068,381
$157,276,563
$171,087,874
$159,770,655
Long
term
capital
gain
....................
—
—
98,436,503
173,300,087
$135,068,381
$157,276,563
$269,524,377
$333,070,742
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
a
a
a
a
Cost
of
investments
.......................
$9,747,368,391
$39,148,392
$5,898,078,761
Unrealized
appreciation
.....................
$8,815,899,489
$8,704,194
$12,834,220,764
Unrealized
depreciation
.....................
(19,724,105)
(128,721)
(52,424,950)
Net
unrealized
appreciation
(depreciation)
.......
$8,796,175,384
$8,575,473
$12,781,795,814
Distributable
earnings:
Undistributed
ordinary
income
................
$—
$170,476
$36,379,051
Undistributed
long
term
capital
gains
...........
—
336,870
1,293,847,955
Total
distributable
earnings
..................
$—
$507,346
$1,330,227,006
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
a
a
a
a
Cost
of
investments
.......................
$65,404,609,330
$5,196,381,520
$3,428,904,807
Unrealized
appreciation
.....................
$6,028,193,634
$155,997,815
$2,747,821,809
Unrealized
depreciation
.....................
(8,209,892,026)
(10,691,527)
(126,106,037)
Net
unrealized
appreciation
(depreciation)
.......
$(2,181,698,392)
$145,306,288
$2,621,715,772
Distributable
earnings:
Undistributed
ordinary
income
................
$—
$—
$12,889,753
Undistributed
long
term
capital
gains
...........
—
—
359,730,065
Total
distributable
earnings
..................
$—
$—
$372,619,818
5.
Income
Taxes
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
138
franklintempleton.com
Annual
Report
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
paydown
losses,
bond
discounts
and
premiums,
corporate
actions,
equity-linked
securities,
wash
sales
and
gains
realized
on
in-kind
shareholder
redemptions.
Franklin
Growth
Fund,
Franklin
Focused
Growth
Fund
and
Franklin
Utilities
Fund
utilized
a
tax
accounting
practice
to
treat
a
portion
of
the
proceeds
from
capital
shares
redeemed
as
a
distribution
from
realized
capital
gains.
6.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
year
ended
September
30,
2020,
were
as
follows:
At
September
30,
2020,
in
connection
with
securities
lending
transactions,
the
Franklin
DynaTech
Fund,
Franklin
Growth
Fund,
and
Franklin
Income
Fund
loaned
equity
investments
and
received
$91,063,755,
$58,589,922
and
$34,856,630
of
cash
collateral,
respectively.
The
gross
amount
of
recognized
liability
for
such
transactions
is
included
in
payable
upon
return
of
securities
loaned
in
the
Statement
of
Assets
and
Liabilities.
The
agreements
can
be
terminated
at
any
time.
7.
Credit Risk
and
Defaulted
Securities
At
September
30,
2020,
Franklin
Income
Fund
had
25.3%
of
its
portfolio
invested
in
high
yield
securities,
senior
secured
floating
rate
loans,
or
other
securities
rated
below
investment
grade
and
unrated
securities.
These
securities
may
be
more
sensitive
to
economic
conditions
causing
greater
price
volatility
and
are
potentially
subject
to
a
greater
risk
of
loss
due
to
default
than
higher
rated
securities.
Franklin
Income
Fund
held
defaulted
securities
and/or
other
securities
for
which
the
income
has
been
deemed
uncollectible.
At
September
30,
2020,
the
aggregate
value
of
these
securities
was
$225,418,973
representing
0.4%
of
each
Fund's
net
assets.
The
Funds
discontinue
accruing
income
on
securities
for
which
income
has
been
deemed
uncollectible
and
provide
an
estimate
for
losses
on
interest
receivable.
The
securities
have
been
identified
in
the
accompanying
Statements
of
Investments.
8. Novel
Coronavirus
Pandemic
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the
Funds, their ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and their ability
to
achieve their investment
objectives.
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Purchases
..............................
$6,268,568,835
$39,035,416
$1,507,830,356
Sales
..................................
$1,668,672,090
$5,526,915
$2,738,978,945
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
Franklin
Utilities
Fund
Purchases
..............................
$45,673,383,991
$3,359,780,212
$789,441,061
Sales
..................................
$49,078,224,645
$3,185,311,997
$906,429,367
5.
Income
Taxes
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
139
franklintempleton.com
Annual
Report
9.
Other
Derivative
Information
At
September
30,
2020,
investments
in
derivative
contracts
are
reflected
in
the
Statements
of
Assets
and
Liabilities
as
follows:
For
the
year
ended
September
30,
2020,
the
effect
of
derivative
contracts
in
the
Statements
of
Operations
was
as
follows:
For
the
year
ended
September
30,
2020,
the
average
month
end
notional
amount
of
futures
contracts,
swap
contracts
and
options
represented
$694,243,389,
$1,923,077
and
$29,417,692,
respectively.
See
Note
1(e)
regarding
derivative
financial
instruments.
Asset
Derivatives
Liability
Derivatives
Derivative
Contracts
Not
Accounted
for
as
Hedging
Instruments
Statement(s)
of
Assets
and
Liabilities
Location
Fair
Value
Statement(s)
of
Assets
and
Liabilities
Location
Fair
Value
Franklin
Income
Fund
Equity
contracts
...........
Investments
in
securities,
at
value
$
—
Options
written,
at
value
$
2,942,000
Total
....................
$—
$2,942,000
Derivative
Contracts
Not
Accounted
for
as
Hedging
Instruments
Statement
of
Operations
Location
Net
Realized
Gain
(Loss)
for
the
Year
Statement
of
Operations
Location
Net
Change
in
Unrealized
Appreciation
(Depreciation)
for
the
Year
Net
realized
gain
(loss)
from:
Net
change
in
unrealized
appreciation
(depreciation)
on:
Franklin
Income
Fund
Interest
rate
contracts
.......
Futures
contracts
$(57,189,500)
Futures
contracts
$(15,254,808)
Credit
contracts
............
Swaps
contracts
14,683,611
Swap
contracts
—
Equity
Contracts
...........
Investments
(22,017,407)
Investments
—
Written
options
193,685,377
Written
options
(26,586,719)
Total
....................
$129,162,081
$(41,841,527)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
140
franklintempleton.com
Annual
Report
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.
During
the
year
ended
September
30,
2020,
investments
in
“affiliated
companies”
were
as
follows:
11.
Reorganization
On
February
7,
2020,
Franklin
Growth
Fund,
pursuant
to
a
plan
of
reorganization
approved
on
November
22,
2019,
by
shareholders
of
Franklin
Select
U.S.
Equity
Fund
(Acquired
Fund),
a
series
of
Franklin
Strategic
Series,
acquired
100%
of
the
Acquired
Fund’s
net
assets,
primarily
made
up
of
investment
securities,
which
included
$34,292,301
of
unrealized
appreciation,
through
a
tax-free
exchange
of
934,087
shares
of
the
Fund
(valued
at
$108,590,632).
