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

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-00537
---------

FRANKLIN CUSTODIAN FUNDS, INC.
------------------------------
(Exact name of registrant as specified in charter)

ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)

MURRAY L. SIMPSON, 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
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Date of fiscal year end: 9/30
----

Date of reporting period: 3/31/04
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ITEM 1. REPORTS TO STOCKHOLDERS.

MARCH 31, 2004
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Franklin DynaTech Fund

Franklin Growth Fund

Franklin Income Fund

Franklin U.S. Government
Securities Fund

Franklin Utilities Fund

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SEMIANNUAL REPORT AND SHAREHOLDER LETTER
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FRANKLIN
CUSTODIAN FUNDS, INC.

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WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at
franklintempleton.com. See inside for details.
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[LOGO]
FRANKLIN[R] TEMPLETON[R]
INVESTMENTS
FRANKLIN o Templeton o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager structure combines the specialized
expertise of three world-class investment management groups--Franklin, Templeton
and Mutual Series.

SPECIALIZED EXPERTISE

Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.

FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.

TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.

MUTUAL SERIES. Founded in 1949, Mutual Series is dedicated to a unique style of
value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.

TRUE DIVERSIFICATION

Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.

RELIABILITY YOU CAN TRUST

At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[PHOTO OMITTED]

Not part of the semiannual report

Contents

SHAREHOLDER LETTER ...................... 1

SEMIANNUAL REPORT

Franklin DynaTech Fund .................. 3

Franklin Growth Fund .................... 8

Franklin Income Fund .................... 14

Franklin U.S. Government
Securities Fund ......................... 23

Franklin Utilities Fund ................. 30

Financial Highlights and
Statements of Investments ............... 36

Financial Statements .................... 85

Notes to
Financial Statements .................... 94

Proxy Voting Policies
and Procedures ..........................110

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Semiannual Report

Franklin DynaTech Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin DynaTech Fund seeks capital
appreciation by investing most of its assets in companies emphasizing scientific
or technological development or that are in fast-growing industries.

This semiannual report for Franklin DynaTech Fund covers the period ended March
31, 2004.

PERFORMANCE OVERVIEW

Franklin DynaTech Fund - Class A posted a +12.79% cumulative total return for
the six months ended March 31, 2004. For the period under review, the Fund
outperformed its narrow benchmark, the NASDAQ 100 Index, which had a price-only
return of 10.33%, and underperformed the broad Standard & Poor's 500 Composite
Index (S&P 500), which posted a 14.07% total return.1 You can find the Fund's
performance data in the Performance Summary beginning on page 6.

ECONOMIC AND MARKET OVERVIEW

During the six months ended March 31, 2004, the U.S. economy strengthened.
Driven by massive fiscal and economic stimuli injected into the economy last
year, the second half of 2003 experienced the fastest advance in output of
U.S.-made goods and services in nearly 20 years. Annualized gross domestic
product (GDP) growth surged 8.2% in the third quarter of 2003 and rose 4.1% in
the fourth quarter. This trend continued in early 2004, and first quarter GDP
increased an estimated annualized 4.2%. During the period, the U.S. dollar's
value declined against most major currencies, particularly versus the euro,
which benefited many U.S. companies and contributed to corporate profit
improvements. Business and consumer sentiment rose in early 2004. Consumer
spending, however, was constrained by slow wage growth and heavy indebtedness.

1. Source: Standard & Poor's Micropal. The NASDAQ 100 Index includes 100 of the
largest domestic and international non-financial companies listed on The NASDAQ
Stock Market based on market capitalization. The index reflects companies across
major industry groups including computer hardware and software,
telecommunications, retail/wholesale trade and biotechnology. It does not
contain financial companies including investment companies. Index returns are
price-return only and do not include reinvested dividends. The S&P 500 consists
of 500 stocks chosen for market size, liquidity and industry group
representation. Each stock's weight in the index is proportionate to its market
value. The S&P 500 includes reinvested dividends and is one of the most widely
used benchmarks of U.S. equity performance. The indexes are unmanaged. One
cannot invest directly in an index, nor is an index representative of the Fund's
portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 39.

Semiannual Report | 3

Productivity gains, shifting global manufacturing operations, raw materials
shortages, and rising fuel prices, as well as U.S. political uncertainty in an
election year, appeared to inhibit U.S. job growth. Unemployment generally
decreased during most of the reporting period, and monthly unemployment figures
for November 2003 through March 2004 were below 6%. Inflation remained in check
during the period, despite higher energy prices stemming from rising global
demand, less supply from oil-producing countries and a lower U.S. dollar, which
made imported oil more expensive in U.S.-dollar terms.

During the period, domestic equity markets continued a rally that began in March
2003. Data showing robust economic growth and improving corporate balance sheets
seemed to increase investor confidence in the stock markets. The S&P 500 rose
14.07% for the six months under review, while the technology-heavy NASDAQ
Composite Index gained 11.94%.2 As economic data improved, some interest rates
increased in fall 2003. However, lack of job creation sparked concerns about the
strength of economic recovery, which contributed to an interest rate decline by
the end of the period. For example, the 10-year Treasury note yielded 3.96% on
September 30, 2003, reached a peak of 4.49% on November 10, 2003, then declined
to 3.86% by March 31, 2004.

INVESTMENT STRATEGY

Normally, we seek to invest in companies and established industry leaders we
believe have a competitive advantage due to their state-of-the-art products and
technologies. We use a conservative, bottom-up research process to find what we
consider undervalued companies.

MANAGER'S DISCUSSION

During the six-month reporting period, International Game Technology, Genentech
and eBay contributed the largest positive performances to the Fund. Shares of
International Game Technology, a dominant manufacturer of casino gaming products
and systems, rose 60.6% in value during the reporting period. Genentech, a major
biotechnology company, also performed well. Share value went up 32.0% during the
period. Lastly, leading Internet auction provider eBay appreciated 29.2%.

PORTFOLIO BREAKDOWN
Franklin DynaTech Fund
3/31/04

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% OF TOTAL
SECTOR/INDUSTRY NET ASSETS
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Semiconductors 12.4%
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Packaged Software 8.0%
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Biotechnology 8.0%
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Medical Specialties 6.5%
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Electronic Production Equipment 4.9%
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Telecommunications Equipment 4.7%
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Major Pharmaceuticals 4.5%
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Other Consumer Services 4.4%
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Casinos & Gaming 4.2%
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Data Processing Services 4.2%
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Electronic Equipment & Instruments 3.7%
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Managed Health Care 2.9%
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Information Technology Services 2.8%
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Computer Communications 2.4%
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Recreational Products 2.3%
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Computer Processing Hardware 2.0%
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Other 16.8%
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Short-Term Investments & Other Net Assets 5.3%
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2. Source: Standard & Poor's Micropal. See footnote 1 for a description of the
S&P 500. The NASDAQ Composite Index measures all domestic and international
common stocks listed on The NASDAQ Stock Market. The index is market
value-weighted and includes over 3,000 companies.

4 | Semiannual Report

On a less positive note, Microsoft, Amgen and Veritas Software detracted the
most from Fund performance during the period under review. Microsoft, a large
Fund position, declined 9.8% in value during the reporting period. Amgen, the
world's largest biotechnology company and another substantial Fund holding, fell
9.9% during the period. Veritas, a data storage software products provider, was
down 24.4% for the time we held it. We sold this stock by period-end.

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

[PHOTO]

/S/Rupert H. Johnson

Rupert H. Johnson, Jr.

[PHOTO]

/S/Robert R. Dean

Robert R. Dean, CFA

Portfolio Management Team
Franklin DynaTech Fund

TOP 10 HOLDINGS
Franklin DynaTech Fund
3/31/04

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COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- -----------------------------------------------
Intel Corp. 4.2%
SEMICONDUCTORS
- -----------------------------------------------
Genentech Inc. 4.1%
BIOTECHNOLOGY
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eBay Inc. 3.9%
OTHER CONSUMER SERVICES
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International Game Technology 3.6%
CASINOS & GAMING
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Microsoft Corp. 3.2%
PACKAGED SOFTWARE
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UnitedHealth Group Inc. 2.9%
MANAGED HEALTH CARE
- -----------------------------------------------
International Business Machines Corp. 2.5%
INFORMATION TECHNOLOGY SERVICES
- -----------------------------------------------
Amgen Inc. 2.3%
BIOTECHNOLOGY
- -----------------------------------------------
Electronic Arts Inc. 2.3%
RECREATIONAL PRODUCTS
- -----------------------------------------------
Cisco Systems Inc. 2.3%
COMPUTER COMMUNICATIONS
- -----------------------------------------------

THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
MARCH 31, 2004, 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 ADVISOR 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.

Semiannual Report | 5

Performance Summary as of 3/31/04

FRANKLIN DYNATECH FUND

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table does not reflect any taxes due on
Fund dividends, capital gain distributions, if any, or any realized gains on the
sale of Fund shares. Total return reflects the Fund's dividend income, capital
gain distributions, if any, and any unrealized gains or losses.

PRICE INFORMATION
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CLASS A CHANGE 3/31/04 9/30/03
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Net Asset Value (NAV) +$2.58 $22.75 $20.17
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CLASS B CHANGE 3/31/04 9/30/03
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Net Asset Value (NAV) +$2.45 $22.24 $19.79
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CLASS C CHANGE 3/31/04 9/30/03
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Net Asset Value (NAV) +$2.42 $22.01 $19.59
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PERFORMANCE

CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES
CHARGES. AVERAGE ANNUAL TOTAL RETURN AND VALUE OF $10,000 INVESTMENT INCLUDE
MAXIMUM SALES CHARGES.

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CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +12.79% +38.30% +9.98% +193.15%
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Average Annual Total Return 2 +6.31% +30.37% +0.72% +10.70%
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Value of $10,000 Investment 3 $10,631 $13,037 $10,366 $27,634
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CLASS B 6-MONTH 1-YEAR 3-YEAR INCEPTION (2/1/00)
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Cumulative Total Return 1 +12.32% +37.28% +9.03% -18.36%
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Average Annual Total Return 2 +8.32% +33.28% +1.97% -5.20%
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Value of $10,000 Investment 3 $10,832 $13,328 $10,603 $8,005
- -----------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (9/16/96)
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Cumulative Total Return 1 +12.35% +37.30% +6.01% +83.85%
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Average Annual Total Return 2 +11.35% +36.30% +1.17% +8.41%
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Value of $10,000 Investment 3 $11,135 $13,630 $10,601 $18,385
- -----------------------------------------------------------------------------------------------------

PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. ONGOING MARKET VOLATILITY
CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER
FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS, AND YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES.

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

6 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

ENDNOTES

INVESTING IN A NON-DIVERSIFIED FUND CONCENTRATING IN THE SCIENTIFIC AND
TECHNOLOGY SECTOR INVOLVES SPECIAL RISKS, INCLUDING THOSE RELATED TO
FLUCTUATIONS IN THE PRICE OF TECHNOLOGY STOCKS AND INCREASED SUSCEPTIBILITY TO
ADVERSE ECONOMIC AND REGULATORY DEVELOPMENTS AFFECTING THE SECTOR. THE
TECHNOLOGY SECTOR HAS BEEN AMONG THE MARKET'S MOST VOLATILE. THE FUND MAY ALSO
INVEST IN SMALL-CAPITALIZATION COMPANIES, WHICH INVOLVE SPECIAL RISKS SUCH AS
RELATIVELY SMALL REVENUES, LIMITED PRODUCT LINES AND MODEST MARKET SHARE. THE
PRICE OF THESE SECURITIES CAN BE VOLATILE, ESPECIALLY OVER THE SHORT TERM, AND
INVESTORS SHOULD EXPECT FLUCTUATION IN THE VALUE OF THEIR INVESTMENT. THE FUND'S
PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS A: Prior to 8/3/98, these shares were offered at a lower initial sales
charge; thus actual total returns may differ. Effective 5/1/94, the Fund
implemented a Rule 12b-1 plan, which affects subsequent performance.

CLASS B: These shares have higher annual fees and expenses than Class A shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares have higher
annual fees and expenses than Class A shares.

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.

2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any current, applicable,
maximum sales charge. Six-month return has not been annualized.

3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge.

Semiannual Report | Past performance does not guarantee future results. | 7

Franklin Growth Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Growth Fund seeks capital
appreciation by investing mainly in equity securities of companies that are
leaders in their industries and that the manager believes are suitable for a
buy-and-hold strategy.

We are pleased to bring you Franklin Growth Fund's semiannual report covering
the period ended March 31, 2004.

PERFORMANCE OVERVIEW

During the six months under review, Franklin Growth Fund - Class A posted a
+12.95% cumulative total return. The Fund underperformed its benchmark, the
Standard & Poor's 500 Composite Index (S&P 500), which returned 14.07% for the
same period.1 You can find the Fund's performance data in the Performance
Summary beginning on page 11.

ECONOMIC AND MARKET OVERVIEW
During the six months ended March 31, 2004, the U.S. economy strengthened.
Driven by massive fiscal and economic stimuli injected into the economy last
year, the second half of 2003 experienced the fastest advance in output of
U.S.-made goods and services in nearly 20 years. Annualized gross domestic
product (GDP) growth surged 8.2% in the third quarter of 2003 and rose 4.1% in
the fourth quarter. This trend continued in early 2004, and first quarter GDP
increased an estimated annualized 4.2%. During the period, the U.S. dollar's
value declined against most major currencies, particularly versus the euro,
which benefited many U.S. companies and contributed to corporate profit
improvements. Business and consumer sentiment rose in early 2004. Consumer
spending, however, was constrained by slow wage growth and heavy indebtedness.

PORTFOLIO BREAKDOWN
Franklin Growth Fund
3/31/04
- ---------------------------------------------------
% OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- ---------------------------------------------------
Health Technology 21.6%
- ---------------------------------------------------
Producer Manufacturing 19.6%
- ---------------------------------------------------
Electronic Technology 18.4%
- ---------------------------------------------------
Technology Services 10.4%
- ---------------------------------------------------
Consumer Services 5.1%
- ---------------------------------------------------
Transportation 5.1%
- ---------------------------------------------------
Consumer Non-Durables 3.0%
- ---------------------------------------------------
Commercial Services 2.9%
- ---------------------------------------------------
Distribution Services 2.7%
- ---------------------------------------------------
Consumer Durables 2.6%
- ---------------------------------------------------
Energy Minerals 2.1%
- ---------------------------------------------------
Industrial Services 1.9%
- ---------------------------------------------------
Process Industries 1.7%
- ---------------------------------------------------
Retail Trade 1.2%
- ---------------------------------------------------
Health Services 0.8%
- ---------------------------------------------------
Finance 0.3%
- ---------------------------------------------------
Short-Term Investments & Other Net Assets 0.6%
- ---------------------------------------------------

1. Source: Standard & Poor's Micropal. The S&P 500 consists of 500 stocks chosen
for market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is one of
the most widely used benchmarks of U.S. equity performance. The index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 49.

8 | Semiannual Report

INVESTMENT STRATEGY

We seek to invest in companies that have strong management teams, financials and
industry leadership. The Fund looks for opportunities in new and rapidly growing
businesses and in mature businesses selling at depressed prices but offering
favorable recovery possibilities. We analyze securities individually and buy
stocks of large and small companies in our effort to maintain a solid and
diversified portfolio.

MANAGER'S DISCUSSION

We remained nearly fully invested in stocks during the entire reporting period.
Of the Fund's 111 companies held on March 31, 2004, 53 exceeded the S&P 500's
return -- 24 of which more than doubled it -- while 58 did not rise as much as
the benchmark index, 17 of which posted negative returns.

Holdings that produced the highest returns for the Fund for the period were
British Airways (up 80.72%), Zimmer Holdings (+66.19%) and Waters Corp.
(+48.89%). The lowest returns came from Delta Airlines (down 40.45%),
Continental Airlines (-24.43%) and Southwest Airlines (-19.72%).

We held a wide array of airline stocks, consistent with our strategy. We saw an
opportunity to diversify the Fund's portfolio into many airline-related
companies that we believed offered attractive stock valuations in light of our
assessment of their long-term prospects.

Despite the Fund's double-digit returns, our health technology holdings --
including Amgen, Wyeth and Merck -- also fared relatively poorly as a group,
negatively impacting performance. We believed the Fund's recently depressed
pharmaceutical and biotechnology company holdings could improve over the longer
term.

TOP 10 HOLDINGS
Franklin Growth Fund
3/31/04

- --------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- --------------------------------------------------
Pfizer Inc. 3.4%
HEALTH TECHNOLOGY
- --------------------------------------------------
3M Co. 3.1%
PRODUCER MANUFACTURING
- --------------------------------------------------
Amgen Inc. 2.6%
HEALTH TECHNOLOGY
- --------------------------------------------------
Genentech Inc. 2.5%
HEALTH TECHNOLOGY
- --------------------------------------------------
International Business Machines Corp. 2.5%
TECHNOLOGY SERVICES
- --------------------------------------------------
Johnson & Johnson Inc. 2.4%
HEALTH TECHNOLOGY
- --------------------------------------------------
Northrop Grumman Corp. 2.4%
ELECTRONIC TECHNOLOGY
- --------------------------------------------------
General Dynamics Corp. 2.1%
ELECTRONIC TECHNOLOGY
- --------------------------------------------------
Tyco International Ltd. 2.1%
PRODUCER MANUFACTURING
- --------------------------------------------------
Boeing Co. 2.0%
ELECTRONIC TECHNOLOGY
- --------------------------------------------------

2. Source: Standard &Poor's Micropal. See footnote 1 for a description of the
S&P 500. The NASDAQ Composite Index measures all domestic and international
common stocks listed on The NASDAQ Stock Market. The index is market
value-weighted and includes over 3,000 companies.