Immediately
after
the
completion
of
the
reorganization,
the
combined
net
assets
of
the
Fund
were
$17,919,822,034.
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares/Principal
Amount
Held
at
End
of
Year
Investment
Income
Franklin
Income
Fund
Non-Controlled
Affiliates
Dividends
Chesapeake
Energy
Corp.
..
$
325,710,000
$
—
$
(159,935,764)
$
(334,910,619)
$
169,136,383
$
—
a
—
$
—
Chesapeake
Energy
Corp.,
Convertible
Preferred,
5.75%
44,721,438
—
(2,811,237)
(65,365,704)
23,455,503
—
a
—
3,248,175
Weatherford
International
plc
.
—
331,232,649
b
(2,940,341)
(4,892,313)
(294,734,995)
28,665,000
14,700,000
—
Interest
Chesapeake
Energy
Corp.,
Senior
Note,
5.5%,
9/15/26
6,075,000
103,470,59
4
b
(5,887,500)
(10,437,322)
—
c
—
c
—
c
5,496,16
7
Chesapeake
Energy
Corp.,
Senior
Bond,
8%,
6/15/27
.
135,500,000
14,777,377
b
(139,196,735)
b
—
(11,080,642)
—
a
—
4,468,444
Chesapeake
Energy
Corp.,
Senior
Note,
8%,
1/15/25
..
396,487,500
30,022,467
b
(357,006,250)
b
—
(69,503,717)
—
a
—
11,243,333
Chesapeake
Energy
Corp.,
Senior
Note,
7.5%,
10/01/26
88,502,000
114,424
b
(66,260,220
b
—
(22,356,204)
—
a
—
2,099,500
Chesapeake
Energy
Corp.,
Senior
Note,
7%,
10/01/24
.
212,871,889
77,873,416
b
(8,570,175)
(21,786,042)
—
c
—
c
—
c
14,270,279
Chesapeake
Energy
Corp.,
Senior
Note,
144A,
8%,
3/15/26
..............
448,500,000
7,914,472
b
(399,497,205)
b
—
(56,917,267)
—
a
—
11,542,588
Total
Affiliated
Securities
(Value
is
0.0%
of
Net
Assets)
$1,658,367,827
$565,405,399
$(1,142,105,427)
(437,392,000)
(262,000,939)
$28,665,000
$52,368,486
a
As
of
September
30,
2020,
no
longer
held
by
the
fund.
b
May
include
accretion,
amortization,
partnership
adjustments,
and/or
corporate
actions.
c
As
of
September
30,
2020,
no
longer
an
affiliate.
Franklin
Custodian
Funds
Notes
to
Financial
Statements
141
franklintempleton.com
Annual
Report
The
primary
purpose
for
the
reorganization
was
to
combine
the
Acquired
Fund
with
a
larger
fund
that
had
lower
annual
fund
operating
expense
ratios,
better
overall
historical
performance,
identical
investment
goals
and
similar
principal
investment
strategies/risks.
The
estimated
cost
of
the
reorganization
was
$159,765
of
which
the
Fund
and
the
Acquired
Fund
each
paid
25%
and
Adviser
paid
50%.
The
allocated
portion
of
the
Fund’s
reorganization
expenses
are
included
with
other
expenses
in
the
Statement
of
Operations.
Assuming
the
reorganization
had
been
completed
on
October
1,
2019,
the
Fund’s
pro
forma
results
of
operations,
would
have
been
as
follows:
12.
Credit
Facility
The
Funds,
together
with
other
U.S.
registered
and
foreign
investment
funds
(collectively,
Borrowers),
managed
by
Franklin
Templeton,
are
borrowers
in
a
joint
syndicated
senior
unsecured
credit
facility
totaling
$2
billion
(Global
Credit
Facility)
which
matures
on
February
5,
2021.
This
Global
Credit
Facility
provides
a
source
of
funds
to
the
Borrowers
for
temporary
and
emergency
purposes,
including
the
ability
to
meet
future
unanticipated
or
unusually
large
redemption
requests.
Under
the
terms
of
the
Global
Credit
Facility,
the
Funds
shall,
in
addition
to
interest
charged
on
any
borrowings
made
by
the
Funds
and
other
costs
incurred
by
the Funds,
pay
their
share
of
fees
and
expenses
incurred
in
connection
with
the
implementation
and
maintenance
of
the
Global
Credit
Facility,
based
upon
their
relative
share
of
the
aggregate
net
assets
of
all
of
the
Borrowers,
including
an
annual
commitment
fee
of
0.15%
based
upon
the
unused
portion
of
the
Global
Credit
Facility.
These
fees
are
reflected
in
other
expenses
in
the
Statements
of
Operations.
During
the
year
ended
September
30,
2020,
the Funds
did
not
use
the
Global
Credit
Facility.
13.
Redemption
In-Kind
During
the
year
ended
September
30,
2019,
the
Franklin
Growth
Fund
realized
$52,349,028
of
net
gains
resulting
from
redemptions
in-kind
in
which
a
shareholder
redeemed
fund
shares
for
cash
and
securities
held
by
the
Fund.
Because
such
gains
are
not
taxable
to
the
Fund
and
are
not
distributed
to
remaining
shareholders,
they
are
reclassified
from
accumulated
net
realized
gains
to
paid-in
capital.
14.
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)
Period
Net
Investment
(Loss)
Net
Realized
and
Unrealized
Gain
(Loss)
Net
Increase
(Decrease)
in
Net
Assets
from
Operations
For
the
period
October
1,
2019,
through
September
30,
2020
........
$60,229,290
$3,869,024,774
$3,929,254,064
11.
Reorganization
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
142
franklintempleton.com
Annual
Report
The
input
levels
are
not
necessarily
an
indication
of
the
risk
or
liquidity
associated
with
financial
instruments
at
that
level.
A
summary
of
inputs
used
as
of
September
30,
2020,
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:
Common
Stocks
:
Aerospace
&
Defense
...................
$
58,194,000
$
—
$
—
$
58,194,000
Automobiles
..........................
156,588,650
—
—
156,588,650
Biotechnology
.........................
317,674,055
79,233,053
—
396,907,108
Capital
Markets
........................
420,276,300
—
—
420,276,300
Diversified
Consumer
Services
............
75,012,000
—
—
75,012,000
Diversified
Financial
Services
.............
11,521,838
—
—
11,521,838
Electric
Utilities
........................
120,738,600
—
—
120,738,600
Electronic
Equipment,
Instruments
&
Components
........................
129,169,000
60,755,027
—
189,924,027
Entertainment
.........................
547,815,950
28,326,505
—
576,142,455
Equity
Real
Estate
Investment
Trusts
(REITs)
.
596,099,000
—
—
596,099,000
Health
Care
Equipment
&
Supplies
.........
1,345,186,500
—
—
1,345,186,500
Health
Care
Providers
&
Services
..........
107,066,000
—
—
107,066,000
Health
Care
Technology
.................
574,386,503
—
—
574,386,503
Industrial
Conglomerates
................
138,288,500
—
—
138,288,500
Insurance
............................
750,772
—
—
750,772
Interactive
Media
&
Services
..............
956,287,011
219,517,434
—
1,175,804,445
Internet
&
Direct
Marketing
Retail
..........
2,361,059,996
141,016,859
—
2,502,076,855
IT
Services
...........................
2,420,247,264
380,602,166
—
2,800,849,430
Life
Sciences
Tools
&
Services
............
499,876,000
268,368,643
—
768,244,643
Machinery
............................
15,242,000
—
—
15,242,000
Media
...............................
187,521,700
—
—
187,521,700
Pharmaceuticals
.......................
164,062,000
163,903,053
—
327,965,053
Professional
Services
...................
288,017,000
—
—
288,017,000
Semiconductors
&
Semiconductor
Equipment
.
1,070,691,600
—
—
1,070,691,600
Software
.............................
3,937,950,803
9,478,890
—
3,947,429,693
Specialty
Retail
........................
60,943,000
—
—
60,943,000
Technology
Hardware,
Storage
&
Peripherals
.
185,296,000
—
—
185,296,000
Textiles,
Apparel
&
Luxury
Goods
..........
31,385,000
—
—
31,385,000
Short
Term
Investments
...................
396,168,348
18,826,755
—
414,995,103
Total
Investments
in
Securities
...........
$17,173,515,390
$1,370,028,385
$—
$18,543,543,775
Franklin
Focused
Growth
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Automobiles
..........................
620,348
—
—
620,348
Capital
Markets
........................
623,295
—
—
623,295
Electric
Utilities
........................
1,048,622
—
—
1,048,622
Entertainment
.........................
1,929,471
—
—
1,929,471
Equity
Real
Estate
Investment
Trusts
(REITs)
.
917,581
—
—
917,581
Food
&
Staples
Retailing
.................
929,745
—
—
929,745
Health
Care
Equipment
&
Supplies
.........
4,367,496
—
—
4,367,496
Health
Care
Technology
.................
1,223,176
—
—
1,223,176
Industrial
Conglomerates
................
804,444
—
—
804,444
Interactive
Media
&
Services
..............
2,202,841
1,056,791
—
3,259,632
Internet
&
Direct
Marketing
Retail
..........
6,845,276
—
—
6,845,276
IT
Services
...........................
5,898,055
1,403,353
—
7,301,408
14.
Fair
Value
Measurements
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
143
franklintempleton.com
Annual
Report
Level
1
Level
2
Level
3
Total
Franklin
Focused
Growth
Fund
(continued)
Assets:
Investments
in
Securities:
Common
Stocks:
Life
Sciences
Tools
&
Services
............
$
358,842
$
538,446
$
—
$
897,288
Media
...............................
1,085,103
—
—
1,085,103
Personal
Products
.....................
448,940
—
—
448,940
Professional
Services
...................
1,223,160
—
—
1,223,160
Semiconductors
&
Semiconductor
Equipment
.
2,776,212
—
—
2,776,212
Software
.............................
9,076,020
—
—
9,076,020
Short
Term
Investments
...................
2,346,648
—
—
2,346,648
Total
Investments
in
Securities
...........
$44,725,275
$2,998,590
$—
$47,723,865
Franklin
Growth
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Aerospace
&
Defense
...................
817,073,662
—
—
817,073,662
Auto
Components
......................
1,362,365
—
—
1,362,365
Beverages
...........................
531,237,212
—
—
531,237,212
Biotechnology
.........................
433,577,847
—
—
433,577,847
Building
Products
......................
200,563,593
—
—
200,563,593
Capital
Markets
........................
536,324,493
—
—
536,324,493
Chemicals
...........................
623,991,887
—
—
623,991,887
Commercial
Services
&
Supplies
...........
60,154,740
—
—
60,154,740
Construction
Materials
..................
93,192,439
—
—
93,192,439
Electric
Utilities
........................
141,015,746
—
—
141,015,746
Electrical
Equipment
....................
68,876,546
—
—
68,876,546
Electronic
Equipment,
Instruments
&
Components
........................
434,521,597
—
—
434,521,597
Entertainment
.........................
213,991,594
—
—
213,991,594
Equity
Real
Estate
Investment
Trusts
(REITs)
.
345,962,554
—
—
345,962,554
Food
Products
........................
121,273,744
—
—
121,273,744
Health
Care
Equipment
&
Supplies
.........
1,143,700,483
—
—
1,143,700,483
Health
Care
Providers
&
Services
..........
198,019,658
—
—
198,019,658
Health
Care
Technology
.................
24,476,843
—
—
24,476,843
Hotels,
Restaurants
&
Leisure
.............
67,363,042
—
—
67,363,042
Interactive
Media
&
Services
..............
789,389,064
—
—
789,389,064
Internet
&
Direct
Marketing
Retail
..........
1,260,120,732
—
—
1,260,120,732
IT
Services
...........................
1,185,131,068
110,562,470
—
1,295,693,538
Life
Sciences
Tools
&
Services
............
746,785,161
76,987,693
—
823,772,854
Machinery
............................
659,277,286
—
—
659,277,286
Media
...............................
186,088,505
—
—
186,088,505
Personal
Products
.....................
20,083,365
—
—
20,083,365
Pharmaceuticals
.......................
862,062,821
—
—
862,062,821
Professional
Services
...................
645,970,236
—
—
645,970,236
Road
&
Rail
..........................
885,264,824
—
—
885,264,824
Semiconductors
&
Semiconductor
Equipment
.
868,294,776
—
—
868,294,776
Software
.............................
2,635,470,887
—
—
2,635,470,887
Technology
Hardware,
Storage
&
Peripherals
.
1,078,997,138
—
—
1,078,997,138
Textiles,
Apparel
&
Luxury
Goods
..........
236,807,608
—
—
236,807,608
Trading
Companies
&
Distributors
..........
122,712,435
—
—
122,712,435
Water
Utilities
.........................
100,390,684
—
—
100,390,684
14.
Fair
Value
Measurements
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
144
franklintempleton.com
Annual
Report
Level
1
Level
2
Level
3
Total
Franklin
Growth
Fund
(continued)
Assets:
Investments
in
Securities:
Short
Term
Investments
...................
$
141,078,855
$
11,718,922
—
$
152,797,777
Total
Investments
in
Securities
...........
$18,480,605,490
$199,269,085
$—
$18,679,874,575
Franklin
Income
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Aerospace
&
Defense
...................
694,765,854
—
$
—
694,765,854
Air
Freight
&
Logistics
...................
499,890,000
—
—
499,890,000
Automobiles
..........................
192,335,000
—
—
192,335,000
Banks
...............................
2,795,815,620
220,781,499
—
3,016,597,119
Beverages
...........................
1,903,475,000
—
—
1,903,475,000
Capital
Markets
........................
193,400,000
—
—
193,400,000
Chemicals
...........................
—
365,298,527
—
365,298,527
Containers
&
Packaging
.................