Semiannual Report | 9

Overall, the Fund was well diversified on March 31, 2004, with heaviest
weightings in health technology, producer manufacturing, electronic technology
and technology services sectors. Of the Fund's top 10 holdings, all were from
these areas.

We welcome your comments and questions and look forward to serving your
investment needs in the years to come.

[PHOTO]

/S/V. Jerry Palmieri

V. Jerry Palmieri
Portfolio Manager
Franklin Growth Fund

10 | Semiannual Report

Performance Summary as of 3/31/04

FRANKLIN GROWTH FUND

PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------------------------
CLASS A CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +3.45 $30.32 $26.87
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.0289
- --------------------------------------------------------------------------------------------------
CLASS B CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.30 $29.62 $26.32
- --------------------------------------------------------------------------------------------------
CLASS C CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.28 $29.37 $26.09
- --------------------------------------------------------------------------------------------------
CLASS R CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.43 $30.17 $26.74
- --------------------------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.42 $30.33 $26.91
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.0945
- --------------------------------------------------------------------------------------------------

Semiannual Report | Past performance does not guarantee future results. | 11

Performance Summary (CONTINUED)

PERFORMANCE

CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18 MONTHS ONLY.
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES.

Cumulative Total Return 1 +12.95% +35.67% +1.89% +163.29%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +6.45% +27.90% -0.80% +9.52%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,645 $12,790 $9,604 $24,818
- -----------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +12.54% +34.64% -1.86% +1.32%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +8.54% +30.64% -0.75% +0.07%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,854 $13,064 $9,632 $10,038
- -----------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +12.53% +34.66% -1.83% +99.18%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +11.53% +33.66% -0.37% +8.03%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,153 $13,366 $9,817 $19,918
- -----------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +12.83% +35.35% -4.29%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +11.83% +34.35% -1.94%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,183 $13,435 $9,571
- -----------------------------------------------------------------------------------------------------
ADVISOR CLASS4 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +13.07% +35.96% +3.15% +170.03%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +13.07% +35.96% +0.62% +10.44%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,307 $13,596 $10,315 $27,003
- -----------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

12 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

ENDNOTES

HISTORICALLY, THE FUND HAS FOCUSED ON LARGER COMPANIES. THE FUND MAY ALSO INVEST
IN SMALL, RELATIVELY NEW AND/OR UNSEASONED COMPANIES, WHICH INVOLVES ADDITIONAL
RISKS, AS THE PRICE OF THESE SECURITIES CAN BE VOLATILE, PARTICULARLY OVER THE
SHORT TERM. THE FUND'S INVESTMENTS IN FOREIGN COMPANIES CAN INVOLVE EXPOSURE TO
CURRENCY VOLATILITY AND POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. THE
FUND'S PORTFOLIO INCLUDES INVESTMENTS IN TECHNOLOGY, WHICH HAS BEEN AMONG THE
MARKET'S MOST VOLATILE SECTORS. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS B: These shares have higher annual fees and expenses than Class A shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares have higher
annual fees and expenses than Class A shares.

CLASS R: Shares are available to certain eligible investors as described in the
prospectus. These shares have higher annual fees and expenses than Class A
shares.

ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.

3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge.

4. Effective 1/2/97, the Fund began offering Advisor Class shares, which do not
have sales charges or a Rule 12b-1 plan. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/2/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge, but reflecting the effect of
the Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, actual Advisor
Class performance is used reflecting all charges and fees applicable to that
class. Since 1/2/97 (commencement of sales), the cumulative and average annual
total returns of Advisor Class shares were +51.89% and +5.94%.

Semiannual Report | Past performance does not guarantee future results. | 13

Franklin Income Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Income Fund seeks to maximize
income while maintaining prospects for capital appreciation through a
diversified portfolio of securities.

This semiannual report for Franklin Income Fund covers the period ended March
31, 2004.

PERFORMANCE OVERVIEW

Franklin Income Fund - Class A posted a +11.29% cumulative total return for the
six months ended March 31, 2004. The Fund underperformed its benchmark, the
Standard & Poor's 500 Composite Index (S&P 500), which returned 14.07%. However,
the Fund outperformed its other benchmark, the Lehman Brothers U.S. Aggregate
Index, which returned 2.98%; and the Lipper Income Funds Objective Average,
which returned 8.40%.1 You can find the Fund's performance data in the
Performance Summary beginning on page 19.

ECONOMIC AND MARKET OVERVIEW

PORTFOLIO BREAKDOWN
Franklin Income Fund
3/31/04

- ---------------------------------------------------
% OF TOTAL
NET ASSETS
- ---------------------------------------------------
Corporate Straight Bonds 26.0%
- ---------------------------------------------------
Utilities Stocks 20.1%
- ---------------------------------------------------
Energy Mineral Stocks 5.9%
- ---------------------------------------------------
Zero Coupon & Step-Up Bonds 4.3%
- ---------------------------------------------------
Health Technology Stocks 4.2%
- ---------------------------------------------------
Corporate Convertible Bonds 3.6%
- ---------------------------------------------------
U.S. Government & Agency Securities 3.6%
- ---------------------------------------------------
Finance Stocks 3.0%
- ---------------------------------------------------
Communication Stocks 2.9%
- ---------------------------------------------------
Consumer Durables Stocks 2.8%
- ---------------------------------------------------
Real Estate Stocks 2.2%
- ---------------------------------------------------
Municipal Securities 1.9%
- ---------------------------------------------------
Consumer Non-Durables Stocks 1.1%
- ---------------------------------------------------
Electronic Technology Stocks 1.0%
- ---------------------------------------------------
Technology Services Stocks 0.9%
- ---------------------------------------------------
Other Stocks 3.0%
- ---------------------------------------------------
Short-Term Investment & Other Net Assets 13.5%
- ---------------------------------------------------

1. Sources: Standard & Poor's Micropal; Lipper Inc. The S&P 500 consists of 500
stocks chosen for market size, liquidity and industry group representation. Each
stock's weight in the index is proportionate to its market value. The S&P 500 is
one of the most widely used benchmarks of U.S. equity performance. The Lehman
Brothers U.S. Aggregate Index represents securities that are SEC-registered,
taxable and dollar denominated. The index covers the U.S. investment grade
fixed-rate bond market, with index components for government and corporate
securities, mortgage pass-through securities and asset-backed securities. All
issues included must have at least one year to final maturity and must be rated
investment grade (Baa3 or better) by Moody's Investors Service. They must also
be dollar-denominated and non-convertible. Total return includes price
appreciation/depreciation and income as a percentage of the original investment.
The index is rebalanced monthly by market capitalization. The Lipper Income
Funds Objective Average is an equally weighted average calculation of
performance figures for all funds within the Lipper Income Funds classification
in the Lipper Open-End underlying funds universe. Lipper Income Funds are
defined as funds that seek a high level of current income through investing in
income-producing stocks, bonds, and money market instruments. For the six-month
period ended 3/31/04 there were 173 funds in this category. Lipper calculations
do not include sales charges. The Fund's performance relative to the average
might have differed if such charges had been considered. Past performance does
not guarantee future results. The indexes are unmanaged and include reinvested
distributions. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 59.

14 | Semiannual Report

companies and contributed to corporate profit improvements. Business and
consumer sentiment rose in early 2004. Consumer spending, however, was
constrained by slow wage growth and heavy indebtedness.

INVESTMENT STRATEGY

Based on our independent analysis of debt, convertible and equity securities, we
search for undervalued or out-of-favor securities we believe offer opportunities
for income today and significant growth tomorrow. We consider such factors as a
company's experience and managerial strength; its responsiveness to changes in
interest rates and business conditions; debt maturity schedules and borrowing
requirements; a company's changing financial condition and market recognition of
the change; and a security's relative value based on such factors as anticipated
cash flow, interest or dividend coverage, asset coverage, and earnings.

TOP 5 BOND HOLDINGS
Franklin Income Fund
3/31/04
- --------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------
Charter Communications Holdings LLC 3.0%
- --------------------------------------------
GNMA 2.0%
- --------------------------------------------
Calpine Corp. 2.0%
- --------------------------------------------
Dynegy Holdings Inc. 2.0%
- --------------------------------------------
Tenet Healthcare Corp. 1.4%
- --------------------------------------------

TOP 5 STOCK HOLDINGS
Franklin Income Fund
3/31/04
- ------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- ------------------------------------------
Ford Motor Co. Capital Trust II 1.7%
CONSUMER DURABLES
- ------------------------------------------
Ameren Corp. 1.5%
UTILITIES
- ------------------------------------------
Dominion Resources Inc. 1.5%
UTILITIES
- ------------------------------------------
FirstEnergy Corp. 1.4%
UTILITIES
- ------------------------------------------
Merck & Co. Inc. 1.3%
HEALTH TECHNOLOGY
- ------------------------------------------

Semiannual Report | 15

DIVIDEND DISTRIBUTIONS
Franklin Income Fund
10/1/03-3/31/04

- ----------------------------------------------------------------------------------------
DIVIDEND PER SHARE
-------------------------------------------------------------------------
MONTH CLASS A CLASS B CLASS B1* CLASS C CLASS R ADVISOR CLASS
- ----------------------------------------------------------------------------------------

October 1.30 cents 1.14 cents 1.20 cents 1.20 cents 1.24 cents 1.33 cents
- ----------------------------------------------------------------------------------------
November 1.30 cents 1.14 cents 1.20 cents 1.20 cents 1.24 cents 1.33 cents
- ----------------------------------------------------------------------------------------
December 1.30 cents 1.13 cents 1.20 cents 1.21 cents 1.24 cents 1.33 cents
- ----------------------------------------------------------------------------------------
January 1.30 cents 1.13 cents 1.20 cents 1.21 cents 1.24 cents 1.33 cents
- ----------------------------------------------------------------------------------------
February 1.30 cents 1.13 cents 1.20 cents 1.21 cents 1.24 cents 1.33 cents
- ----------------------------------------------------------------------------------------
March 1.30 cents 1.13 cents 1.19 cents 1.19 cents 1.23 cents 1.33 cents
- ----------------------------------------------------------------------------------------
TOTAL 7.80 CENTS 6.80 CENTS 7.19 CENTS 7.22 CENTS 7.43 CENTS 7.98 CENTS
- ----------------------------------------------------------------------------------------

*On November 1, 2001, the Fund closed Class B to new investors and changed the
name to Class B1; a new Class B became available to investors.

MANAGER'S DISCUSSION

During the six months under review, the Fund benefited from the electric utility
sector's strong performance. The sector rose 12.9% during the reporting period
as measured by the S&P 500 Electric Utilities Index.3 Several trends appeared to
favorably impact the sector such as attractive dividend yields and valuation
relative to the overall market, more investors attracted to qualified dividend
income due to 2003's tax relief act, and greater perceived earnings and cash
flow stability as electric utility companies focused on core utility operations
instead of failed growth initiatives. Large holdings that contributed to Fund
performance during the period include FirstEnergy, DTE Energy and Duke Energy.

Major oil and gas companies also benefited the Fund as crude oil and domestic
natural gas prices remained relatively high. Higher prices enabled these
companies to increase earnings, cash flow and dividends per share. The gradual
global economic recovery helped increase demand as the natural decline of
existing oil and gas fields and potential actions by the Organization of the
Petroleum Exporting Countries (OPEC) influenced global supply. Significant Fund
holdings that performed well during the period include BP and ChevronTexaco.

3. Source: Standard & Poor's Micropal. The S&P 500 Electric Utilities Index is a
market capitalization-weighted index that includes electric utility stocks in
the S&P 500.

16 | Semiannual Report

Strong growth domestically and abroad helped drive share prices of cyclical
companies, or those that are sensitive to economic changes. Holdings that
enhanced Fund performance include commodity chemical producer DOW Chemical, and
pulp and paper manufacturer Georgia-Pacific. Increased demand for these
companies' products enabled them to deliver higher earnings per share during the
period.

Within fixed income markets, high yield corporate bonds outperformed 10-year
U.S. Treasury securities and investment-grade corporate bonds. Stronger economic
conditions along with improving fundamental business conditions enabled the
difference, or spread, between Treasury and high yield bond yields to narrow.
Already low interest rates and a tighter yield spread contributed to higher
corporate bond prices. Some corporate bond holdings that benefited Fund
performance include Allegheny Energy Supply, General Motors and Lyondell
Chemical.

On the other hand, health care investments, particularly stocks of major
pharmaceutical companies, underperformed the overall market. Investors focused
on several issues clouding the sector's fundamental outlook and were generally
more interested in companies they perceived could derive greater benefit from a
global economic upturn. Concerns, such as patent expirations, the upcoming
presidential election, potential changes to existing legislation and Medicare
reimbursement levels, the need to discover new products to drive future revenue
and profits, and increased drug importation to offset rising health care costs,
weighed on the sector. Holdings that negatively impacted Fund performance
include Tenet Healthcare bonds, Goldman Sachs Group into Wyeth convertible
preferred stock, and Bristol-Myers Squibb common stock.

Semiannual Report | 17

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

[PHOTO]

/S/Charles B. Johnson

Charles B. Johnson

/S/Edward Perks

Edward Perks, CFA

Portfolio Management Team
Franklin Income Fund

18 | Semiannual Report

Performance Summary as of 3/31/04

FRANKLIN INCOME FUND

PRICE AND DISTRIBUTION INFORMATION
- ---------------------------------------------------------------------------------------------------
CLASS A CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$0.16 $2.41 $2.25
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.0780
- ---------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.0120
- ---------------------------------------------------------------------------------------------------
TOTAL $0.0900
- ---------------------------------------------------------------------------------------------------
CLASS B CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.16 $2.40 $2.24
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.0680
- ---------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.0120
- ---------------------------------------------------------------------------------------------------
TOTAL $0.0800
- ---------------------------------------------------------------------------------------------------
CLASS B 1 CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.16 $2.41 $2.25
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.0719
- ---------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.0120
- ---------------------------------------------------------------------------------------------------
TOTAL $0.0839
- ---------------------------------------------------------------------------------------------------
CLASS C CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.16 $2.42 $2.26
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.0722
- ---------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.0120
- ---------------------------------------------------------------------------------------------------
TOTAL $0.0842
- ---------------------------------------------------------------------------------------------------

Semiannual Report | Past performance does not guarantee future results. | 19

Performance Summary (CONTINUED)

PRICE AND DISTRIBUTION INFORMATION (CONTINUED)
- ---------------------------------------------------------------------------------------------------
CLASS R CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$0.16 $2.39 $2.23
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.0743
- ---------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.0120
- ---------------------------------------------------------------------------------------------------
TOTAL $0.0863
- ---------------------------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.16 $2.40 $2.24
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.0798
- ---------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.0120
- ---------------------------------------------------------------------------------------------------
TOTAL $0.0918
- ---------------------------------------------------------------------------------------------------

20 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE

CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS B1: CDSC DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED
THEREAFTER; CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18
MONTHS ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL
TOTAL RETURN AND VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES.

- ------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------

Cumulative Total Return 1 +11.29% +31.16% +63.15% +147.49%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +6.56% +25.46% +9.33% +9.02%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,656 $12,546 $15,621 $23,713
- ------------------------------------------------------------------------------------------------------
Distribution Rate 4 6.19%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 4.34%
- ------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR INCEPTION (11/1/01)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.86% +30.24% +32.42%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +6.86% +26.24% +11.29%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,686 $12,624 $12,942
- ------------------------------------------------------------------------------------------------------
Distribution Rate 4 5.65%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 3.69%
- ------------------------------------------------------------------------------------------------------
CLASS B 1 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +11.00% +30.50% +59.15% +54.62%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +7.00% +26.50% +9.46% +8.53%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,700 $12,650 $15,715 $15,362
- ------------------------------------------------------------------------------------------------------
Distribution Rate 4 5.93%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 4.04%
- ------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.96% +30.34% +58.82% +124.01%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +9.96% +29.34% +9.69% +9.46%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,996 $12,934 $15,882 $22,401
- ------------------------------------------------------------------------------------------------------
Distribution Rate 4 5.90%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 4.04%
- ------------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +11.21% +31.03% +29.78%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.21% +30.03% +12.34%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,021 $13,003 $12,978
- ------------------------------------------------------------------------------------------------------
Distribution Rate 4 6.18%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 4.18%
- ------------------------------------------------------------------------------------------------------
ADVISOR CLASS 6 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +11.42% +31.51% +63.95% +151.76%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +11.42% +31.51% +10.39% +9.67%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,142 $13,151 $16,395 $25,176
- ------------------------------------------------------------------------------------------------------
Distribution Rate 4 6.65%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 4.68%
- ------------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 21

Performance Summary (CONTINUED)

ENDNOTES

THE RISKS ASSOCIATED WITH HIGHER YIELDING, LOWER-RATED SECURITIES INCLUDE HIGHER
RISK OF DEFAULT AND LOSS OF PRINCIPAL. THE FUND MAY ALSO INVEST IN FOREIGN
COMPANIES, WHICH CAN INVOLVE EXPOSURE TO CURRENCY VOLATILITY AND POLITICAL,
ECONOMIC AND REGULATORY UNCERTAINTY. INTEREST RATE MOVEMENTS MAY AFFECT THE
FUND'S SHARE PRICE AND YIELD. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION
OF THE MAIN INVESTMENT RISKS.