228,101,326
—
—
228,101,326
Diversified
Telecommunication
Services
.....
1,547,933,467
—
—
1,547,933,467
Electric
Utilities
........................
3,480,443,304
—
—
3,480,443,304
Energy
Equipment
&
Services
.............
28,665,000
—
—
28,665,000
Equity
Real
Estate
Investment
Trusts
(REITs)
.
79,705,536
—
—
79,705,536
Health
Care
Providers
&
Services
..........
292,000,000
—
—
292,000,000
Household
Products
....................
903,435,000
—
—
903,435,000
Industrial
Conglomerates
................
658,440,000
—
—
658,440,000
Insurance
............................
520,380,000
—
—
520,380,000
IT
Services
...........................
304,175,000
—
—
304,175,000
Machinery
............................
359,940,802
—
—
359,940,802
Media
...............................
173,475,000
—
—
173,475,000
Metals
&
Mining
.......................
497,785,000
—
—
497,785,000
Multiline
Retail
........................
328,220,700
—
—
328,220,700
Multi-Utilities
..........................
1,629,340,000
—
—
1,629,340,000
Oil,
Gas
&
Consumable
Fuels
.............
3,111,695,000
—
—
3,111,695,000
Personal
Products
.....................
—
184,966,880
—
184,966,880
Pharmaceuticals
.......................
2,254,820,000
710,246,561
—
2,965,066,561
Road
&
Rail
..........................
393,740,000
—
—
393,740,000
Semiconductors
&
Semiconductor
Equipment
.
969,248,690
—
—
969,248,690
Software
.............................
179,100,000
—
—
179,100,000
Tobacco
.............................
374,950,000
—
—
374,950,000
Wireless
Telecommunication
Services
.......
—
66,274,104
—
66,274,104
Equity-Linked
Securities
...................
—
12,428,195,892
—
12,428,195,892
Convertible
Preferred
Stocks
:
Banks
...............................
446,400,000
—
—
446,400,000
Capital
Markets
........................
70,200,000
—
—
70,200,000
Chemicals
...........................
11,075,000
—
—
11,075,000
Electric
Utilities
........................
756,578,196
—
—
756,578,196
Health
Care
Equipment
&
Supplies
.........
63,878,000
—
—
63,878,000
Machinery
............................
76,092,606
—
—
76,092,606
Multi-Utilities
..........................
227,495,390
—
—
227,495,390
Semiconductors
&
Semiconductor
Equipment
.
523,635,000
—
—
523,635,000
Thrifts
&
Mortgage
Finance
...............
—
115,387,500
—
115,387,500
Preferred
Stocks
........................
148,823,265
—
—
148,823,265
Convertible
Bonds
.......................
—
86,246,298
—
86,246,298
Corporate
Bonds
........................
—
18,544,596,136
—
18,544,596,136
Index-Linked
Notes
......................
—
172,075,680
—
172,075,680
Senior
Floating
Rate
Interests
...............
—
154,440,885
—
154,440,885
U.S.
Government
and
Agency
Securities
.......
—
983,001,952
—
983,001,952
Mortgage-Backed
Securities
................
—
1,598,089,598
—
1,598,089,598
14.
Fair
Value
Measurements
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
145
franklintempleton.com
Annual
Report
a
Includes
securities
determined
to
have
no
value
at
September
30,
2020.
A
reconciliation
in
which
Level
3
inputs
are
used
in
determining
fair
value
is
presented
when
there
are
significant
Level
3
assets
and/or
liabilities
at
the
beginning
and/or
end
of
the year.
15.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
The
amendments
in
the
ASU
provides
optional
temporary
financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
London
Interbank
Offered
Rate
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021.
The
ASU
is
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022.
Management
has
reviewed
the
requirements
and
believes
the
adoption
of
this
ASU
will
not
have
a
material
impact
on
the
financial
statements.
16.
Subsequent
Events
The
Funds
have
evaluated
subsequent
events
through
the
issuance
of
the
financial
statements
and
determined
that
no
events
have
occurred
that
require
disclosure.
Level
1
Level
2
Level
3
Total
Franklin
Income
Fund
(continued)
Assets:
Investments
in
Securities:
Convertible
Preferred
Stocks:
Escrows
and
Litigation
Trusts
...............
$
—
$
—
$
—
a
$
—
Short
Term
Investments
...................
662,122,040
11,734,630
—
673,856,670
Total
Investments
in
Securities
...........
$27,581,574,796
$35,641,336,142
$—
$63,222,910,938
Liabilities:
Other
Financial
Instruments:
Options
written
..........................
$
2,942,000
$
—
$
—
$
2,942,000
$—
$—
$—
$—
Franklin
U.S.
Government
Securities
Fund
Assets:
Investments
in
Securities:
U.S.
Government
and
Agency
Securities
.......
—
22,851,660
—
22,851,660
Mortgage-Backed
Securities
................
—
5,087,253,090
—
5,087,253,090
Short
Term
Investments
...................
231,583,058
—
—
231,583,058
Total
Investments
in
Securities
...........
$231,583,058
$5,110,104,750
$—
$5,341,687,808
Franklin
Utilities
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Diversified
Telecommunication
Services
.....
—
35,188,105
—
35,188,105
Electric
Utilities
........................
3,463,685,926
—
—
3,463,685,926
Gas
Utilities
..........................
167,217,500
—
—
167,217,500
Independent
Power
and
Renewable
Electricity
Producers
..........................
68,409,868
—
—
68,409,868
Multi-Utilities
..........................
1,806,788,747
157,079,385
—
1,963,868,132
Oil,
Gas
&
Consumable
Fuels
.............
141,984,000
21,669,327
—
163,653,327
Water
Utilities
.........................
143,755,907
33,140,433
—
176,896,340
Corporate
Bonds
........................
—
6,582,622
—
6,582,622
Short
Term
Investments
...................
5,118,759
—
—
5,118,759
Total
Investments
in
Securities
...........
$5,796,960,707
$253,659,872
$—
$6,050,620,579
14.
Fair
Value
Measurements
(continued)
Franklin
Custodian
Funds
Notes
to
Financial
Statements
146
franklintempleton.com
Annual
Report
Abbreviations
Selected
Portfolio
ADR
American
Depositary
Receipt
FHLMC
Federal
Home
Loan
Mortgage
Corp.
FNMA
Federal
National
Mortgage
Association
FRN
Floating
Rate
Note
GNMA
Government
National
Mortgage
Association
LIBOR
London
Inter-Bank
Offered
Rate
NYRS
New
York
Registry
Shares
Franklin
Custodian
Funds
Report
of
Independent
Registered
Public
Accounting
Firm
147
franklintempleton.com
Annual
Report
To
the
Board
of
Trustees
of
Franklin
Custodian
Funds
and
Shareholders
of
Franklin
DynaTech
Fund,
Franklin
Focused
Growth
Fund,
Franklin
Growth
Fund,
Franklin
Income
Fund,
Franklin
U.S.
Government
Securities
Fund,
and
Franklin
Utilities
Fund
Opinions
on
the
Financial
Statements
We
have
audited
the
accompanying
statements
of
assets
and
liabilities,
including
the
statements
of
investments,
of
Franklin
DynaTech
Fund,
Franklin
Focused
Growth
Fund,
Franklin
Growth
Fund,
Franklin
Income
Fund,
Franklin
U.S.
Government
Securities
Fund,
and
Franklin
Utilities
Fund
(constituting
Franklin
Custodian
Funds,
hereafter
collectively
referred
to
as
the
"Funds")
as
of
September
30,
2020,
the
related
statements
of
operations
for
the
year
ended
September
30,
2020,
the
statements
of
changes
in
net
assets
for
each
of
the
two
years
in
the
period
ended
September
30,
2020,
including
the
related
notes,
and
the
financial
highlights
for
each
of
the
periods
indicated
therein
(collectively
referred
to
as
the
“financial
statements”).
In
our
opinion,
the
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
of
each
of
the
Funds
as
of
September
30,
2020,
the
results
of
each
of
their
operations
for
the
year
then
ended,
the
changes
in
each
of
their
net
assets
for
each
of
the
two
years
in
the
period
ended
September
30,
2020
and
each
of
the
financial
highlights
for
each
of
periods
indicated
therein
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
of
America.
Basis
for
Opinions
These
financial
statements
are
the
responsibility
of
the
Funds’
management.
Our
responsibility
is
to
express
an
opinion
on
the
Funds’
financial
statements
based
on
our
audits.
We
are
a
public
accounting
firm
registered
with
the
Public
Company
Accounting
Oversight
Board
(United
States)
(PCAOB)
and
are
required
to
be
independent
with
respect
to
the
Funds
in
accordance
with
the
U.S.
federal
securities
laws
and
the
applicable
rules
and
regulations
of
the
Securities
and
Exchange
Commission
and
the
PCAOB.
We
conducted
our
audits
of
these
financial
statements
in
accordance
with
the
standards
of
the
PCAOB.
Those
standards
require
that
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement,
whether
due
to
error
or
fraud.
Our
audits
included
performing
procedures
to
assess
the
risks
of
material
misstatement
of
the
financial
statements,
whether
due
to
error
or
fraud,
and
performing
procedures
that
respond
to
those
risks.
Such
procedures
included
examining,
on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
financial
statements.
Our
audits
also
included
evaluating
the
accounting
principles
used
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
financial
statements.
Our
procedures
included
confirmation
of
securities
owned
as
of
September
30,
2020
by
correspondence
with
the
custodian,
transfer
agent
and
brokers;
when
replies
were
not
received
from
brokers,
we
performed
other
auditing
procedures.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinions.
PricewaterhouseCoopers
LLP
San
Francisco,
California
November
18,
2020
We
have
served
as
the
auditor
of
one
or
more
investment
companies
in
the
Franklin
Templeton
Group
of
Funds
since
1948.
Franklin
Custodian
Funds
Tax
Information
(unaudited)
148
franklintempleton.com
Annual
Report
Under
Section
852(b)(3)(C)
of
the
Internal
Revenue
Code,
the
Funds
hereby
report
the
maximum
amount
allowable
but
no
less
than
the
following
amounts
as
long
term
capital
gain
dividends
for
the
fiscal
year
ended
September
30,
2020:
Under
Section
871(k)(2)(C)
of
the
Internal
Revenue
Code,
the
Funds
hereby
report
the
maximum
amount
allowable
but
no
less
than
the
following
amounts
as
short
term
capital
gain
dividends
for
purposes
of
the
tax
imposed
under
Section
871(a)(1)
(A)
of
the
Internal
Revenue
Code
for
the
fiscal
year
ended
September
30,
2020:
Under
Section
854(b)(1)(A)
of
the
Internal
Revenue
Code,
the
Funds
hereby
report
the
following
percentage
amounts
of
the
ordinary
income
dividends
as
income
qualifying
for
the
dividends
received
deduction
for
the
fiscal
year
ended
September
30,
2020:
Under
Section
854(b)(1)(B)
of
the
Internal
Revenue
Code,
the
Funds
hereby
report
the
maximum
amount
allowable
but
no
less
than
the
following
amounts
as
qualified
dividends
for
purposes
of
the
maximum
rate
under
Section
1(h)(11)
of
the
Internal
Revenue
Code
for
the
fiscal
year
ended
September
30,
2020:
Distributions,
including
qualified
dividend
income,
paid
during
calendar
year
2020
will
be
reported
to
shareholders
on
Form
1099-DIV
by
mid-February
2021.
Shareholders
are
advised
to
check
with
their
tax
advisors
for
information
on
the
treatment
of
these
amounts
on
their
individual
income
tax
returns.
Under
Section
871(k)(1)(C)
of
the
Internal
Revenue
Code,
the
Funds
hereby
report
the
maximum
amount
allowable
but
no
less
than
the
following
amounts
as
interest
related
dividends
for
purposes
of
the
tax
imposed
under
Section
871(a)(1)(A)
of
the
Internal
Revenue
Code
for
the
fiscal
year
ended
September
30,
2020:
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Franklin
Utilities
Fund
$71,650,551
$297,169
$1,002,785,184
$139,618,093
Franklin
Focused
Growth
Fund
Franklin
Utilities
Fund
$5,450
$9,110,270
Franklin
Growth
Fund
Franklin
Focused
Growth
Fund
Franklin
Income
Fund
Franklin
Utilities
Fund
100%
100%
21%
100%
Franklin
DynaTech
Fund
Franklin
Focused
Growth
Fund
Franklin
Growth
Fund
Franklin
Income
Fund
Franklin
Utilities
Fund
$42,103,838
$54,153
$177,925,805
$988,036,099
$210,571,780
Franklin
Income
Fund
Franklin
U.S.
Government
Securities
Fund
$2,181,632,144
$132,444,837
Franklin
Custodian
Funds
Board
Members
and
Officers
149
franklintempleton.com
Annual
Report
The
name,
year
of
birth
and
address
of
the
officers
and
board
members,
as
well
as
their
affiliations,
positions
held
with
the
Trust,
principal
occupations
during
at
least
the
past
five
years
and
number
of
U.S.
registered
portfolios
overseen
in
the
Franklin
Templeton
fund
complex,
are
shown
below.
Generally,
each
board
member
serves
until
that
person’s
successor
is
elected
and
qualified.
Independent
Board
Members
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Harris
J.
Ashton
(1932)
Trustee
Since
1976
126
Bar-S
Foods
(meat
packing
company)
(1981-2010).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
and
formerly
,
Director,
RBC
Holdings,
Inc.
(bank
holding
company)
(until
2002);
and
President,
Chief
Executive
Officer
and
Chairman
of
the
Board,
General
Host
Corporation
(nursery
and
craft
centers)
(until
1998).
Terrence
J.