CLASS A: Prior to 7/1/94, these shares were offered at a lower initial sales
charge; thus actual total returns may differ. Effective 5/1/94, the Fund
implemented a Rule 12b-1 plan, which affects subsequent performance.

CLASS B: These shares have higher annual fees and expenses than Class A shares.

CLASS B1 (formerly Class B): These shares have higher annual fees and expenses
than Class A shares. Effective 11/1/01, closed to new investors.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares have higher
annual fees and expenses than Class A shares.

CLASS R: Shares are available to certain eligible investors as described in the
prospectus. These shares have higher annual fees and expenses than Class A
shares.

ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.

3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge.

4. Distribution rate is based on an annualization of the respective class's
March dividend and the maximum offering price (NAV for Classes B, B1, C, R and
Advisor) per share on 3/31/04.

5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 3/31/04.

6. Effective 1/2/97, the Fund began offering Advisor Class shares, which do not
have sales charges or a Rule 12b-1 plan. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/2/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge, but reflecting the effect of
the Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, actual Advisor
Class performance is used reflecting all charges and fees applicable to that
class. Since 1/2/97 (commencement of sales), the cumulative and average annual
total returns of Advisor Class shares were +90.36% and +9.29%.

22 | Past performance does not guarantee future results. | Semiannual Report

Franklin U.S. Government Securities Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin U.S. Government Securities
Fund seeks high, current income from a portfolio of U.S. government securities.

- --------------------------------------------------------------------------------
Since 1983, the Fund has invested primarily 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.
- --------------------------------------------------------------------------------

We are pleased to bring you Franklin U.S. Government Securities Fund's
semiannual report covering the period ended March 31, 2004.

PERFORMANCE OVERVIEW

During the six months under review, Franklin U.S. Government Securities Fund -
Class A posted a +2.12% cumulative total return. The Fund outperformed the
Lehman Brothers Intermediate U.S. Government Bond Index, which returned 2.00%,
and the Lipper GNMA Funds Objective Average, which returned 1.93% for the same

FRANKLIN U.S. GOVERNMENT SECURITIES FUND -
CLASS A VS. COMPARABLE INVESTMENTS
Risk vs. Return (4/99-3/04)

[CHART OMITTED]

plot points:

For the 5-year period ended 3/31/04
Risk Return
- --------------------------------------------------------------------
Franklin US Govt - Class A 2.81% 6.00%
- --------------------------------------------------------------------
PR Tsy 1 year 0.93% 4.14%
- --------------------------------------------------------------------
PR Tsy 10 Year 7.82% 7.34%
- --------------------------------------------------------------------
PR Tsy 30 Year 11.85% 8.04%
- --------------------------------------------------------------------

*Source: Standard & Poor's Micropal (Payden & Rygel). Indexes are unmanaged.
Investors cannot invest directly in an index. Average annual total return
represents the average annual change in value of an investment over the period
indicated. These figures assume reinvestment of distributions and do not include
sales charges. Risk is measured by the annualized standard deviation of monthly
total returns. In general, the higher the standard deviation, the greater the
volatility. The value of Treasuries, if held to maturity, is fixed; principal is
guaranteed and interest is fixed. The Fund's Class A shares' average annual
total return does not include the current, maximum 4.25% initial sales charge.
The Fund's investment return and share price will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. The
figures do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the sale of Fund shares. Past performance does not
guarantee future results.

1. U.S. government securities owned by the Fund, but not shares of the Fund, are
guaranteed by the U.S. government as to timely payment of principal and
interest. The Fund's yield and share price are not guaranteed and will vary with
market conditions.

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 74.

Semiannual Report | 23

period. 2 The Fund's return reflects the effect of management fees and expenses,
while indexes do not have such costs. You can find the Fund's performance data
in the Performance Summary beginning on page 27.

ECONOMIC AND MARKET OVERVIEW

For the six months under review, the U.S. economy grew at an estimated 4.1%
annualized rate. During the period, a dominant topic was the confusing
employment picture. Although the unemployment rate declined over the period to
5.7%, until the March report, job creation was slower than many market
participants expected.3 This important factor contributed to the interest rate
decline over the period. However, lower interest rates meant reduced mortgage
rates, which enabled many homeowners to refinance their mortgages. Refinancing
activity helped keep home sales and prices near three-year highs. This, combined
with personal income tax reductions, helped improve consumers' net worths and
spending ability, thereby supporting the country's economic growth.

Increased business spending also helped economic growth. After having been
largely absent since the end of 2000, business spending posted strong results
for the latter half of 2003. Nonresidential investment spending rose 10.9%
annualized in the fourth quarter of 2003.4 Lower interest rates during the
reporting period allowed many businesses the opportunity to refinance their old
debt at more attractive levels, in turn boosting profits and operating
performance. Many corporate fixed income products also benefited from this
improvement. Productivity continued to grow, which helped businesses generate
more goods and services without substantially raising inflation and labor costs.

The core Consumer Price Index, a measure of inflation that excludes food and
energy, rose 1.6% for March 2004 compared with the same month a year earlier.
Expected inflation is a key determinant of interest rates, and recent, subdued
inflation contributed to the historically lower overall interest rate
environment during the period. In addition to the positive effect of declining
interest rates on the economy, corporate dividend tax reductions supported
economic growth during the period.

YIELD COMPARISON
3/31/04

[BAR CHART]

Franklin U.S. Government Securities Fund - Class A* 3.96%
10-Year Treasury Note* 3.86%
Lipper GNMA Funds Average* 3.36%
Money Market Funds Average* 0.35%

*Sources: Standard & Poor's Micropal; Lipper Inc. Franklin U.S. Government
Securities Fund-Class A shares' yield, calculated as required by the SEC, is
based on earnings of the Fund's portfolio for the 30 days ended 3/31/04. The
value of Treasuries, if held to maturity, is fixed; principal is guaranteed and
interest is fixed. Money funds attempt to maintain a stable net asset value of
$1.00 per share, while shares of Franklin U.S. Government Securities Fund will
fluctuate with market conditions. The Lipper GNMA Funds Average is an average of
the monthly SEC yields of 66 funds in the Lipper GNMA Funds classification for
the 30 days ended 3/31/04. The Lipper Money Market Funds Average is an average
of the monthly SEC yields of 351 funds in the Lipper Money Market Funds
classification for the 30 days ended 3/31/04.
Lipper averages do not include sales charges.

2. Sources: Standard & Poor's Micropal; Lipper Inc. The Lehman Brothers
Intermediate U.S. Government Bond Index includes fixed-rate debt issues rated
investment grade or higher by Moody's, S&P or Fitch, in that order. All issues
have at least one year to maturity and an outstanding par value of at least $100
million for U.S. government issues. All returns are market value-weighted
inclusive of accrued interest. The index includes issues of the U.S. government
or any agency thereof. It includes only issues with a remaining term to maturity
of less than 10 years. Total return includes price appreciation/depreciation and
income as a percentage of the original investment. The total return index is
rebalanced monthly by market capitalization. The Lipper GNMA Funds Objective
Average is an equally weighted average calculation of performance figures for
all funds within the Lipper GNMA Funds classification in the Lipper Open-End
underlying funds universe. Lipper GNMA Funds are defined as funds that invest
primarily in government national mortgage association securities. For the
six-month period ended 3/31/04, there were 66 funds in this category. Lipper
calculations do not include sales charges. The Fund's performance relative to
the average might have differed if such charges had been considered. Past
performance does not guarantee future results. The indexes are unmanaged and
include reinvested distributions. One cannot invest directly in an index, nor is
an index representative of the Fund's portfolio.
3. Source: Bureau of Labor Statistics.
4. Source: Bureau of Economic Analysis.

24 | Semiannual Report

DIVIDEND DISTRIBUTIONS*
Franklin U.S. Government Securities Fund
10/1/03-3/31/04

- --------------------------------------------------------------------------------
DIVIDEND PER SHARE
----------------------------------------------------------------
MONTH CLASS A CLASS B CLASS C CLASS R ADVISOR CLASS
- --------------------------------------------------------------------------------
October 2.98 cents 2.70 cents 2.67 cents 2.79 cents 3.05 cents
- --------------------------------------------------------------------------------
November 2.98 cents 2.70 cents 2.67 cents 2.79 cents 3.05 cents
- --------------------------------------------------------------------------------
December** 4.20 cents 3.90 cents 3.91 cents 3.98 cents 4.27 cents
- --------------------------------------------------------------------------------
January 2.98 cents 2.68 cents 2.69 cents 2.76 cents 3.06 cents
- --------------------------------------------------------------------------------
February 2.98 cents 2.68 cents 2.69 cents 2.76 cents 3.05 cents
- --------------------------------------------------------------------------------
March 2.98 cents 2.68 cents 2.67 cents 2.77 cents 3.04 cents
- --------------------------------------------------------------------------------
TOTAL 19.10 CENTS 17.34 CENTS 17.30 CENTS 17.85 CENTS 19.52 CENTS
- --------------------------------------------------------------------------------

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

**Includes an additional 1.22 cent distribution to meet excise tax requirements.

INVESTMENT STRATEGY

We seek to invest primarily in GNMA (Ginnie Mae) obligations. We analyze
securities using proprietary models to help us identify attractive investment
opportunities. The Fund's short-term investments include short-term government
securities and cash or cash equivalents.

MANAGERS' DISCUSSION

During the period under review, we continued our investment strategy of
investing primarily in GNMAs because our research shows that over the past 5-,
10- and 15-year time periods, GNMAs have offered attractive risk-adjusted
returns when compared with a variety of asset classes including U.S. Treasuries,
Agency debentures, investment grade and high yield corporate bonds, and large
capitalization and small capitalization stocks. These time periods include
multiple credit, prepayment, economic and interest rate cycles.

During the six months under review, we used our research to uncover areas of the
markets where we thought mortgage risk may have offered value. In the recent
interest rate environment, we looked to add to those positions with valuations
that we considered attractive, consistent with our investment strategy. In terms
of coupon, we invested across a wide spectrum of securities. With the overall
interest rate decline during the reporting period, the Ginnie Mae market
generally rose in value; consequently, our holdings provided positive total
returns for the Fund.

Semiannual Report | 25

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 to come.

[PHOTO]

/S/Jack Lemein

Jack Lemein

[PHOTO]

/S/Roger A. Bayston

Roger A. Bayston, CFA

[PHOTO]

/S/T. Anthony Coffey

T. Anthony Coffey, CFA

Portfolio Management Team
Franklin U.S. Government Securities Fund

THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
MARCH 31, 2004, 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, INDUSTRY,
SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE,
BUT THE ADVISOR 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.

26 | Semiannual Report

Performance Summary as of 3/31/04

FRANKLIN U.S. GOVERNMENT SECURITIES FUND

Net Asset Value (NAV) -$0.05 $6.76 $6.81
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.1910
- --------------------------------------------------------------------------------------------------
CLASS B CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.05 $6.75 $6.80
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.1734
- --------------------------------------------------------------------------------------------------
CLASS C CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.05 $6.73 $6.78
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.1730
- --------------------------------------------------------------------------------------------------
CLASS R CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.05 $6.76 $6.81
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.1785
- --------------------------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 3/31/04 9/30/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.06 $6.77 $6.83
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.1952
- --------------------------------------------------------------------------------------------------

Semiannual Report | Past performance does not guarantee future results. | 27

Performance Summary (CONTINUED)

PERFORMANCE

CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 0% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18 MONTHS ONLY.
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN
INCLUDES MAXIMUM SALES CHARGES.

Cumulative Total Return 1 +2.12% +2.56% +33.81% +92.07%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -2.19% -1.81% +5.09% +6.28%
- ------------------------------------------------------------------------------------------------------
Distribution Rate 3 5.07%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 4 3.96%
- ------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +1.85% +2.03% +30.22% +30.89%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -2.12% -1.85% +5.10% +5.11%
- ------------------------------------------------------------------------------------------------------
Distribution Rate 3 4.76%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 4 3.61%
- ------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +1.85% +2.03% +30.26% +71.22%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +0.86% +1.06% +5.43% +6.21%
- ------------------------------------------------------------------------------------------------------
Distribution Rate 3 4.76%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 4 3.61%
- ------------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +1.93% +2.19% +11.60%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +0.94% +1.22% +5.02%
- ------------------------------------------------------------------------------------------------------
Distribution Rate 3 4.92%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 4 3.75%
- ------------------------------------------------------------------------------------------------------
ADVISOR CLASS 5 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +2.03% +2.54% +34.74% +94.36%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +2.03% +2.54% +6.14% +6.87%
- ------------------------------------------------------------------------------------------------------
Distribution Rate 3 5.39%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 4 4.27%
- ------------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

28 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

ENDNOTES

THE FUND'S SHARE PRICE AND YIELD MAY BE AFFECTED BY INTEREST RATE MOVEMENTS AND
MORTGAGE PREPAYMENTS. SECURITIES OWNED BY THE FUND, BUT NOT SHARES OF THE FUND,
ARE GUARANTEED BY THE U.S. GOVERNMENT AS TO TIMELY PAYMENT OF PRINCIPAL AND
INTEREST. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN
INVESTMENT RISKS.

CLASS B: These shares have higher annual fees and expenses than Class A shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares have higher
annual fees and expenses than Class A shares.

CLASS R: Shares are available to certain eligible investors as described in the
prospectus. These shares have higher annual fees and expenses than Class A
shares.

ADVISOR CLASS: Shares are available to a limited class of investors.

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.

3. Distribution rate is based on an annualization of the respective class's
March dividend and the maximum offering price (NAV for Classes B, C, R and
Advisor) per share on 3/31/04.

4. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 3/31/04.

5. Effective 1/2/97, the Fund began offering Advisor Class shares, which do not
have sales charges or a Rule 12b-1 plan. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/2/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge, but reflecting the effect of
the Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, actual Advisor
Class performance is used reflecting all charges and fees applicable to that
class. Since 1/2/97 (commencement of sales), the cumulative and average annual
total returns of Advisor Class shares were +58.95% and +6.60%.

Semiannual Report | Past performance does not guarantee future results. | 29

Franklin Utilities Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Utilities Fund seeks both
capital appreciation and current income from a portfolio of public utility
industry securities.

This semiannual report for Franklin Utilities Fund covers the period ended March
31, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Utilities Fund - Class A delivered a
+13.66% cumulative total return. The Fund underperformed its benchmark, the
Standard & Poor's 500 Composite Index (S&P 500), which returned 14.07% for the
same period.1 Given that the Fund invests in only a few sectors within the S&P
500, the Fund's results are not directly comparable to the index's. You can find
the Fund's performance data in the Performance Summary beginning on page 33.

ECONOMIC AND MARKET OVERVIEW

PORTFOLIO BREAKDOWN
Franklin Utilities Fund
Based on Total Net Assets as of 3/31/04

[BAR CHART]

Utilities 93.1%
Communications 2.9%
Producer Manufacturing 2.5%
Electronic Technology 0.9%
Short-Term Investments & Other Net Assets 0.6%

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 81.

30 | Semiannual Report

INVESTMENT STRATEGY

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

MANAGER'S DISCUSSION

Electric utility companies experienced significant changes in recent years
related to competition implementation. Several states that were moving toward
deregulation in the past considered slowing or reversing that process. Ohio and
Virginia are two examples of states that delayed electric utility competition to
better understand the transitioning marketplace. California's new governor also
gave high priority to analyzing competition and ensuring adequate reliability of
electricity.

We acquired new positions in two California utilities, PG&E and Edison
International, during the reporting period. Both companies generated positive
returns by period-end as their outlook has improved since the 2000-2001
California energy crisis. Edison recently reinstated quarterly dividends, and
PG&E could exit from Chapter 11 bankruptcy in April. Another western electric
utility, Sierra Pacific Resources, was one of the Fund's top performers during
the period. Despite Sierra Pacific's strong performance, we continued to hold
this stock because the company's share price remained at a significant discount
to its December 2003 book value. National Grid Transco and Scottish & Southern
Energy also performed well. These holdings, along with our other U.K.-based
utility holdings, delivered enhanced returns due to the British pound's
appreciation against the U.S. dollar.