Checki
(1945)
Trustee
Since
2017
107
Hess
Corporation
(exploration
of
oil
and
gas)
(2014-present).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Member
of
the
Council
on
Foreign
Relations
(1996-present);
Member
of
the
National
Committee
on
U.S.-China
Relations
(1999-present);
member
of
the
board
of
trustees
of
the
Economic
Club
of
New
York
(2013-present);
member
of
the
board
of
trustees
of
the
Foreign
Policy
Association
(2005-present);
member
of
the
board
of
directors
of
Council
of
the
Americas
(2007-present)
and
the
Tallberg
Foundation
(2018–
present);
and
formerly
,
Executive
Vice
President
of
the
Federal
Reserve
Bank
of
New
York
and
Head
of
its
Emerging
Markets
and
Internal
Affairs
Group
and
Member
of
Management
Committee
(1995-2014);
and
Visiting
Fellow
at
the
Council
on
Foreign
Relations
(2014).
Mary
C.
Choksi
(1950)
Trustee
Since
2014
126
Omnicom
Group
Inc.
(advertising
and
marketing
communications
services)
(2011-present)
and
White
Mountains
Insurance
Group,
Ltd.
(holding
company)
(2017-present);
and
formerly
,
Avis
Budget
Group
Inc.
(car
rental)
(2007-May
2020).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
and
formerly
,
Founder
and
Senior
Advisor,
Strategic
Investment
Group
(investment
management
group)
(2015-2017);
Founding
Partner
and
Senior
Managing
Director,
Strategic
Investment
Group
(1987-2015);
Founding
Partner
and
Managing
Director,
Emerging
Markets
Management
LLC
(investment
management
firm)
(1987-2011);
and
Loan
Officer/Senior
Loan
Officer/Senior
Pension
Investment
Officer,
World
Bank
Group
(international
financial
institution)
(1977-1987).
Franklin
Custodian
Funds
150
franklintempleton.com
Annual
Report
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Edith
E.
Holiday
(1952)
Lead
Independent
Trustee
Trustee
since
1998
and
Lead
Independent
Trustee
since
2019
126
Hess
Corporation
(exploration
of
oil
and
gas)
(1993-present),
Canadian
National
Railway
(railroad)
(2001-present),
White
Mountains
Insurance
Group,
Ltd.
(holding
company)
(2004-present),
Santander
Consumer
USA
Holdings,
Inc.
(consumer
finance)
(2016-present);
Santander
Holdings
USA.
(holding
company)
(2019-present);
and
formerly
,
RTI
International
Metals,
Inc.
(manufacture
and
distribution
of
titanium)
(1999-2015)
and
H.J.
Heinz
Company
(processed
foods
and
allied
products)
(1994-2013).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
or
Trustee
of
various
companies
and
trusts;
and
formerly
,
Assistant
to
the
President
of
the
United
States
and
Secretary
of
the
Cabinet
(1990-1993);
General
Counsel
to
the
United
States
Treasury
Department
(1989-1990);
and
Counselor
to
the
Secretary
and
Assistant
Secretary
for
Public
Affairs
and
Public
Liaison-United
States
Treasury
Department
(1988-1989).
J.
Michael
Luttig
(1954)
Trustee
Since
2009
126
Boeing
Capital
Corporation
(aircraft
financing)
(2006-2010).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Private
investor;
and
formerly
,
Counselor
and
Senior
Advisor
to
the
Chairman,
CEO,
and
Board
of
Directors,
of
The
Boeing
Company
(aerospace
company),
and
member
of
the
Executive
Council
(May
2019-January
1,
2020);
Executive
Vice
President,
General
Counsel
and
member
of
the
Executive
Council,
The
Boeing
Company
(2006-2019);
and
Federal
Appeals
Court
Judge,
United
States
Court
of
Appeals
for
the
Fourth
Circuit
(1991-2006).
Larry
D.
Thompson
(1945)
Trustee
Since
2007
126
Graham
Holdings
Company
(education
and
media
organization)
(2011-present);
and
formerly
,
The
Southern
Company
(energy
company)
(2014-May
2020;
previously
2010-2012),
Cbeyond,
Inc.
(business
communications
provider)
(2010-2012).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
Counsel,
Finch
McCranie,
LLP
(law
firm)
(2015-present);
John
A.
Sibley
Professor
of
Corporate
and
Business
Law,
University
of
Georgia
School
of
Law
(2015-present;
previously
2011-2012);
and
formerly
,
Independent
Compliance
Monitor
and
Auditor,
Volkswagen
AG
(manufacturer
of
automobiles
and
commercial
vehicles)
(2017-September
2020);
Executive
Vice
President
-
Government
Affairs,
General
Counsel
and
Corporate
Secretary,
PepsiCo,
Inc.
(consumer
products)
(2012-2014);
Senior
Vice
President
-
Government
Affairs,
General
Counsel
and
Secretary,
PepsiCo,
Inc.
(2004-2011);
Senior
Fellow
of
The
Brookings
Institution
(2003-2004);
Visiting
Professor,
University
of
Georgia
School
of
Law
(2004);
and
Deputy
Attorney
General,
U.S.
Department
of
Justice
(2001-2003).
Independent
Board
Members
(continued)
Franklin
Custodian
Funds
151
franklintempleton.com
Annual
Report
Interested
Board
Members
and
Officers
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
**Gregory
E.
Johnson
(1961)
Trustee
Since
2013
137
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
Franklin
Resources,
Inc.;
officer
and/or
director
or
trustee,
as
the
case
may
be,
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
39
of
the
investment
companies
in
Franklin
Templeton;
Vice
Chairman,
Investment
Company
Institute;
and
formerly
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015),
Franklin
Resources,
Inc.
**Rupert
H.
Johnson,
Jr.
(1940)
Chairman
of
the
Board,
Trustee
and
Vice
President
Chairman
of
the
Board
since
2013,
Trustee
since
1983
and
Vice
President
since
1982
126
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
(Vice
Chairman),
Franklin
Resources,
Inc.;
Director,
Franklin
Advisers,
Inc.;
and
officer
and/or
director
or
trustee,
as
the
case
may
be,
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
37
of
the
investment
companies
in
Franklin
Templeton.
Alison
E.
Baur
(1964)
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Deputy
General
Counsel,
Franklin
Templeton;
and
officer
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
41
of
the
investment
companies
in
Franklin
Templeton.
Breda
M.
Beckerle
(1958)
Chief
Compliance
Officer
Since
October
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
Principal
Occupation
During
at
Least
the
Past
5
Years:
Chief
Compliance
Officer,
Fiduciary
Investment
Management
International,
Inc.,
Franklin
Advisers,
Inc.,
Franklin
Advisory
Services,
LLC,
Franklin
Mutual
Advisers,
LLC,
Franklin
Templeton
Institutional,
LLC;
and
officer
of
41
of
the
investment
companies
in
Franklin
Templeton.
Gaston
Gardey
(1967)
Treasurer,
Chief
Financial
Officer
and
Chief
Accounting
Officer
Since
2009
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting
and
officer
of
24
of
the
investment
companies
in
Franklin
Templeton.
Steven
J.
Gray
(1955)
Vice
President
and
Co-Secretary
Vice
President
since
2009
and
Co-Secretary
since
2019
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Associate
General
Counsel,
Franklin
Templeton;
Vice
President,
Franklin
Templeton
Distributors,
Inc.
and
FASA,
LLC;
and
officer
of
41
of
the
investment
companies
in
Franklin
Templeton.
Franklin
Custodian
Funds
152
franklintempleton.com
Annual
Report
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Matthew
T.
Hinkle
(1971)
Chief
Executive
Officer
–
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Vice
President,
Franklin
Templeton
Services,
LLC;
officer
of
41
of
the
investment
companies
in
Franklin
Templeton;
and
formerly
,
Vice
President,
Global
Tax
(2012-April
2017)
and
Treasurer/Assistant
Treasurer,
Franklin
Templeton
(2009-2017).
Robert
Lim
(1948)
Vice
President
–
AML
Compliance
Since
2016
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Vice
President,
Franklin
Templeton
Companies,
LLC;
Chief
Compliance
Officer,
Franklin
Templeton
Distributors,
Inc.
and
Franklin
Templeton
Investor
Services,
LLC;
and
officer
of
41
of
the
investment
companies
in
Franklin
Templeton.
Edward
D.
Perks
(1970)
President
and
Chief
Executive
Officer
–
Investment
Management
Since
2018
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
President
and
Director,
Franklin
Advisers,
Inc.;
and
officer
of
eight
of
the
investment
companies
in
Franklin
Templeton
(since
December
2018).
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Associate
General
Counsel
and
officer
of
41
of
the
investment
companies
in
Franklin
Templeton.
Craig
S.
Tyle
(1960)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
General
Counsel
and
Executive
Vice
President,
Franklin
Resources,
Inc.;
and
officer
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
41
of
the
investment
companies
in
Franklin
Templeton.
Lori
A.
Weber
(1964)
Vice
President
and
Co-Secretary
Vice
President
since
2011
and
Co-Secretary
since
2019
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Associate
General
Counsel,
Franklin
Templeton;
Assistant
Secretary,
Franklin
Resources,
Inc.;
Vice
President
and
Secretary,
Templeton
Investment
Counsel,
LLC;
and
officer
of
41
of
the
investment
companies
in
Franklin
Templeton.
Interested
Board
Members
and
Officers
(continued)
Franklin
Custodian
Funds
153
franklintempleton.com
Annual
Report
*We
base
the
number
of
portfolios
on
each
separate
series
of
the
U.S.
registered
investment
companies
within
the
Franklin
Templeton
fund
complex.
These
portfolios
have
a
common
investment
manager
or
affiliated
investment
managers.
**Gregory
E.
Johnson
is
considered
to
be
an
interested
person
of
the
Fund
under
the
federal
securities
laws
due
to
his
position
as
an
officer
and
director
of
Franklin
Resources,
Inc.
(Resources),
which
is
the
parent
company
of
the
Fund’s
investment
manager
and
distributor.
Rupert
H.
Johnson,
Jr.
is
considered
to
be
an
interested
person
of
the
Fund
under
the
federal
securities
laws
due
to
his
position
as
an
officer
and
director
and
major
shareholder
of
Resources.
Note
1:
Rupert
H.
Johnson,
Jr.
is
the
uncle
of
Gregory
E.
Johnson.
Note
2:
Officer
information
is
current
as
of
the
date
of
this
report.
It
is
possible
that
after
this
date,
information
about
officers
may
change.
The
Sarbanes-Oxley
Act
of
2002
and
Rules
adopted
by
the
Securities
and
Exchange
Commission
require
the
Fund
to
disclose
whether
the
Fund’s
Audit
Committee
includes
at
least
one
member
who
is
an
audit
committee
financial
expert
within
the
meaning
of
such
Act
and
Rules.
The
Fund’s
Board
has
determined
that
there
is
at
least
one
such
financial
expert
on
the
Audit
Committee
and
has
designated
Mary
C.
Choksi
as
its
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Choksi
qualifies
as
such
an
expert
in
view
of
her
extensive
business
background
and
experience.
She
served
as
a
director
of
Avis
Budget
Group,
Inc.
(2007-May
2020)
and
formerly,
Founder
and
Senior
Advisor,
Strategic
Investment
Group
(1987
to
2017).
Ms.
Choksi
has
been
a
Member
of
the
Fund’s
Audit
Committee
since
2014.
As
a
result
of
such
background
and
experience,
the
Board
believes
that
Ms.
Choksi
has
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
statements,
the
general
application
of
such
principles
in
connection
with
the
accounting
estimates,
accruals
and
reserves,
and
analyzing
and
evaluating
financial
statements
that
present
a
breadth
and
level
of
complexity
of
accounting
issues
generally
comparable
to
those
of
the
Fund,
as
well
as
an
understanding
of
internal
controls
and
procedures
for
financial
reporting
and
an
understanding
of
audit
committee
functions.
Ms.
Choksi
is
an
independent
Board
member
as
that
term
is
defined
under
the
relevant
Securities
and
Exchange
Commission
Rules
and
Releases.
The
Statement
of
Additional
Information
(SAI)
includes
additional
information
about
the
board
members
and
is
available,
without
charge,
upon
request.
Shareholders
may
call
(800)
DIAL
BEN/342-5236
to
request
the
SAI.
Interested
Board
Members
and
Officers
(continued)
Franklin
Custodian
Funds
Shareholder
Information
154
franklintempleton.com
Annual
Report
Liquidity
Risk
Management
Program
Each
of
the
Funds
has
adopted
and
implemented
a
written
Liquidity
Risk
Management
Program
(the
“LRMP”)
as
required
by
Rule
22e-4
under
the
Investment
Company
Act
of
1940
(the
“Liquidity
Rule”).
The
LRMP
is
designed
to
assess
and
manage
each
Fund’s
liquidity
risk,
which
is
defined
as
the
risk
that
the
Fund
could
not
meet
requests
to
redeem
shares
issued
by
the
Fund
without
significant
dilution
of
remaining
investors’
interests
in
the
Fund.
In
accordance
with
the
Liquidity
Rule,
the
LRMP
includes
policies
and
procedures
that
provide
for:
(1)
assessment,
management,
and
review
(no
less
frequently
than
annually)
of
each
Fund’s
liquidity
risk;
(2)
classification
of
each
Fund’s
portfolio
holdings
into
one
of
four
liquidity
categories
(Highly
Liquid,
Moderately
Liquid,
Less
Liquid,
and
Illiquid);
(3)
for
Funds
that
do
not
primarily
hold
assets
that
are
Highly
Liquid,
establishing
and
maintaining
a
minimum
percentage
of
the
Fund’s
net
assets
in
Highly
Liquid
investments
(called
a
“Highly
Liquid
Investment
Minimum”
or
“HLIM”);
and
(4)
prohibiting
the
Fund’s
acquisition
of
Illiquid
investments
that
would
result
in
the
Fund
holding
more
than
15%
of
its
net
assets
in
Illiquid
assets.