TOP 10 HOLDINGS
Franklin Utilities Fund
3/31/04

- -----------------------------------------------
% OF TOTAL
COMPANY NET ASSETS
- -----------------------------------------------
FirstEnergy Corp. 5.1%
- -----------------------------------------------
Dominion Resources Inc. 4.8%
- -----------------------------------------------
Entergy Corp. 4.6%
- -----------------------------------------------
FPL Group Inc. 4.3%
- -----------------------------------------------
American Electric Power Co. Inc. 4.2%
- -----------------------------------------------
Exelon Corp. 4.1%
- -----------------------------------------------
Progress Energy Inc. 3.8%
- -----------------------------------------------
Southern Co. 3.5%
- -----------------------------------------------
TXU Corp. 3.4%
- -----------------------------------------------
United Utilities PLC (U.K.) 3.4%
- -----------------------------------------------

Semiannual Report | 31

Given the low interest rate environment during the period under review, all our
utilities holdings posted positive performance. However, Puget Energy and Nicor
produced lower results. A rate case decision in Washington negatively impacted
Puget Energy, and Nicor faced regulatory investigations in Illinois. Based on
our long-term investment strategy, we continued to hold these two companies as
we believed their long-term prospects were attractive.

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

[PHOTO]

/S/John C. Kohli, CFA

John C. Kohli, CFA

Portfolio Manager
Franklin Utilities Fund

32 | Semiannual Report

Performance Summary as of 3/31/04

FRANKLIN UTILITIES FUND

Net Asset Value (NAV) +$0.99 $9.79 $8.80
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.2020
- ---------------------------------------------------------------------------------------------------
CLASS B CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.99 $9.79 $8.80
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.1796
- ---------------------------------------------------------------------------------------------------
CLASS C CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.99 $9.77 $8.78
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.1800
- ---------------------------------------------------------------------------------------------------
CLASS R CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.99 $9.78 $8.79
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.1861
- ---------------------------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 3/31/04 9/30/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.99 $9.83 $8.84
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/03-3/31/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.2086
- ---------------------------------------------------------------------------------------------------

Semiannual Report | Past performance does not guarantee future results. | 33

Performance Summary (CONTINUED)

PERFORMANCE

CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18 MONTHS ONLY.
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES.

Cumulative Total Return 1 +13.66% +29.86% +40.14% +118.19%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +8.83% +24.34% +6.06% +7.65%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,883 $12,434 $13,418 $20,895
- -----------------------------------------------------------------------------------------------------
Distribution Rate 4 3.95%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 3.80%
- -----------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +13.39% +29.29% +36.80% +21.19%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +9.39% +25.29% +6.15% +3.59%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,939 $12,529 $13,480 $12,031
- -----------------------------------------------------------------------------------------------------
Distribution Rate 4 3.67%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 3.45%
- -----------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +13.42% +29.19% +36.63% +100.52%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +12.42% +28.19% +6.44% +8.11%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,242 $12,819 $13,663 $20,052
- -----------------------------------------------------------------------------------------------------
Distribution Rate 4 3.69%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 3.45%
- -----------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +13.48% +29.33% +10.53%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +12.48% +28.33% +4.57%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,248 $12,833 $11,053
- -----------------------------------------------------------------------------------------------------
Distribution Rate 4 3.80%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 3.60%
- -----------------------------------------------------------------------------------------------------
ADVISOR CLASS 6 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +13.67% +30.06% +41.13% +122.91%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +13.67% +30.06% +7.13% +8.35%
- -----------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,367 $13,006 $14,113 $22,291
- -----------------------------------------------------------------------------------------------------
Distribution Rate 4 4.25%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 4.10%
- -----------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

34 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

ENDNOTES

SECURITIES ISSUED BY UTILITY COMPANIES ARE PARTICULARLY SENSITIVE TO INTEREST
RATE MOVEMENTS. WHEN INTEREST RATES FALL, UTILITY SECURITIES PRICES TEND TO
RISE; WHEN INTEREST RATES RISE, THEIR PRICES GENERALLY FALL. THE FUND'S
PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS B: These shares have higher annual fees and expenses than Class A shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares have higher
annual fees and expenses than Class A shares.

CLASS R: Shares are available to certain eligible investors as described in the
prospectus. These shares have higher annual fees and expenses than Class A
shares.

ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.

3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge.

4. Distribution rate is based on an annualization of the respective class's
current quarterly dividend and the maximum offering price (NAV for Classes B, C,
R and Advisor) per share on 3/31/04.

5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 3/31/04.

Semiannual Report | Past performance does not guarantee future results. | 35

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS

FRANKLIN DYNATECH FUND

-------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............. $20.17 $15.37 $18.76 $28.60 $23.11 $17.84
-------------------------------------------------------------------------

Income from investment operations:

Net investment income (loss)a ................... (.04) (.06) .03 .44 .56 .37

Net realized and unrealized gains (losses) ...... 2.62 4.86 (3.11) (9.70) 5.30 5.14
-------------------------------------------------------------------------
Total from investment operations ................. 2.58 4.80 (3.08) (9.26) 5.86 5.51
-------------------------------------------------------------------------

Less distributions from:

Net investment income ........................... -- -- (.29) (.58) (.37) (.24)

Tax return of capital ........................... -- -- (.02) -- -- --
-------------------------------------------------------------------------
Total distributions .............................. -- -- (.31) (.58) (.37) (.24)
-------------------------------------------------------------------------
Net asset value, end of period ................... $22.75 $20.17 $15.37 $18.76 $28.60 $23.11
-------------------------------------------------------------------------

Total return b ................................... 12.79% 31.23% (16.83)% (32.86)% 25.57% 31.15%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................ $647,615 $558,687 $413,309 $530,074 $809,140 $499,471

Ratios to average net assets:

Expenses ........................................ .97%c 1.04% 1.00% .95% .94% 1.00%

Net investment income (loss) .................... (.38)%c (.40)% .13% 1.93% 1.98% 1.70%

Portfolio turnover rate .......................... 1.51% 13.68% 8.11% 4.07% 5.45% 6.49%

<FN>
a Based on average daily shares outstanding.
b Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
c Annualized.
</FN>

36 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN DYNATECH FUND (CONTINUED)

---------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS B (UNAUDITED) 2003 2002 2001 2000 D
---------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ......................... $19.79 $15.20 $18.57 $28.45 $28.05
---------------------------------------------------------------

Income from investment operations:

Net investment income (loss) a .............................. (.12) (.25) (.12) .25 .28

Net realized and unrealized gains (losses) .................. 2.57 4.84 (3.08) (9.62) .12
---------------------------------------------------------------
Total from investment operations ............................. 2.45 4.59 (3.20) (9.37) .40
---------------------------------------------------------------

Less distributions from:

Net investment income ....................................... -- -- (.16) (.51) --

Tax return of capital ....................................... -- -- (.01) -- --
---------------------------------------------------------------
Total distributions .......................................... -- -- (.17) (.51) --
---------------------------------------------------------------
Net asset value, end of period ............................... $22.24 $19.79 $15.20 $18.57 $28.45
---------------------------------------------------------------

Total return b ............................................... 12.32% 30.20% (17.51)% (33.37)% 1.43%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............................ $16,471 $10,406 $5,066 $5,473 $4,749

Ratios to average net assets:

Expenses .................................................... 1.72%c 1.79% 1.75% 1.70% 1.73%c

Net investment income (loss) ................................ (1.13)%c (1.15)% (.62)% 1.13% 1.43%c

Portfolio turnover rate ...................................... 1.51% 13.68% 8.11% 4.07% 5.45%

Semiannual Report | 37

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN DYNATECH FUND (CONTINUED)

--------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
--------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............. $19.59 $15.04 $18.34 $27.95 $22.64 $17.53
--------------------------------------------------------------------------

Income from investment operations:

Net investment income (loss) a .................. (.12) (.25) (.11) .27 .34 .22

Net realized and unrealized gains (losses) ...... 2.54 4.80 (3.05) (9.50) 5.21 5.05
--------------------------------------------------------------------------
Total from investment operations ................. 2.42 4.55 (3.16) (9.23) 5.55 5.27
--------------------------------------------------------------------------

Less distributions from:

Net investment income ........................... -- -- (.13) (.38) (.24) (.16)

Tax return of capital ........................... -- -- (.01) -- -- --
--------------------------------------------------------------------------
Total distributions .............................. -- -- (.14) (.38) (.24) (.16)
--------------------------------------------------------------------------
Net asset value, end of period ................... $22.01 $19.59 $15.04 $18.34 $27.95 $22.64
--------------------------------------------------------------------------

Total return b ................................... 12.35% 30.25% (17.48)% (33.36)% 24.65% 30.20%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................ $78,645 $66,952 $51,809 $77,204 $126,313 $73,890

Ratios to average net assets:

Expenses ........................................ 1.72%c 1.79% 1.74% 1.70% 1.69% 1.75%

Net investment income (loss) .................... (1.13)%c (1.15)% (.61)% 1.19% 1.23% 1.00%

Portfolio turnover rate .......................... 1.51% 13.68% 8.11% 4.07% 5.45% 6.49%

<FN>
a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
</FN>

38 | See notes to financial statements. | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN DYNATECH FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 94.7%
AIR FREIGHT/COURIERS 1.9%

C.H. Robinson Worldwide Inc. ............................................................ 100,000 $ 4,150,000
United Parcel Service Inc., B ........................................................... 140,000 9,777,600
-------------
13,927,600
-------------

BIOTECHNOLOGY 8.0%
a Amgen Inc. .............................................................................. 300,000 17,451,000
a Chiron Corp. ............................................................................ 150,000 6,601,500
a Genentech Inc. .......................................................................... 290,000 30,687,800
a Gilead Sciences Inc. .................................................................... 80,000 4,461,600
-------------
59,201,900
-------------
BROADCASTING 1.5%
Clear Channel Communications Inc. ....................................................... 200,000 8,470,000
a Entercom Communications Corp. ........................................................... 60,000 2,716,200
-------------
11,186,200
-------------

CABLE/SATELLITE TELEVISION 1.1%
a Comcast Corp., A ........................................................................ 170,000 4,739,600
a Liberty Media Corp., A .................................................................. 300,000 3,285,000
-------------
8,024,600
-------------

CASINOS/GAMING 4.2%
GTECH Holdings Corp. .................................................................... 70,000 4,139,800
International Game Technology ........................................................... 600,000 26,976,000
-------------
31,115,800
-------------

CHEMICALS: SPECIALTY .9%
Sigma-Aldrich Corp. ..................................................................... 125,000 6,917,500
-------------

COMPUTER COMMUNICATIONS 2.4%
a Cisco Systems Inc. ...................................................................... 720,000 16,934,400
a F5 Networks Inc. ........................................................................ 30,000 1,015,500
-------------
17,949,900
-------------

COMPUTER PERIPHERALS .8%
a EMC Corp. ............................................................................... 240,000 3,266,400
a Storage Technology Corp. ................................................................ 95,000 2,643,850
-------------
5,910,250
-------------

COMPUTER PROCESSING HARDWARE 2.0%
a Dell Inc. ............................................................................... 145,000 4,874,900
Hewlett-Packard Co. ..................................................................... 450,862 10,297,688
-------------
15,172,588
-------------

Semiannual Report | 39

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

a Computer Sciences Corp. ................................................................. 190,000 $ 7,662,700
First Data Corp. ........................................................................ 300,000 12,648,000
Paychex Inc. ............................................................................ 300,000 10,680,000
-------------
30,990,700
-------------

ELECTRONIC COMPONENTS .2%
a Flextronics International Ltd. (Singapore) .............................................. 100,000 1,722,000
-------------

ELECTRONIC EQUIPMENT/INSTRUMENTS 3.7%
a Agilent Technologies Inc. ............................................................... 300,000 9,489,000
a JDS Uniphase Corp. ...................................................................... 350,000 1,424,500
Rockwell Automation Inc. ................................................................ 250,000 8,667,500
a Waters Corp. ............................................................................ 200,000 8,168,000
-------------
27,749,000
-------------

ELECTRONIC PRODUCTION EQUIPMENT 4.9%
a Applied Materials Inc. .................................................................. 500,000 10,690,000
a KLA-Tencor Corp. ........................................................................ 200,000 10,070,000
a Lam Research Corp. ...................................................................... 150,000 3,781,500
a Novellus Systems Inc. ................................................................... 100,000 3,179,000
a Teradyne Inc. ........................................................................... 200,000 4,766,000
a Varian Semiconductor Equipment Associates Inc. .......................................... 100,000 4,200,000
-------------
36,686,500
-------------

ELECTRONICS/APPLIANCE STORES .7%
Best Buy Co. Inc. ....................................................................... 100,000 5,172,000
-------------

FINANCIAL CONGLOMERATES 1.3%
Citigroup Inc. .......................................................................... 190,000 9,823,000
-------------

HOUSEHOLD/PERSONAL CARE .6%
Estee Lauder Cos. Inc., A ............................................................... 100,000 4,434,000
-------------

INDUSTRIAL CONGLOMERATES .4%
Tyco International Ltd. ................................................................. 100,000 2,865,000
-------------

INFORMATION TECHNOLOGY SERVICES 2.8%
a Cognizant Technology Solutions Corp., A ................................................. 50,000 2,262,500
International Business Machines Corp. ................................................... 200,000 18,368,000
-------------

20,630,500
-------------

INSURANCE BROKERS/SERVICES .6%
a ChoicePoint Inc. ........................................................................ 120,000 4,563,600
-------------

40 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

a Amazon.com Inc. ......................................................................... 100,000 $ 4,328,000
a Interactive Corp. ....................................................................... 50,000 1,579,500
-------------
5,907,500
-------------

INTERNET SOFTWARE/SERVICES 1.7%
a Check Point Software Technologies Ltd. (Israel) ......................................... 100,000 2,277,000
a Yahoo! Inc. ............................................................................. 210,000 10,203,900
-------------
12,480,900
-------------

MAJOR PHARMACEUTICALS 4.5%
Bristol-Myers Squibb Co. ................................................................ 150,000 3,634,500
Johnson & Johnson Inc. .................................................................. 130,000 6,593,600
Merck & Co. Inc. ........................................................................ 150,000 6,628,500
Pfizer Inc. ............................................................................. 470,000 16,473,500
-------------
33,330,100
-------------

MANAGED HEALTH CARE 2.9%
UnitedHealth Group Inc. ................................................................. 340,000 21,909,600
-------------

MEDIA CONGLOMERATES 1.4%
News Corp. Ltd., ADR (Australia) ........................................................ 150,000 5,397,000
a Time Warner Inc. ........................................................................ 280,000 4,720,800
-------------
10,117,800
-------------

MEDICAL DISTRIBUTORS .7%
McKesson Corp. .......................................................................... 175,000 5,265,750
-------------

MEDICAL SPECIALTIES 6.5%
Alcon Inc. (Switzerland) ................................................................ 150,000 9,495,000
Medtronic Inc. .......................................................................... 275,000 13,131,250
a Steris Corp. ............................................................................ 75,000 1,935,000
Stryker Corp. ........................................................................... 140,000 12,394,200
a Varian Medical Systems Inc. ............................................................. 10,000 863,100
a Zimmer Holdings Inc. .................................................................... 140,000 10,329,200
-------------
48,147,750
-------------

OILFIELD SERVICES/EQUIPMENT .9%
Schlumberger Ltd. ....................................................................... 100,000 6,385,000
-------------

OTHER CONSUMER SERVICES 4.4%
a Apollo Group Inc., A .................................................................... 40,000 3,444,400
a eBay Inc. ............................................................................... 420,000 29,118,600
-------------
32,563,000
-------------

Semiannual Report | 41

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Teva Pharmaceutical Industries Ltd., ADR (Israel) ....................................... 150,000 $ 9,511,500
-------------
PACKAGED SOFTWARE 8.0%
Adobe Systems Inc. ...................................................................... 260,000 10,251,800
a Cognos Inc. (Canada) .................................................................... 75,000 2,329,500
a Intuit Inc. ............................................................................. 230,000 10,322,400
Microsoft Corp. ......................................................................... 950,000 23,721,500
a Oracle Corp. ............................................................................ 220,000 2,642,200
a Symantec Corp. .......................................................................... 220,000 10,186,000
-------------
59,453,400
-------------

RECREATIONAL PRODUCTS 2.3%
a Electronic Arts Inc. .................................................................... 320,000 17,267,200
-------------

SEMICONDUCTORS 12.4%
Analog Devices Inc. ..................................................................... 300,000 14,403,000
a Broadcom Corp., A ....................................................................... 125,000 4,896,250
Intel Corp. ............................................................................. 1,150,000 31,280,000
a International Rectifier Corp. ........................................................... 180,000 8,278,200
Intersil Corp. .......................................................................... 100,000 2,229,000
Linear Technology Corp. ................................................................. 400,000 14,808,000
Microchip Technology Inc. ............................................................... 150,000 3,984,000
a Xilinx Inc. ............................................................................. 320,000 12,160,000
-------------
92,038,450
-------------

TELECOMMUNICATIONS EQUIPMENT 4.7%
Motorola Inc. ........................................................................... 680,750 11,981,200
Nokia Corp., ADR (Finland) .............................................................. 330,000 6,692,400
QUALCOMM Inc. ........................................................................... 240,000 15,940,800
-------------
34,614,400
-------------

TOTAL COMMON STOCKS (COST $504,547,035) ................................................. 703,034,988
-------------

SHORT TERM INVESTMENT (COST $37,155,070) 5.0%
b Franklin Institutional Fiduciary Trust Money Market Portfolio ........................... 37,155,070 37,155,070
-------------

TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT (COST $541,702,105) ....................... 740,190,058
-------------

42 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN DYNATECH FUND PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (COST $2,351,143) .3%

c Joint Repurchase Agreement, 1.010%, 4/01/04 (Maturity Value $2,351,209) ................. $ 2,351,143 $ 2,351,143
ABN AMRO Bank, N.V., New York Branch (Maturity Value $232,934)
Banc of America Securities LLC (Maturity Value $109,637)
Barclays Capital Inc. (Maturity Value $232,934)
Bear, Stearns & Co. Inc. (Maturity Value $109,637)
BNP Paribas Securities Corp. (Maturity Value $232,934)
Deutsche Bank Securities Inc. (Maturity Value $232,934)
Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $109,637)
Goldman, Sachs & Co. (Maturity Value $232,934)
Greenwich Capital Markets Inc. (Maturity Value $158,826)
Lehman Brothers Inc. (Maturity Value $232,934)
Morgan Stanley & Co. Inc. (Maturity Value $232,934)
UBS Securities LLC (Maturity Value $232,934)
Collateralized by U.S. Treasury Bills, Notes, and Bonds, and
U.S. Government Agency Securities
-------------
TOTAL INVESTMENTS (COST $544,053,248) 100.0% ............................................ 742,541,201
OTHER ASSETS, LESS LIABILITIES .......................................................... 189,974
-------------

NET ASSETS 100.0% ....................................................................... $742,731,175
-------------

<FN>
a Non-income producing.
b See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
c See Note 1(c) regarding repurchase agreements.
</FN>

Semiannual Report | See notes to financial statements.| 43

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS

FRANKLIN GROWTH FUND

----------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)

Net asset value, beginning of period ..... $26.87 $22.02 $27.81 $36.91 $33.21 $28.58
----------------------------------------------------------------------------------

Income from investment operations:

Net investment income a ................. .03 .08 .07 .23 .45 .39

Net realized and unrealized gains
(losses) ................................ 3.45 4.81 (5.65) (7.26) 3.96 4.89
----------------------------------------------------------------------------------
Total from investment operations ......... 3.48 4.89 (5.58) (7.03) 4.41 5.28
----------------------------------------------------------------------------------

Less distributions from:

Net investment income ................... (.03) (.04) (.16) (.40) (.45) (.44)

Net realized gains ...................... -- -- (.05) (1.67) (.26) (.21)
----------------------------------------------------------------------------------
Total distributions ...................... (.03) (.04) (.21) (2.07) (.71) (.65)
----------------------------------------------------------------------------------
Net asset value, end of period ........... $30.32 $26.87 $22.02 $27.81 $36.91 $33.21
----------------------------------------------------------------------------------

Total return b ........................... 12.95% 22.27% (20.35)% (20.12)% 13.53% 18.63%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ........ $1,572,475 $1,433,742 $1,249,745 $1,657,387 $2,149,928 $2,119,740

Ratios to average net assets:

Expenses ................................ 1.00%c 1.06% .96% .91% .93% .89%

Net investment income ................... .17%c .31% .24% .69% 1.27% 1.19%

Portfolio turnover rate .................. .85% 5.12% 2.16% .29% 8.12% 3.74%

44 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN GROWTH FUND (CONTINUED)

--------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999 D
--------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............. $26.32 $21.70 $27.46 $36.54 $33.03 $31.45
--------------------------------------------------------------------------

Income from investment operations:

Net investment income (loss) a .................. (.08) (.11) (.14) (.03) .16 .14

Net realized and unrealized gains (losses) ...... 3.38 4.73 (5.57) (7.18) 3.96 1.44
--------------------------------------------------------------------------
Total from investment operations ................. 3.30 4.62 (5.71) (7.21) 4.12 1.58
--------------------------------------------------------------------------

Less distributions from:

Net investment income ........................... -- -- -- (.20) (.35) --

Net realized gains .............................. -- -- (.05) (1.67) (.26) --
--------------------------------------------------------------------------
Total distributions .............................. -- -- (.05) (1.87) (.61) --
--------------------------------------------------------------------------
Net asset value, end of period ................... $29.62 $26.32 $21.70 $27.46 $36.54 $33.03
--------------------------------------------------------------------------

Total return b ................................... 12.54% 21.29% (20.90)% (20.74)% 12.68% 5.02%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................ $121,984 $103,499 $75,141 $66,095 $38,353 $17,271

Ratios to average net assets:

Expenses ........................................ 1.75%c 1.81% 1.71% 1.66% 1.68% 1.65%c

Net investment income (loss) .................... (.58)%c (.44)% (.51)% (.10)% .45% .57%c

Portfolio turnover rate .......................... .85% 5.12% 2.16% .29% 8.12% 3.74%

Semiannual Report | 45

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN GROWTH FUND (CONTINUED)

------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .............. $26.09 $21.51 $27.24 $36.19 $32.58 $28.11
------------------------------------------------------------------------

Income from investment operations:

Net investment income (loss) a ................... (.08) (.11) (.14) (.02) .18 .14

Net realized and unrealized gains (losses) ....... 3.36 4.69 (5.54) (7.13) 3.91 4.81
------------------------------------------------------------------------
Total from investment operations .................. 3.28 4.58 (5.68) (7.15) 4.09 4.95
------------------------------------------------------------------------
Less distributions from:

Net investment income ............................ -- -- -- (.13) (.22) (.27)

Net realized gains ............................... -- -- (.05) (1.67) (.26) (.21)
------------------------------------------------------------------------
Total distributions ............................... -- -- (.05) (1.80) (.48) (.48)
------------------------------------------------------------------------
Net asset value, end of period .................... $29.37 $26.09 $21.51 $27.24 $36.19 $32.58
------------------------------------------------------------------------

Total return b .................................... 12.53% 21.29% (20.92)% (20.72)% 12.71% 17.71%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................. $283,343 $259,169 $232,307 $310,650 $374,483 $362,216

Ratios to average net assets:

Expenses ......................................... 1.75%c 1.82% 1.70% 1.66% 1.68% 1.65%

Net investment income (loss) ..................... (.58)%c (.45)% (.51)% (.06)% .52% .45%

Portfolio turnover rate ........................... .85% 5.12% 2.16% .29% 8.12% 3.74%

<FN>
a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
</FN>

46 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN GROWTH FUND (CONTINUED)

---------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30,
CLASS R (UNAUDITED) 2003 2002 D
---------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............................ $26.74 $21.98 $31.59
---------------------------------------

Income from investment operations:

Net investment income (loss)a .................................. (.01) -- --

Net realized and unrealized gains (losses) ..................... 3.44 4.81 (9.61)
---------------------------------------
Total from investment operations ................................ 3.43 4.81 (9.61)
---------------------------------------
Less distributions from net investment income ................... -- (.05) --
---------------------------------------
Net asset value, end of period .................................. $30.17 $26.74 $21.98
---------------------------------------

Total return b .................................................. 12.83% 21.92% (30.42)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............................... $19,199 $14,755 $2,788

Ratios to average net assets:

Expenses ....................................................... 1.25%c 1.31% 1.21%c

Net investment income (loss) ................................... (.08)%c .06% .02%c

Portfolio turnover rate ......................................... .85% 5.12% 2.16%

Semiannual Report | 47

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN GROWTH FUND (CONTINUED)

------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
ADVISOR CLASS (UNAUDITED) 2003 2002 2001 2000 1999
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............... $26.91 $22.06 $27.86 $36.99 $33.27 $28.63
------------------------------------------------------------------------

Income from investment operations:

Net investment income a ........................... .06 .14 .14 .31 .54 .46

Net realized and unrealized gains (losses) ........ 3.45 4.82 (5.65) (7.28) 3.97 4.90
------------------------------------------------------------------------
Total from investment operations ................... 3.51 4.96 (5.51) (6.97) 4.51 5.36
------------------------------------------------------------------------
Less distributions from:

Net investment income ............................. (.09) (.11) (.24) (.49) (.53) (.51)

Net realized gains ................................ -- -- (.05) (1.67) (.26) (.21)
------------------------------------------------------------------------
Total distributions ................................ (.09) (.11) (.29) (2.16) (.79) (.72)
------------------------------------------------------------------------
Net asset value, end of period ..................... $30.33 $26.91 $22.06 $27.86 $36.99 $33.27
------------------------------------------------------------------------

Total return b ..................................... 13.07% 22.58% (20.14)% (19.94)% 13.84% 18.89%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .................. $86,791 $41,216 $27,431 $32,498 $39,442 $35,461

Ratios to average net assets:

Expenses .......................................... .75%c .81% .71% .66% .68% .65%

Net investment income ............................. .42%c .56% .49% .94% 1.51% 1.41%

Portfolio turnover rate ............................ .85% 5.12% 2.16% .29% 8.12% 3.74%

<FN>
a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c Annualized.
</FN>

48 | See notes to financial statements. | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN GROWTH FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 99.4%
COMMERCIAL SERVICES 2.9%

a Dun & Bradstreet Corp. ................................................................. 122,000 $ 6,527,000
Equifax Inc. ........................................................................... 400,000 10,328,000
Moody's Corp. .......................................................................... 244,000 17,275,200
a Robert Half International Inc. ......................................................... 300,000 7,086,000
Sabre Holdings Corp., A ................................................................ 800,000 19,848,000
---------------
61,064,200
---------------

CONSUMER DURABLES 2.6%
Eastman Kodak Co. ...................................................................... 500,000 13,085,000
Harley-Davidson Inc. ................................................................... 200,000 10,668,000
Hasbro Inc. ............................................................................ 600,000 13,050,000
Mattel Inc. ............................................................................ 1,000,000 18,440,000
---------------
55,243,000
---------------

CONSUMER NON-DURABLES 3.0%
Hershey Foods Corp. .................................................................... 258,200 21,391,870
International Flavors & Fragrances Inc. ................................................ 500,000 17,750,000
Tootsie Roll Industries Inc. ........................................................... 21,834 798,249
V.F. Corp. ............................................................................. 500,000 23,350,000
---------------
63,290,119
---------------

CONSUMER SERVICES 5.1%
Carnival Corp. ......................................................................... 500,000 22,455,000
Clear Channel Communications Inc. ...................................................... 500,000 21,175,000
Fairmont Hotels & Resorts Inc. (Canada) ................................................ 125,000 3,143,750
a Time Warner Inc. ....................................................................... 1,350,000 22,761,000
Viacom Inc., A ......................................................................... 200,000 7,908,000
Viacom Inc., B ......................................................................... 100,000 3,921,000
The Walt Disney Co. .................................................................... 1,000,000 24,990,000
---------------
106,353,750
---------------

DISTRIBUTION SERVICES 2.7%
Cardinal Health Inc. ................................................................... 236,250 16,277,625
Genuine Parts Co. ...................................................................... 461,700 15,106,824
W.W. Grainger Inc. ..................................................................... 500,000 24,000,000
---------------
55,384,449
---------------

ELECTRONIC TECHNOLOGY 18.4%
a Agilent Technologies Inc. .............................................................. 400,000 12,652,000
a Apple Computer Inc. .................................................................... 500,000 13,525,000
Boeing Co. ............................................................................. 1,000,000 41,070,000
a Cisco Systems Inc. ..................................................................... 1,350,000 31,752,000
a Conexant Systems Inc. .................................................................. 300,000 1,848,000
a Dell Inc. .............................................................................. 500,000 16,810,000
a Dionex Corp. ........................................................................... 250,000 13,200,000
a EMC Corp. .............................................................................. 1,000,000 13,610,000
a Gateway Inc. ........................................................................... 500,000 2,640,000

Semiannual Report | 49

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

General Dynamics Corp. ................................................................. 500,000 $ 44,665,000
Hewlett-Packard Co. .................................................................... 1,116,250 25,495,150
Intel Corp. ............................................................................ 800,000 21,760,000
Lockheed Martin Corp. .................................................................. 500,000 22,820,000
a Micrel Inc. ............................................................................ 25,000 333,750
a Mindspeed Technologies Inc. ............................................................ 100,000 653,000
a Mykrolis Corp. ......................................................................... 270,725 3,860,538
Northrop Grumman Corp. ................................................................. 500,000 49,210,000
Raytheon Co. ........................................................................... 600,000 18,804,000
Rockwell Automation Inc. ............................................................... 100,000 3,467,000
Rockwell Collins Inc. .................................................................. 100,000 3,161,000
a Sun Microsystems Inc. .................................................................. 1,600,000 6,656,000
Texas Instruments Inc. ................................................................. 515,000 15,048,300
a Waters Corp. ........................................................................... 500,000 20,420,000
---------------
383,460,738
---------------

ENERGY MINERALS 2.1%
BP PLC, ADR (United Kingdom) ........................................................... 295,200 15,114,240
Encana Corp. (Canada) .................................................................. 342,000 14,747,040
Royal Dutch Petroleum Co., N.Y. shs. (Netherlands) ..................................... 280,000 13,322,400
---------------
43,183,680
---------------

FINANCE .3%
a ChoicePoint Inc. ....................................................................... 160,000 6,084,797
---------------

HEALTH SERVICES .8%
a Caremark RX Inc. ....................................................................... 75,625 2,514,531
IMS Health Inc. ........................................................................ 500,000 11,630,000
a Medco Health Solutions Inc. ............................................................ 48,240 1,640,160
---------------
15,784,691
---------------

HEALTH TECHNOLOGY 21.6%
Abbott Laboratories .................................................................... 400,000 16,440,000
a Advanced Medical Optics Inc. ........................................................... 88,888 2,168,867
Allergan Inc. .......................................................................... 400,000 33,664,000
a Amgen Inc. ............................................................................. 932,000 54,214,440
Baxter International Inc. .............................................................. 500,000 15,445,000
Bristol-Myers Squibb Co. ............................................................... 640,000 15,507,200
a Edwards Lifesciences Corp. ............................................................. 50,000 1,597,500
Eli Lilly & Co. ........................................................................ 400,000 26,760,000
a Genentech Inc. ......................................................................... 500,000 52,910,000
Johnson & Johnson Inc. ................................................................. 996,000 50,517,120
Merck & Co. Inc. ....................................................................... 500,000 22,095,000
a Millipore Corp. ........................................................................ 400,000 20,552,000

50 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Pall Corp. ............................................................................. 500,000 $ 11,345,000
Pfizer Inc. ............................................................................ 2,000,000 70,100,000
Schering-Plough Corp. .................................................................. 1,800,000 29,196,000
Wyeth .................................................................................. 600,000 22,530,000
a Zimmer Holdings Inc. ................................................................... 64,000 4,721,920
---------------
449,764,047
---------------

INDUSTRIAL SERVICES 1.9%
a Ionics Inc. ............................................................................ 400,000 11,360,000
Schlumberger Ltd. ...................................................................... 400,000 25,540,000
a Transocean Inc. ........................................................................ 77,440 2,159,802
---------------
39,059,802
---------------

PROCESS INDUSTRIES 1.7%
Air Products & Chemicals Inc. .......................................................... 500,000 25,060,000
Sigma-Aldrich Corp. .................................................................... 200,000 11,068,000
---------------
36,128,000
---------------

PRODUCER MANUFACTURING 19.6%
3M Co. ................................................................................. 800,000 65,496,000
American Power Conversion Corp. ........................................................ 500,000 11,505,000
ArvinMeritor Inc. ...................................................................... 12,499 247,855
Avery Dennison Corp. ................................................................... 462,000 28,741,020
a CUNO Inc. .............................................................................. 86,200 3,868,656
Deere & Co. ............................................................................ 300,000 20,793,000
Emerson Electric Co. ................................................................... 500,000 29,960,000
Illinois Tool Works Inc. ............................................................... 500,000 39,615,000
Ingersoll Rand Co., A .................................................................. 501,000 33,892,650
Johnson Controls Inc. .................................................................. 400,000 23,660,000
Molex Inc. ............................................................................. 146,483 4,451,619
Molex Inc., A .......................................................................... 146,483 3,814,417
Teleflex Inc. .......................................................................... 500,000 24,615,000
Textron Inc. ........................................................................... 525,000 27,903,750
Thomas & Betts Corp. ................................................................... 500,000 10,910,000
Tyco International Ltd. ................................................................ 1,550,052 44,408,990
United Technologies Corp. .............................................................. 400,000 34,520,000
---------------
408,402,957
---------------

RETAIL TRADE 1.2%
Family Dollar Stores Inc. .............................................................. 200,000 7,190,000
a Interactive Corp. ...................................................................... 600,200 18,960,318
---------------
26,150,318
---------------

Semiannual Report | 51

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Automatic Data Processing Inc. ......................................................... 800,000 $ 33,600,000
Certegy Inc. ........................................................................... 200,000 7,004,000
a Computer Sciences Corp. ................................................................ 1,000,000 40,330,000
International Business Machines Corp. .................................................. 560,000 51,430,400
Microsoft Corp. ........................................................................ 1,000,000 24,970,000
a Oracle Corp. ........................................................................... 500,000 6,005,000
a Sungard Data Systems Inc. .............................................................. 500,000 13,700,000
a Yahoo! Inc. ............................................................................ 800,000 38,872,000
---------------
215,911,400
---------------