The
LRMP
also
requires
reporting
to
the
SEC
(on
a
non-public
basis)
and
to
the
Board
if
the
Fund’s
holdings
of
Illiquid
assets
exceed
15%
of
the
Fund’s
net
assets.
Funds
with
HLIMs
must
have
procedures
for
addressing
HLIM
shortfalls,
including
reporting
to
the
Board
and,
with
respect
to
HLIM
shortfalls
lasting
more
than
seven
consecutive
calendar
days,
reporting
to
the
Securities
and
Exchange
Commission
(“SEC”)
(on
a
non-public
basis).
The
Funds’
Board
of
Trustees
approved
the
appointment
of
the
Director
of
Liquidity
Risk
within
the
Investment
Risk
Management
Group
(the
“IRMG”)
as
the
Administrator
of
the
LRMP.
The
IRMG
maintains
the
Investment
Liquidity
Committee
(the
“ILC”)
to
provide
oversight
and
administration
of
policies
and
procedures
governing
liquidity
risk
management
for
FT
products
and
portfolios.
The
ILC
includes
representatives
from
Franklin
Templeton’s
Risk,
Trading,
Global
Compliance,
Investment
Compliance,
Investment
Operations,
Valuation
Committee
and
Product
Management
groups.
In
assessing
and
managing
each
Fund’s
liquidity
risk,
the
ILC
considers,
as
relevant,
a
variety
of
factors,
including
the
Fund’s
investment
strategy
and
the
liquidity
of
its
portfolio
investments
during
both
normal
and
reasonably
foreseeable
stressed
conditions;
its
short
and
long-term
cash
flow
projections;
and
its
cash
holdings
and
access
to
other
funding
sources
including
the
Funds’
interfund
lending
facility
and
line
of
credit.
Classification
of
the
Fund’s
portfolio
holdings
in
the
four
liquidity
categories
is
based
on
the
number
of
days
it
is
reasonably
expected
to
take
to
convert
the
investment
to
cash
(for
Highly
Liquid
and
Moderately
Liquid
holdings)
or
sell
or
dispose
of
the
investment
(for
Less
Liquid
and
Illiquid
investments),
in
current
market
conditions
without
significantly
changing
the
investment’s
market
value.
The
Fund
primarily
holds
liquid
assets
that
are
defined
under
the
Liquidity
Rule
as
"Highly
Liquid
Investments,"
and
therefore
is
not
required
to
establish
an
HLIM.
Highly
Liquid
Investments
are
defined
as
cash
and
any
investment
reasonably
expected
to
be
convertible
to
cash
in
current
market
conditions
in
three
business
days
or
less
without
the
conversion
to
cash
significantly
changing
the
market
value
of
the
investment.
At
meetings
of
the
Funds’
Board
of
Trustees
held
in
May
2020,
the
Program
Administrator
provided
a
written
report
to
the
Board
addressing
the
adequacy
and
effectiveness
of
the
program
during
the
period
December
1,
2018
to
December
31,
2019.
The
Program
Administrator
report
concluded
that
(i.)
the
LRMP,
as
adopted
and
implemented,
remains
reasonably
designed
to
assess
and
manage
each
Fund’s
liquidity
risk;
(ii.)
the
LRMP,
including
the
Highly
Liquid
Investment
Minimum
(“HLIM”)
where
applicable,
was
implemented
and
operated
effectively
to
achieve
the
goal
of
assessing
and
managing
each
Fund’s
liquidity
risk;
and
(iii.)
each
Fund
was
able
to
meet
requests
for
redemption
without
significant
dilution
of
remaining
investors’
interests
in
the
Fund.
At
the
same
time,
the
Program
Administrator
also
presented
the
Fund
Board
of
Trustees
an
update
on
liquidity
during
the
first
quarter
of
2020
in
relation
to
the
COVID-19
pandemic.
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
Franklin
Custodian
Funds
Shareholder
Information
155
franklintempleton.com
Annual
Report
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
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.
gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive
each
Fund’s
financial
reports
every
six
months
as
well
as
an
annual
updated
summary
prospectus
(prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
FCF
A
11/20
©
2020
Franklin
Templeton
Investments.
All
rights
reserved.
Authorized
for
distribution
only
when
accompanied
or
preceded
by
a
summary
prospectus
and/or
prospectus.
Investors
should
carefully
consider
a
fund’s
investment
goals,
risks,
charges
and
expenses
before
investing.
A
prospectus
contains
this
and
other
information;
please
read
it
carefully
before
investing.
To
help
ensure
we
provide
you
with
quality
service,
all
calls
to
and
from
our
service
areas
are
monitored
and/or
recorded.
Annual
Report
and
Shareholder
Letter
Franklin
Custodian
Funds
Investment
Manager
Distributor
Shareholder
Services
Franklin
Advisors,
Inc.
Franklin
Templeton
Distributors,
Inc.
(800)
DIAL
BEN
®
/
342-5236
franklintempleton.com
(800)
632-2301
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 13(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial expert is Mary C. Choksi and she is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4.Principal Accountant Fees and Services.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $511,004 for the fiscal year ended September 30, 2020 and $672,777 for the fiscal year ended September 30, 2019.
(b) Audit-Related Fees
The aggregate fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4 were $9,399 for the fiscal year ended September 30, 2020 and $9,399 for the fiscal year ended September 30, 2019. The services for which these fees were paid included attestation services.
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planningwere $199,302 for the fiscal year ended September 30, 2020 and $210,000 for the fiscal year ended September 30, 2019. The services for which these fees were paid included professional fees in connection with tax treatment of equipment lease transactions, professional fees in connection with an Indonesia withholding tax refund claim and tax compliance services related to year-end.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended September 30, 2020 and $45,059 for the fiscal year ended September 30, 2019. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $87,457 for the fiscal year ended September 30, 2020 and $114,908 for the fiscal year ended September 30, 2019. The services for which these fees were paid included valuation services related to fair value engagement, the issuance of an Auditor’s Certificate for South Korean regulatory shareholders disclosures, benchmarking services in connection with the ICI TA Survey, professional fees in connection with determining the feasibility of a U.S. direct lending structure, and compliance examination for Investment Advisor Act rule 204-2 and 206-4 (2)n.
(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $296,158 for the fiscal year ended September 30, 2020 and $379,366 for the fiscal year ended September 30, 2019.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee
of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and
Affiliated Purchasers. N/A
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b)
Changes in Internal Controls
.
During the period covered by this report, a third-party service provider commenced performing certain accounting and administrative services for the Registrant that are subject to Franklin Templeton’s oversight.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A
Item 13. Exhibits.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN
CUSTODIAN FUNDS
By __S\MATTHEW T. HINKLE_____
Matthew T. Hinkle
Chief Executive Officer - Finance and Administration
Date November 25, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By ___S\MATTHEW T. HINKLE____
Matthew T. Hinkle
Chief Executive Officer - Finance and Administration
Date November 25, 2020
By ___S\GASTON GARDEY________
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date November 25, 2020