TRANSPORTATION 5.1%
a Alaska Air Group Inc. .................................................................. 500,000 12,330,000
a AMR Corp. .............................................................................. 1,080,000 13,748,400
a British Airways PLC, ADR (United Kingdom) .............................................. 500,000 25,500,000
Canadian Pacific Railway Ltd. (Canada) ................................................. 250,000 6,045,000
a Continental Airlines Inc., B ........................................................... 500,000 6,265,000
Delta Air Lines Inc. ................................................................... 1,000,000 7,920,000
KLM Royal Dutch Airlines, N.Y. shs. (Netherlands) ...................................... 500,000 10,385,000
a Northwest Airlines Corp. ............................................................... 500,000 5,055,000
Providence & Worchester Railroad Co. ................................................... 23,700 225,150
Southwest Airlines Co. ................................................................. 65,200 926,492
Union Pacific Corp. .................................................................... 300,000 17,946,000
---------------
106,346,042
---------------

TOTAL COMMON STOCKS (COST $1,021,119,747) .............................................. 2,071,611,990
---------------

SHORT TERM INVESTMENT (COST $19,754,329) 1.0%
b Franklin Institutional Fiduciary Trust Money Market Portfolio .......................... 19,754,329 19,754,329
---------------

TOTAL INVESTMENTS (COST $1,040,874,076) 100.4% ......................................... 2,091,366,319
OTHER ASSETS, LESS LIABILITIES (.4)% ................................................... (7,574,485)
---------------

NET ASSETS 100.0% ...................................................................... $2,083,791,834
---------------

<FN>
a Non-income producing.
b See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
</FN>

52 | See notes to financial statements. | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS

FRANKLIN INCOME FUND

Net asset value, beginning of period ..... $2.25 $1.90 $2.16 $2.35 $2.23 $2.34
----------------------------------------------------------------------------------

Income from investment operations:

Net investment income a ................. .06 .14 .14 .17 .18 .17

Net realized and unrealized gains
(losses) ................................ .19 .38 (.21) (.15) .13 (.09)
----------------------------------------------------------------------------------
Total from investment operations ......... .25 .52 (.07) .02 .31 .08
----------------------------------------------------------------------------------

Less distributions from:

Net investment income ................... (.08) (.16) (.17) (.18) (.18) (.18)

Net realized gains ...................... (.01) (.01) (.02) (.03) (.01) (.01)
----------------------------------------------------------------------------------
Total distributions ...................... (.09) (.17) (.19) (.21) (.19) (.19)
----------------------------------------------------------------------------------
Net asset value, end of period ........... $2.41 $2.25 $1.90 $2.16 $2.35 $2.23
----------------------------------------------------------------------------------

Total return b ........................... 11.29% 28.12% (4.18)% .58% 14.68% 4.02%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ........ $12,610,530 $9,640,156 $6,001,117 $5,960,990 $6,083,135 $6,776,804

Ratios to average net assets:

Expenses ................................ .69%c .73% .72% .73% .76% .73%

Net investment income ................... 5.04%c 6.63% 6.67% 7.54% 8.01% 7.46%

Portfolio turnover rate .................. 20.48% 48.36% 51.16% 28.13% 24.41% 17.35%

Semiannual Report | 53

Franklin Custodian Funds, Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN INCOME FUND (CONTINUED)

----------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30,
CLASS B (UNAUDITED) 2003 2002 D
----------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............................ $2.24 $1.90 $2.15
----------------------------------------

Income from investment operations:

Net investment income a ........................................ .05 .12 .11

Net realized and unrealized gains (losses) ..................... .19 .37 (.21)
----------------------------------------
Total from investment operations ................................ .24 .49 (.10)
----------------------------------------
Less distributions from:

Net investment income .......................................... (.07) (.14) (.13)

Net realized gains ............................................. (.01) (.01) (.02)
----------------------------------------
Total distributions ............................................. (.08) (.15) (.15)
----------------------------------------
Net asset value, end of period .................................. $2.40 $2.24 $1.90
----------------------------------------
Total return b .................................................. 10.86% 26.58% (5.63)%
----------------------------------------

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............................... $2,965,795 $2,083,783 $558,580

Ratios to average net assets:

Expenses ....................................................... 1.54%c 1.58% 1.57%c

Net investment income .......................................... 4.19%c 5.78% 6.01%c

Portfolio turnover rate ......................................... 20.48% 48.36% 51.16%

54 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN INCOME FUND (CONTINUED)

------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS B1 (UNAUDITED) 2003 2002 2001 2000 1999 D
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............... $2.25 $1.90 $2.17 $2.35 $2.24 $2.36
------------------------------------------------------------------------

Income from investment operations:

Net investment income a ........................... .05 .13 .13 .16 .17 .12

Net realized and unrealized gains (losses) ........ .19 .38 (.22) (.14) .12 (.11)
------------------------------------------------------------------------
Total from investment operations ................... .24 .51 (.09) .02 .29 .01
------------------------------------------------------------------------

Less distributions from:

Net investment income ............................. (.07) (.15) (.16) (.17) (.17) (.13)

Net realized gains ................................ (.01) (.01) (.02) (.03) (.01) --
------------------------------------------------------------------------
Total distributions ................................ (.08) (.16) (.18) (.20) (.18) (.13)
------------------------------------------------------------------------
Net asset value, end of period ..................... $2.41 $2.25 $1.90 $2.17 $2.35 $2.24
------------------------------------------------------------------------

Total return b ..................................... 11.00% 27.51% (4.66)% .10% 14.09% .34%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .................. $524,313 $495,004 $430,226 $446,245 $140,711 $83,031

Ratios to average net assets:

Expenses .......................................... 1.19%c 1.23% 1.22% 1.23% 1.26% 1.23%c

Net investment income ............................. 4.54%c 6.13% 6.15% 7.02% 7.49% 7.22%c

Portfolio turnover rate ............................ 20.48% 48.36% 51.16% 28.13% 24.41% 17.35%

Semiannual Report | 55

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN INCOME FUND (CONTINUED)

--------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
--------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)

Net asset value, beginning of period ....... $2.26 $1.91 $2.17 $2.36 $2.24 $2.34
--------------------------------------------------------------------------------

Income from investment operations:

Net investment income a ................... .05 .13 .13 .16 .17 .16

Net realized and unrealized gains
(losses) .................................. .19 .38 (.21) (.15) .13 (.08)
--------------------------------------------------------------------------------
Total from investment operations ........... .24 .51 (.08) .01 .30 .08
--------------------------------------------------------------------------------

Less distributions from:

Net investment income ..................... (.07) (.15) (.16) (.17) (.17) (.17)

Net realized gains ........................ (.01) (.01) (.02) (.03) (.01) (.01)
--------------------------------------------------------------------------------
Total distributions ........................ (.08) (.16) (.18) (.20) (.18) (.18)
--------------------------------------------------------------------------------
Net asset value, end of period ............. $2.42 $2.26 $1.91 $2.17 $2.36 $2.24
--------------------------------------------------------------------------------

Total return b ............................. 10.96% 27.37% (4.64)% .09% 14.54% 3.46%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .......... $5,531,928 $3,764,372 $1,545,377 $1,080,315 $872,662 $997,438

Ratios to average net assets:

Expenses .................................. 1.19%c 1.24% 1.21% 1.23% 1.26% 1.23%

Net investment income ..................... 4.54%c 6.12% 6.21% 7.04% 7.51% 6.97%

Portfolio turnover rate .................... 20.48% 48.36% 51.16% 28.13% 24.41% 17.35%

<FN>
a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
</FN>

56 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN INCOME FUND (CONTINUED)

--------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30,
CLASS R (UNAUDITED) 2003 2002 D
--------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ....................... $2.23 $1.89 $2.18

Income from investment operations:

Net investment income a ................................... .06 .13 .10

Net realized and unrealized gains (losses) ................ .18 .37 (.27)
--------------------------------------
Total from investment operations ........................... .24 .50 (.17)
--------------------------------------

Less distributions from:

Net investment income ..................................... (.07) (.15) (.12)

Net realized gains ........................................ (.01) (.01) --
--------------------------------------
Total distributions ........................................ (.08) (.16) (.12)
--------------------------------------
Net asset value, end of period ............................. $2.39 $2.23 $1.89
--------------------------------------

Total return b ............................................. 11.21% 27.31% (8.34)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .......................... $60,160 $36,417 $6,350

Ratios to average net assets:

Expenses .................................................. 1.04%c 1.08% 1.07%c

Net investment income ..................................... 4.69%c 6.28% 6.77%c

Portfolio turnover rate .................................... 20.48% 48.36% 51.16%

Semiannual Report | 57

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN INCOME FUND (CONTINUED)

Net asset value, beginning of period ............... $2.24 $1.89 $2.16 $2.34 $2.23 $2.34
------------------------------------------------------------------------

Income from investment operations:

Net investment income a ........................... .06 .14 .14 .18 .18 .17

Net realized and unrealized gains (losses) ........ .19 .38 (.22) (.15) .12 (.09)
------------------------------------------------------------------------
Total from investment operations ................... .25 .52 (.08) .03 .30 .08
------------------------------------------------------------------------

Less distributions from:

Net investment income ............................. (.08) (.16) (.17) (.18) (.18) (.18)

Net realized gains ................................ (.01) (.01) (.02) (.03) (.01) (.01)
------------------------------------------------------------------------
Total distributions ................................ (.09) (.17) (.19) (.21) (.19) (.19)
------------------------------------------------------------------------
Net asset value, end of period ..................... $2.40 $2.24 $1.89 $2.16 $2.34 $2.23
------------------------------------------------------------------------

Total return b ..................................... 11.42% 28.47% (4.50)% 1.21% 14.90% 3.71%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .................. $458,544 $95,009 $30,737 $22,737 $21,220 $23,891

Ratios to average net assets:

Expenses .......................................... .54%c .58% .57% .58% .61% .58%

Net investment income ............................. 5.19%c 6.78% 6.85% 7.69% 8.16% 7.60%

Portfolio turnover rate ............................ 20.48% 48.36% 51.16% 28.13% 24.41% 17.35%

<FN>
a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c Annualized.
</FN>

58 | See notes to financial statements. | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN INCOME FUND COUNTRY SHARES/WARRANTS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS 37.5%
COMMUNICATIONS 2.2%

AT&T Corp. ...................................................... United States 5,000,000 $ 97,850,000
BellSouth Corp. ................................................. United States 1,000,000 27,690,000
a NII Holdings Inc., B ............................................ United States 320,232 11,217,727
a NTL Inc. ........................................................ United States 379,020 22,532,739
SBC Communications Inc. ......................................... United States 5,333,000 130,871,820
a Telecom Argentina Stet - France Telecom SA, B, ADR .............. Argentina 1,700,000 18,105,000
Verizon Communications Inc. ..................................... United States 4,583,200 167,470,128
a XO Communications Inc. .......................................... United States 83,772 417,185
a XO Communications Inc., wts., A, 1/16/10 ........................ United States 167,543 351,840
a XO Communications Inc., wts., B, 1/16/10 ........................ United States 125,656 207,333
a XO Communications Inc., wts., C, 1/16/10 ........................ United States 125,656 144,504
----------------
476,858,276
----------------

CONSUMER DURABLES .5%
General Motors Corp. ............................................ United States 2,500,000 117,750,000
----------------

CONSUMER NON-DURABLES 1.1%
Altria Group Inc. ............................................... United States 3,250,000 176,962,500
Loews Corp. - Carolina Group .................................... United States 2,717,500 74,323,625
----------------

251,286,125
----------------

ELECTRONIC TECHNOLOGY .4%
Lockheed Martin Corp. ........................................... United States 1,925,600 87,884,384
----------------

ENERGY MINERALS 5.3%
BP PLC, ADR ..................................................... United Kingdom 3,500,000 179,200,000
a,b Callon Petroleum Company, wts., 12/08/10 ...................... United States 1,537,500 5,677,987
Canadian Oil Sands Trust ........................................ Canada 6,000,000 203,157,695
ChevronTexaco Corp. ............................................. United States 2,500,000 219,450,000
Marathon Oil Corp. .............................................. United States 4,812,500 162,036,875
a,c Mission Resources Corp. ....................................... United States 3,330,000 10,822,500
Petroleo Brasileiro SA, ADR ..................................... Brazil 1,600,000 53,600,000
Royal Dutch Petroleum Co., N.Y. shs. ............................ Netherlands 5,000,000 237,900,000
Yukos Corp., ADR ................................................ Russia 1,958,000 112,271,720
----------------
1,184,116,777
----------------

FINANCE 2.6%
Bank of America Corp. ........................................... United States 2,443,320 197,860,054
Comerica Inc. ................................................... United States 3,500,000 190,120,000
Fifth Third Bancorp ............................................. United States 1,000,000 55,370,000
JP Morgan Chase & Co. ........................................... United States 3,250,000 136,337,500
----------------
579,687,554
----------------

Semiannual Report | 59

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Bristol-Myers Squibb Co. ........................................ United States 10,000,000 $ 242,300,000
Johnson & Johnson Inc. .......................................... United States 3,250,000 164,840,000
Merck & Co. Inc. ................................................ United States 6,700,000 296,073,000
Pfizer Inc. ..................................................... United States 3,000,000 105,150,000
----------------
808,363,000
----------------

NON-ENERGY MINERALS .8%
AngloGold Ltd., ADR ............................................. South Africa 2,250,000 95,107,500
Barrick Gold Corp. .............................................. Canada 3,000,000 71,340,000
----------------
166,447,500
----------------

PROCESS INDUSTRIES .6%
Dow Chemical Co. ................................................ United States 1,250,000 50,350,000
Georgia-Pacific Corp. ........................................... United States 2,500,000 84,225,000
----------------
134,575,000
----------------

PRODUCER MANUFACTURING .5%
General Electric Co. ............................................ United States 3,400,000 103,768,000
----------------

REAL ESTATE INVESTMENT TRUSTS .7%
Archstone-Smith Trust ........................................... United States 1,346,900 39,747,019
iStar Financial Inc. ............................................ United States 2,586,900 109,425,870
----------------
149,172,889
----------------

TECHNOLOGY SERVICES
a Anacomp Inc., A ................................................. United States 76,900 1,526,465
----------------

UTILITIES 19.1%
Alliant Energy Corp. ............................................ United States 5,000,000 130,300,000
Ameren Corp. .................................................... United States 7,000,000 322,630,000
American Electric Power Co. Inc. ................................ United States 5,500,000 181,060,000
CenterPoint Energy Inc. ......................................... United States 3,000,000 34,290,000
Cinergy Corp. ................................................... United States 5,500,000 224,895,000
a CMS Energy Corp. ................................................ United States 3,650,000 32,667,500
Dominion Resources Inc. ......................................... United States 5,000,000 321,500,000
DTE Energy Co. .................................................. United States 5,250,000 216,037,500
Duke Energy Corp. ............................................... United States 6,500,000 146,900,000
Edison International ............................................ United States 1,590,300 38,628,387
Energy East Corp. ............................................... United States 4,500,000 114,120,000
Exelon Corp. .................................................... United States 3,500,000 241,045,000
FirstEnergy Corp. ............................................... United States 8,000,000 312,640,000
FPL Group Inc. .................................................. United States 2,161,500 144,496,275
Hawaiian Electric Industries Inc. ............................... United States 860,000 44,582,400
KeySpan Corp. ................................................... United States 3,769,600 144,074,112
NiSource Inc. ................................................... United States 3,760,700 79,914,875
ONEOK Inc. ...................................................... United States 3,196,900 72,090,095

60 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Pepco Holdings Inc. ............................................. United States 5,500,000 $ 112,420,000
Pinnacle West Capital Corp. ..................................... United States 3,250,000 127,887,500
PPL Corp. ....................................................... United States 2,500,000 114,000,000
Progress Energy Inc. ............................................ United States 3,924,000 184,741,920
Public Service Enterprise Group Inc. ............................ United States 3,000,000 140,940,000
Puget Energy Inc. ............................................... United States 4,000,000 89,480,000
Sempra Energy ................................................... United States 4,200,000 133,560,000
Southern Co. .................................................... United States 6,639,100 202,492,550
TECO Energy Inc. ................................................ United States 9,000,000 131,670,000
TXU Corp. ....................................................... United States 4,200,000 120,372,000
Xcel Energy Inc. ................................................ United States 4,332,500 77,161,825
----------------
4,236,596,939
----------------

TOTAL COMMON STOCKS AND WARRANTS (COST $7,162,604,049) .......... 8,298,032,909
----------------

PREFERRED STOCK
COMMUNICATIONS
a Nortel Inversora SA, B, ADR, pfd. ............................... Argentina 524,000 2,656,680
----------------

PROCESS INDUSTRIES
a,d Asia Pulp & Paper Co. Ltd., 12.00%, pfd. ...................... Indonesia 75,000,000 1,500,000
----------------

TOTAL PREFERRED STOCK (COST $65,541,450) ........................ 4,156,680
----------------

CONVERTIBLE PREFERRED STOCKS 9.6%
COMMUNICATIONS .7%
ALLTEL Corp., 7.75%, cvt. pfd. .................................. United States 2,900,000 147,088,000
a McLeodUSA Inc., 2.50%, cvt. pfd. ................................ United States 177,366 1,298,319
----------------
148,386,319
----------------

CONSUMER DURABLES 2.3%
Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd. ............... United States 7,000,000 371,350,000
General Motors Corp., 6.25%, cvt. pfd. .......................... United States 4,500,000 137,745,000
----------------
509,095,000
----------------

CONSUMER SERVICES .3%
Goldman Sachs Group Inc. into Time Warner, 6.50%, cvt. pfd. ..... United States 4,500,000 70,843,500
----------------

ELECTRONIC TECHNOLOGY .6%
Lehman Brothers Holdings Inc. into Solectron Corp., 7.00%, cvt. pfd. United States 3,000,000 67,515,000
Motorola Inc., 7.00%, cvt. pfd. ................................. United States 1,250,000 60,700,000
----------------
128,215,000
----------------

ENERGY MINERALS .6%
Range Resources Corp., 5.90%, cvt. pfd. ......................... United States 900,000 67,950,000
Unocal Corp., 6.25%, cvt. pfd. .................................. United States 1,250,000 65,468,750
----------------
133,418,750
----------------

Semiannual Report | 61

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Nuevo Financing I, 5.75%, cvt. pfd., A .......................... United States 1,583,100 $ 72,031,050
Travelers Property Casualty Corp., 4.50%, cvt. pfd. ............. United States 700,000 17,115,000
----------------
89,146,050
----------------

HEALTH TECHNOLOGY .5%
Goldman Sachs Group Inc. into Wyeth, 7.00%, cvt. pfd. ........... United States 1,400,000 55,455,400
Morgan Stanley into Pfizer Inc., 5.00%, cvt. pfd. ............... United States 1,780,000 62,413,475
----------------
117,868,875
----------------

INDUSTRIAL SERVICES .8%
Lehman Brothers Holdings Inc. into Rowan Companies, 6.00%,
cvt. pfd. ..................................................... United States 4,000,000 87,400,000
Lehman Brothers Holdings Inc. into Weatherford International, 6.00%,
cvt. pfd. ..................................................... United States 2,250,000 93,791,250
----------------
181,191,250
----------------

PROCESS INDUSTRIES
El Paso Energy Capital Trust I, 4.75%, cvt. pfd. ................ United States 199,200 6,374,400
----------------

REAL ESTATE INVESTMENT TRUSTS 1.5%
Felcor Lodging Trust Inc., 7.80%, cvt. pfd., A .................. United States 2,100,000 50,295,000
Glenborough Realty Trust Inc., 7.75%, cvt. pfd., A .............. United States 3,550,000 89,779,500
Host Marriott Corp., 6.75%, cvt. pfd. ........................... United States 2,500,000 128,247,500
Reckson Associates Realty Corp., 7.625%, cvt. pfd., A ........... United States 1,900,000 50,587,500
----------------
318,909,500
----------------

TECHNOLOGY SERVICES .9%
Electronic Data Systems Corp., 7.625%, cvt. pfd. ................ United States 2,000,000 37,940,000
Morgan Stanley into Accenture Inc., 6.00%, cvt. pfd. ............ United States 6,750,000 157,443,750
----------------
195,383,750
----------------

UTILITIES 1.0%
American Electric Power Co. Inc., 9.25%, cvt. pfd. .............. United States 848,400 40,002,060
CMS Energy Trust I, 7.75%, cvt. pfd. ............................ United States 1,150,000 49,709,900
ONEOK Inc., 8.50%, cvt. pfd. .................................... United States 700,000 21,938,000
Sempra Energy, 8.50%, cvt. pfd. ................................. United States 2,000,000 57,740,000
TXU Corp., 8.75%, cvt. pfd. ..................................... United States 1,300,000 47,606,000
----------------
216,995,960
----------------

TOTAL CONVERTIBLE PREFERRED STOCKS (COST $2,052,168,216) ........ 2,115,828,354
----------------

-----------------
PRINCIPAL AMOUNT
-----------------
BONDS 26.0%
COMMUNICATIONS 2.8%
Qwest Capital Funding, 7.00%, 8/03/09 ........................... United States $ 165,000,000 145,612,500
Qwest Capital Funding, 7.25%, 2/15/11 ........................... United States 145,000,000 125,425,000
Qwest Communications Inc., senior notes, 144A, 7.50%, 2/15/14 ... United States 90,000,000 85,275,000

62 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN INCOME FUND COUNTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
BONDS (CONT.)
COMMUNICATIONS (CONT.)

Qwest Corp., 7.20%, 11/10/26 .................................... United States $ 38,000,000 $ 35,150,000
Qwest Corp., 6.875%, 9/15/33 .................................... United States 70,000,000 62,300,000
Time Warner Telecom Inc., senior note, 10.125%, 2/01/11 ......... United States 47,400,000 43,963,500
Time Warner Telecom Inc., senior note, 144A, 9.25%, 2/15/14 ..... United States 52,500,000 53,287,500
d WorldCom Inc., 8.00%, 5/15/06 ................................... United States 150,000,000 51,000,000
d WorldCom Inc., 7.50%, 5/15/11 ................................... United States 73,000,000 24,820,000
----------------
626,833,500
----------------

CONSUMER DURABLES .6%
General Motors, 8.375%, 7/15/33 ................................. United States 125,000,000 142,214,375
----------------

CONSUMER NON-DURABLES
d Compania Alimentos Fargo SA, 13.25%, 8/01/08 .................... Argentina 27,000,000 4,860,000
----------------

CONSUMER SERVICES 5.1%
d Adelphia Communications Corp., senior note, 7.875%, 5/01/09 ..... United States 53,600,000 49,848,000
d Adelphia Communications Corp., senior note, 10.875%, 10/01/10 ... United States 55,000,000 53,625,000
e Cablevision Systems Corp., senior note, 144A, 8.00%, 4/15/12 .... United States 192,000,000 192,480,000
Charter Communications Holdings LLC, senior note, 8.25%,
4/01/07 ....................................................... United States 214,800,000 205,671,000
Charter Communications Holdings LLC, senior note, 8.625%,
4/01/09 ....................................................... United States 155,000,000 128,650,000
Charter Communications Holdings LLC, senior note, 10.75%,
10/01/09 ...................................................... United States 70,000,000 61,600,000
CKE Restaurants Inc., senior sub. note, 9.125%, 5/01/09 ......... United States 12,900,000 13,448,250
Coast Hotel & Casino Inc., senior sub. note, 9.50%, 4/01/09 ..... United States 38,900,000 41,039,500
CSC Holdings Inc., senior note, B, 7.625%, 4/01/11 .............. United States 118,000,000 125,080,000
CSC Holdings Inc., senior sub. deb., 9.875%, 4/01/23 ............ United States 40,000,000 41,900,000
EchoStar DBS Corp., senior note, 10.375%, 10/01/07 .............. United States 49,000,000 53,532,500
El Dorado Resorts LLC, senior sub. note, 10.50%, 8/15/06 ........ United States 7,052,000 7,122,520
Host Marriott LP, senior note, 7.125%, 11/01/13 ................. United States 60,000,000 62,550,000
Six Flags Inc., senior note, 9.50%, 2/01/09 ..................... United States 45,000,000 47,700,000
Universal City Development, senior note, 11.75%, 4/01/10 ........ United States 8,000,000 9,350,000
Young Broadcasting Inc., senior sub. note, 10.00%, 3/01/11 ...... United States 23,768,000 25,550,600
----------------
1,119,147,370
----------------

ELECTRONIC TECHNOLOGY .9%
Invensys PLC, 144A, 9.875%, 3/15/11 ............................. United Kingdom 51,100,000 52,633,000
Lucent Technologies, 6.45%, 3/15/29 ............................. United States 180,000,000 153,000,000
Solectron Corp., senior note, 9.625%, 2/15/09 ................... United States 3,400,000 3,774,000
----------------
209,407,000
----------------

ENERGY MINERALS .6%
Callon Petroleum Co., 144A, 9.75%, 12/08/10 ..................... United States 117,500,000 112,226,394
c Mission Resources Corp., senior sub. note, C, 10.875%, 4/01/07 .. United States 24,600,000 24,723,000
----------------
136,949,394
----------------

Semiannual Report | 63

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Ford Motor Credit Co., 7.00%, 10/01/13 .......................... United States $ 150,000,000 $ 158,564,700
----------------

HEALTH SERVICES 1.7%
HealthSouth Corp., senior note, 7.625%, 6/01/12 ................. United States 75,000,000 74,062,500
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11 ........... United States 200,000,000 174,000,000
Tenet Healthcare Corp., senior note, 7.375%, 2/01/13 ............ United States 145,000,000 131,587,500
----------------
379,650,000
----------------

INDUSTRIAL SERVICES 1.3%
El Paso Corp., senior note, 6.75%, 5/15/09 ...................... United States 157,500,000 139,781,250
El Paso Corp., senior note, 7.75%, 1/15/32 ...................... United States 100,000,000 80,750,000
El Paso Production Holdings, 7.75%, 6/01/13 ..................... United States 24,000,000 22,380,000
Hanover Equipment Trust 01, senior secured note, B, 8.75%,
9/01/11 ....................................................... United States 16,200,000 17,658,000
Williams Co. Inc., 7.125%, 9/01/11 .............................. United States 30,000,000 31,650,000
----------------
292,219,250
----------------

PROCESS INDUSTRIES 1.8%
Consoltex Group Inc., PIK, 11.00%, 1/31/09 ...................... United States 58,995,205 5,899
Equistar Chemicals LP, senior note, 10.125%, 9/01/08 ............ United States 49,800,000 53,784,000
Four M Corp., senior note, B, 12.00%, 6/01/06 ................... United States 30,000,000 29,850,000
Graphic Packaging International Corp., 9.50%, 8/15/13 ........... United States 50,000,000 56,750,000
Huntsman LLC, 11.625%, 10/15/10 ................................. United States 52,600,000 55,493,000
Lyondell Chemical Co., 9.625%, 5/01/07 .......................... United States 82,000,000 85,280,000
Lyondell Chemical Co., senior secured note, 10.50%, 6/01/13 ..... United States 71,500,000 75,790,000
Nalco Co., senior sub. note, 144A, 8.875%, 11/15/13 ............. United States 2,800,000 2,933,000
d Tjiwi Kimia Finance Mauritius, senior note, 10.00%, 8/01/04 ..... Indonesia 87,000,000 31,755,000
----------------
391,640,899
----------------

PRODUCER MANUFACTURING .9%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11 ........ United States 78,000,000 88,530,000
Dana Corp., 7.00%, 3/01/29 ...................................... United States 41,000,000 41,102,500
H&E Equipment/Finance, 11.125%, 6/15/12 ......................... United States 26,000,000 27,170,000
Trench Electric & Trench Inc., senior sub. deb., 10.25%, 12/15/07 Canada 30,000,000 31,050,000
----------------
187,852,500
----------------

REAL ESTATE INVESTMENT TRUSTS 1.1%
Felcor Lodging LP, 9/15/08 ...................................... United States 74,000,000 79,180,000
HMH Properties Inc., B, 7.875%, 8/01/08 ......................... United States 75,000,000 78,187,500
Meristar Hospitality Corp., 9.125%, 1/15/11 ..................... United States 72,500,000 76,668,750
----------------
234,036,250
----------------

UTILITIES 8.5%
Allegheny Energy Supply Co. LLC, 7.80%, 3/15/11 ................. United States 90,000,000 88,200,000
Allegheny Energy Supply Co. LLC, 144A, 8.75%, 4/15/12 ........... United States 140,000,000 140,000,000
Aquila Inc., 14.875%, 7/01/12 ................................... United States 97,500,000 131,625,000
Calpine Canada Energy Finance, senior note, 8.50%, 5/01/08 ...... Canada 158,000,000 117,710,000
Calpine Corp., senior note, 8.50%, 2/15/11 ...................... United States 292,500,000 216,450,000

64 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Calpine Corp., senior secured note, 144A, 8.75%, 7/15/13 ........ United States $ 45,000,000 $ 41,400,000
Calpine Corp., senior note, 8.625%, 8/15/10 ..................... United States 128,000,000 94,720,000
Calpine Corp., senior note, 7.875%, 4/01/08 ..................... United States 125,000,000 91,718,750
Calpine Generating Co., 144A, 10.25%, 4/01/11 ................... United States 50,000,000 47,625,000
CMS Energy Corp., senior note, 144A, 7.75%, 8/01/10 ............. United States 40,000,000 41,700,000
Dynegy Holdings Inc., secured note, 144A, 9.875%, 7/15/10 ....... United States 100,000,000 109,250,000
Dynegy Holdings Inc., secured note, 144A, 10.125%, 7/15/13 ...... United States 97,000,000 106,942,500
Dynegy Holdings Inc., senior note, 6.875%, 4/01/11 .............. United States 147,500,000 129,062,500
Dynegy Holdings Inc., senior note, 8.75%, 2/15/12 ............... United States 100,000,000 95,000,000
FirstEnergy Corp., 6.45%, 11/15/11 .............................. United States 60,000,000 65,809,440
Pacific Gas & Electric Co., 6.05%, 3/01/34 ...................... United States 240,000,000 243,757,680
Sierra Pacific Resources, 8.75%, 5/15/05 ........................ United States 114,900,000 123,517,500
----------------
1,884,488,370
----------------

TOTAL BONDS (COST $5,578,830,313) ............................... 5,767,863,608
----------------

CONVERTIBLE BONDS 3.6%
COMMUNICATIONS .3%
Nextel Communications Inc., cvt., 5.25%, 1/15/10 ................ United States 60,000,000 60,600,000
----------------

CONSUMER SERVICES .3%
d Adelphia Communications Corp., junior sub. note, cvt., 6.00%,
2/15/06 ....................................................... United States 85,000,000 35,700,000
Charter Communications Inc., cvt., 5.75%, 10/15/05 .............. United States 22,000,000 21,450,000
Charter Communications Inc., cvt., 4.75%, 6/01/06 ............... United States 4,400,000 4,180,000
----------------
61,330,000
----------------

ELECTRONIC TECHNOLOGY 1.5%
Liberty Media Corp. into Motorola, senior deb., cvt., 3.50%,
1/15/31 ....................................................... United States 5,000,000 4,593,750
Nortel Networks Corp., senior note, cvt., 4.25%, 9/01/08 ........ Canada 230,000,000 234,887,500
SCI Systems Inc., sub. note, cvt., 3.00%, 3/15/07 ............... United States 100,000,000 96,250,000
----------------
335,731,250
----------------

HEALTH TECHNOLOGY .1%
Enzon Pharmaceuticals Inc., cvt., 4.50%, 7/01/08 ................ United States 13,500,000 13,061,250
----------------

INDUSTRIAL SERVICES .2%
Hanover Compressor Co., cvt., 4.75%, 3/15/08 .................... United States 55,000,000 52,250,000
----------------

NON-ENERGY MINERALS
Trizec Hahn Corp. into Barrick Gold, cvt., senior deb., 3.00%,
1/29/21 ....................................................... Canada 9,900,000 8,068,500
----------------

REAL ESTATE INVESTMENT TRUSTS 1.2%
Host Marriott LP, 144A, cvt., 3.25%, 3/15/24 .................... United States 140,000,000 141,965,600
Meristar Hospitality Corp., cvt., 9.50%, 4/01/10 ................ United States 95,000,000 122,550,000
----------------

264,515,600
----------------

TOTAL CONVERTIBLE BONDS (COST $700,149,655) ..................... 795,556,600
----------------

Semiannual Report | 65

Franklin Custodian Funds, Inc.
STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Johnsondiversey Inc., zero cpn. to 5/15/07, 10.67% thereafter,
5/15/13 ....................................................... United States $ 100,000,000 $ 76,000,000
----------------

CONSUMER SERVICES 2.0%
Charter Communications Holdings LLC, senior disc. note,
zero cpn. to 4/01/04, 9.92% thereafter, 4/01/11 ............... United States 160,000,000 133,200,000
Charter Communications Holdings LLC, senior disc. note,
zero cpn. to 1/15/06, 13.50% thereafter, 1/15/11 .............. United States 150,000,000 108,000,000
Dex Media Inc., zero cpn. to 11/15/08, 9.00% thereafter, 11/15/13 United States 200,000,000 129,000,000
Quebecor Media Inc., senior disc. note, zero cpn. to 7/15/06,
13.75% thereafter, 7/15/11 .................................... Canada 55,200,000 50,508,000
Yell Finance BV, senior disc. note, zero cpn. to 8/01/06,
13.50% thereafter, 8/01/11 .................................... United Kingdom 26,865,000 25,387,425
----------------
446,095,425
----------------

INDUSTRIAL SERVICES .1%
Hanover Compressor Co., sub. note, zero cpn., 3/31/07 ........... United States 35,000,000 27,125,000
----------------

PROCESS INDUSTRIES 1.9%
HMP Equity Holdings Corp., 144A, zero cpn., 5/15/08 ............. United States 21,500,000 14,405,000
Huntsman ICI Holdings LLC, senior disc. note, zero cpn., 12/31/09 United States 180,000,000 83,700,000
Nalco Finance Holdings, senior note, 144A, zero cpn. to 8/1/09,
9.00% thereafter, 2/01/14 ..................................... United States 515,000,000 309,000,000
----------------
407,105,000
----------------

TOTAL ZERO COUPON/STEP-UP BONDS (COST $976,639,275) ............. 956,325,425
----------------

AGENCY BONDS 3.6%
FHLMC, 5.00%, 5/01/33 ........................................... United States 1,986,447 1,998,465
FHLMC, 5.00%, 6/01/33 ........................................... United States 3,962,173 3,986,145
FHLMC, 5.00%, 7/01/33 ........................................... United States 3,982,285 4,006,378
FHLMC, 5.00%, 8/01/33 ........................................... United States 7,875,803 7,923,451
FHLMC, 5.00%, 9/01/33 ........................................... United States 22,850,585 22,988,832
FHLMC, 5.00%, 10/01/33 .......................................... United States 59,396,834 59,756,188
FHLMC, 5.00%, 11/01/33 .......................................... United States 29,649,104 29,828,482
FHLMC, 5.00%, 12/01/33 .......................................... United States 57,622,949 57,971,571
FHLMC, 5.00%, 1/01/34 ........................................... United States 64,679,411 65,070,966
FHLMC, 5.00%, 2/01/34 ........................................... United States 13,973,807 14,058,467
FHLMC, 5.00%, 8/01/33 ........................................... United States 8,907,174 8,961,062
FHLMC, 5.00%, 2/01/34 ........................................... United States 72,821,769 73,262,343
GNMA, 5.00%, 4/15/33 ............................................ United States 3,999,600 4,034,287
GNMA, 5.00%, 7/15/33 ............................................ United States 1,000,099 1,008,773
GNMA, 5.00%, 8/15/33 ............................................ United States 38,997,707 39,335,924
GNMA, 5.00%, 9/15/33 ............................................ United States 84,993,545 85,730,665
GNMA, 5.00%, 10/15/33 ........................................... United States 33,997,023 34,291,867
GNMA, 5.00%, 11/15/33 ........................................... United States 8,999,105 9,077,151
GNMA, 5.00%, 1/15/34 ............................................ United States 2,000,198 2,017,325

66 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

GNMA, 5.00%, 3/15/34 ............................................ United States $ 26,000,200 $ 26,222,827
GNMA, 5.00%, 4/01/34 ............................................ United States 250,000,000 251,797,000
----------------
TOTAL AGENCY BONDS (COST $792,699,051) .......................... 803,328,169
----------------

MUNICIPAL BONDS 1.9%
California State GO, 5.00%, 2/01/26 ............................. United States 10,450,000 10,464,734
California State GO, 5.25%, 11/01/26 ............................ United States 25,000,000 25,603,750
California State GO, 5.25%, 11/01/27 ............................ United States 20,400,000 20,876,952
California State GO, 5.25%, 2/01/28 ............................. United States 24,600,000 25,143,906
California State GO, 5.00%, 2/01/32 ............................. United States 65,250,000 64,953,765
California State GO, 5.00%, 2/01/33 ............................. United States 126,650,000 125,802,400
California State GO, Refunding, 5.25%, 2/01/33 .................. United States 28,500,000 29,021,550
California State Various Purpose GO, 5.25%, 11/01/28 ............ United States 25,000,000 25,565,250
California State Various Purpose GO, 5.25%, 11/01/29 ............ United States 22,500,000 22,991,625
California State Various Purpose GO, 5.50%, 11/01/33 ............ United States 55,300,000 57,834,952
----------------
TOTAL MUNICIPAL BONDS (COST $391,387,870) ....................... 408,258,884
----------------

TOTAL LONG TERM INVESTMENTS (COST $17,720,019,879) .............. 19,149,350,629
----------------

------------
SHARES
------------
SHORT TERM INVESTMENT (COST $158,578,689) .7%
f Franklin Institutional Fiduciary Trust Money Market Portfolio ... United States 158,578,689 158,578,689
----------------

TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS
(COST $17,878,598,568) ........................................ 19,307,929,318
----------------

------------------
PRINCIPAL AMOUNT
------------------
REPURCHASE AGREEMENTS 14.3%
g Joint Repurchase Agreement, 1.010%, 4/01/04
(Maturity Value $3,100,021,247) ............................... United States $ 3,099,934,277 3,099,934,277
ABN AMRO Bank, N.V., New York Branch
(Maturity Value $307,119,105)
Banc of America Securities LLC (Maturity Value $144,553,991)
Barclays Capital Inc. (Maturity Value $307,119,105)
Bear, Stearns & Co. Inc. (Maturity Value $144,553,991)
BNP Paribas Securities Corp. (Maturity Value $307,119,105)
Deutsche Bank Securities Inc. (Maturity Value $307,119,105)
Dresdner Kleinwort Wasserstein Securities LLC
(Maturity Value $144,553,991)
Goldman, Sachs & Co. (Maturity Value $307,119,105)
Greenwich Capital Markets Inc. (Maturity Value $307,119,105)
Lehman Brothers Inc. (Maturity Value $209,406,434)
Morgan Stanley & Co. Inc. (Maturity Value $307,119,105)
UBS Securities LLC (Maturity Value $307,119,105)
Collateralized by U.S. Treasury Bills, Notes, and Bonds, and
U.S. Government Agency Securities

Semiannual Report | 67

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

h Barclays Capital Inc., 1.07%, 4/01/04
(Maturity Value $1,562,079) ................................... United States $ 1,562,033 $ 1,562,033
Collateralized by U.S. Government Agency Securities
h Bear, Stearns & Co. Inc., 1.08%, 4/01/04
(Maturity Value $15,000,773) .................................. United States 15,000,323 15,000,323
Collateralized by U.S. Government Agency Securities
h Deutsche Bank Securities Inc., 1.10%, 4/01/04
(Maturity Value $15,000,789) .................................. United States 15,000,331 15,000,331
Collateralized by U.S. Government Agency Securities
h Morgan Stanley & Co. Inc., 1.10%, 4/01/04
(Maturity Value $15,000,789) .................................. United States 15,000,331 15,000,331
Collateralized by U.S. Government Agency Securities
h Goldman, Sachs & Co., 1.10%, 4/01/04
(Maturity Value $15,000,789) .................................. United States 15,000,331 15,000,331
Collateralized by U.S. Government Agency Securities
h JP Morgan Securities Inc., 1.10%, 4/01/04
(Maturity Value $15,000,789) .................................. United States 15,000,331 15,000,331
Collateralized by U.S. Government Agency Securities
----------------

TOTAL REPURCHASE AGREEMENTS (COST $3,176,497,957) ............... 3,176,497,957
----------------

TOTAL INVESTMENTS (COST $21,055,096,525) 101.5% ................. 22,484,427,275
OTHER ASSETS, LESS LIABILITIES (1.5)% ........................... (333,157,117)
----------------

NET ASSETS 100.0% ............................................... $22,151,270,158
----------------

<FN>
See glossary of terms on page 84.

a Non-income producing.
b See Note 8 regarding restricted securities.
c See Note 9 regarding holdings of 5% voting securities.
d The fund discontinues accruing income on defaulted securities. See Note 7.
e See Note 1(d) regarding securities purchased on a when-issued, delayed
delivery or TBA basis.
f See Note 6 regarding investments in the Franklin Institutional
Fiduciary Trust Money Market Portfolio.
g See Note 1(c) regarding repurchase agreements.
h Collateral for loaned securities. See Note 1(f).
</FN>

68 | See notes to financial statements. | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS

FRANKLIN U.S. GOVERNMENT SECURITIES FUND

Net asset value, beginning of period ...... $6.81 $6.99 $6.93 $6.63 $6.62 $6.99
----------------------------------------------------------------------------------

Income from investment operations:

Net investment income a .................. .13 .28 .38 .41d .43 .44

Net realized and unrealized gains
(losses) ................................. .01 (.10) .09 .33d .01 (.37)
----------------------------------------------------------------------------------
Total from investment operations .......... .14 .18 .47 .74 .44 .07
----------------------------------------------------------------------------------

Less distributions from net investment
income ................................... (.19) (.36) (.41) (.44) (.43) (.44)
----------------------------------------------------------------------------------
Net asset value, end of period ............ $6.76 $6.81 $6.99 $6.93 $6.63 $6.62
----------------------------------------------------------------------------------

Total return b ............................ 2.12% 2.66% 7.06% 11.52% 6.90% 1.05%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......... $6,910,272 $7,286,317 $7,726,914 $7,197,334 $6,852,374 $7,895,906

Ratios to average net assets:

Expenses ................................. .71%c .70% .69% .68% .70% .67%

Net investment income .................... 4.03%c 4.11% 5.48% 6.12%d 6.62% 6.43%

Portfolio turnover rate ................... 17.39% 66.96% 44.62% 19.18% 3.98% 15.04%

d Effective October 1, 2000, the Fund adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began recording all paydown
gains and losses as part of investment income, as required. The effect of this
change was as follows:

Net investment income per share ........................... $(.008)
Net realized and unrealized gains (losses) per share ...... .008
Ratio of net investment income to average net assets ...... (.11)%

Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
</FN>

Semiannual Report | 69

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN U.S. GOVERNMENT SECURITIES FUND (CONTINUED)

------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999 E
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............... $6.80 $6.98 $6.93 $6.63 $6.62 $6.91
------------------------------------------------------------------------

Income from investment operations:

Net investment income a ........................... .12 .25 .34 .37d .39 .30

Net realized and unrealized gains (losses) ........ -- (.10) .09 .33d .01 (.28)
------------------------------------------------------------------------
Total from investment operations ................... .12 .15 .43 .70 .40 .02
------------------------------------------------------------------------
Less distributions from net investment income ...... (.17) (.33) (.38) (.40) (.39) (.31)
------------------------------------------------------------------------
Net asset value, end of period ..................... $6.75 $6.80 $6.98 $6.93 $6.63 $6.62
------------------------------------------------------------------------

Total return b ..................................... 1.85% 2.13% 6.37% 10.94% 6.35% .25%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .................. $630,526 $678,814 $559,966 $225,517 $80,167 $51,433

Ratios to average net assets:

Expenses .......................................... 1.24%c 1.23% 1.22% 1.22% 1.25% 1.22%c

Net investment income ............................. 3.50%c 3.58% 4.95% 5.51%d 6.07% 5.93%c

Portfolio turnover rate ............................ 17.39% 66.96% 44.62% 19.18% 3.98% 15.04%

<FN>
a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
d Effective October 1, 2000, the Fund adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began recording all paydown
gains and losses as part of investment income, as required. The effect of this
change was as follows:

Net investment income per share ......................... $(.008)
Net realized and unrealized gains (losses) per share .... .008
Ratio of net investment income to average net assets .... (.11)%

Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy. e For the period January 1, 1999 (effective
date) to September 30, 1999.
</FN>

70 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN U.S. GOVERNMENT SECURITIES FUND (CONTINUED)

Net asset value, beginning of period ............... $6.78 $6.97 $6.91 $6.61 $6.60 $6.97
------------------------------------------------------------------------

Income from investment operations:

Net investment income a ........................... .12 .25 .34 .37d .39 .40

Net realized and unrealized gains (losses) ........ -- (.11) .10 .33d .01 (.37)
------------------------------------------------------------------------
Total from investment operations ................... .12 .14 .44 .70 .40 .03
------------------------------------------------------------------------
Less distributions from net investment income ...... (.17) (.33) (.38) (.40) (.39) (.40)
------------------------------------------------------------------------
Net asset value, end of period ..................... $6.73 $6.78 $6.97 $6.91 $6.61 $6.60
------------------------------------------------------------------------

Total return b ..................................... 1.85% 2.00% 6.53% 10.96% 6.36% .50%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .................. $706,219 $814,635 $803,049 $422,114 $264,413 $308,961

Ratios to average net assets:

Expenses .......................................... 1.24%c 1.23% 1.21% 1.22% 1.25% 1.22%

Net investment income ............................. 3.50%c 3.58% 4.96% 5.55%d 6.08% 5.89%

Portfolio turnover rate ............................ 17.39% 66.96% 44.62% 19.18% 3.98% 15.04%

<FN>
a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized. d Effective October 1, 2000, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
recording all paydown gains and losses as part of investment income, as
required. The effect of this change was as follows:

Net investment income per share .......................... $(.008)
Net realized and unrealized gains (losses) per share ..... .008
Ratio of net investment income to average net assets ..... (.11)%

Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
</FN>

Semiannual Report | 71

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN U.S. GOVERNMENT SECURITIES FUND (CONTINUED)

Net asset value, beginning of period ............................ $6.81 $6.99 $6.81
----------------------------------------

Income from investment operations:

Net investment income a ........................................ .12 .25 .25

Net realized and unrealized gains (losses) ..................... .01 (.09) .22
----------------------------------------
Total from investment operations ................................ .13 .16 .47
----------------------------------------
Less distributions from net investment income ................... (.18) (.34) (.29)
----------------------------------------
Net asset value, end of period .................................. $6.76 $6.81 $6.99
----------------------------------------

Total return b .................................................. 1.93% 2.29% 7.03%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............................... $56,264 $54,042 $14,042

Ratios to average net assets:

Expenses ....................................................... 1.09%c 1.08% 1.07%c

Net investment income .......................................... 3.65%c 3.73% 5.10%c

Portfolio turnover rate ......................................... 17.39% 66.96% 44.62%

72 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN U.S. GOVERNMENT SECURITIES FUND (CONTINUED)

-----------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
ADVISOR CLASS (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ................ $6.83 $7.01 $6.94 $6.64 $6.63 $7.00
-----------------------------------------------------------------------

Income from investment operations:

Net investment income a ............................ .14 .29 .38 .43d .44 .45

Net realized and unrealized gains (losses) ......... -- (.10) .11 .32d -- (.37)
-----------------------------------------------------------------------
Total from investment operations .................... .14 .19 .49 .75 .44 .08
-----------------------------------------------------------------------
Less distributions from net investment income ....... (.20) (.37) (.42) (.45) (.43) (.45)
-----------------------------------------------------------------------
Net asset value, end of period ...................... $6.77 $6.83 $7.01 $6.94 $6.64 $6.63
-----------------------------------------------------------------------

Total return b ...................................... 2.03% 2.79% 7.33% 11.63% 7.02% 1.16%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................... $328,402 $308,411 $198,437 $19,960 $46,775 $15,544

Ratios to average net assets:

Expenses ........................................... .59%c .58% .57% .57% .60% .57%

Net investment income .............................. 4.15%c 4.23% 5.60% 6.30%d 6.73% 6.53%

Portfolio turnover rate ............................. 17.39% 66.96% 44.62% 19.18% 3.98% 15.04%

<FN>
a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c Annualized.
d Effective October 1, 2000, the Fund adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began recording all paydown
gains and losses as part of investment income, as required. The effect of this
change was as follows:

Net investment income per share ......................... $(.008)
Net realized and unrealized gains (losses) per share .... .008
Ratio of net investment income to average net assets .... (.11)%

Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
</FN>

Semiannual Report | See notes to financial statements. | 73

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN U.S. GOVERNMENT SECURITIES FUND PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) 96.1%

a GNMA I, SF, 5.00%, 2/15/33 - 4/01/34 ................................................. $ 589,310,841 $ 594,372,915
GNMA II, 5.00%, 7/20/33 - 12/20/33 ................................................... 808,557,577 814,515,564
a GNMA I, SF, 5.50%, 4/15/03 - 2/15/34 ................................................. 1,947,442,637 2,005,539,140
GNMA II, 5.50%, 7/20/33 - 3/15/34 .................................................... 151,874,996 156,214,641
GNMA I, SF, 6.00%, 9/15/23 - 8/15/33 ................................................. 1,371,361,977 1,434,102,552
GNMA II, 6.00%, 10/20/23 - 2/20/31 ................................................... 29,021,114 30,382,554
GNMA I, SF, 6.50%, 5/15/23 - 3/15/33 ................................................. 1,086,847,574 1,149,614,718
GNMA II, 6.50%, 6/20/24 - 3/20/33 .................................................... 234,174,854 246,813,229
GNMA I, SF, 6.75%, 3/15/26 - 4/15/26 ................................................. 305,423 325,388
GNMA PL, 6.75%, 1/15/34 .............................................................. 34,379,584 36,513,191
GNMA I, SF, 7.00%, 4/15/16 - 9/15/32 ................................................. 802,474,497 857,566,675
GNMA II, 7.00%, 2/20/28 - 7/20/33 .................................................... 286,112,060 304,100,791
GNMA PL, 7.00%, 9/15/35 .............................................................. 8,604,030 9,103,731
GNMA I, SF, 7.25%, 11/15/25 - 1/15/26 ................................................ 1,882,475 2,023,872
GNMA I, SF, 7.50%, 6/15/05 - 8/15/32 ................................................. 188,556,643 203,832,754
GNMA II, 7.50%, 10/20/22 - 1/20/32 ................................................... 31,286,524 33,621,838
GNMA I, SF, 7.70%, 12/15/20 - 1/15/22 ................................................ 1,632,151 1,794,100
GNMA I, SF, 8.00%, 10/15/07 - 9/15/30 ................................................ 134,723,217 148,415,241
GNMA II, 8.00%, 8/20/16 - 6/20/30 .................................................... 12,296,138 13,402,770
GNMA I, GP, 8.25%, 3/15/17 - 11/15/17 ................................................ 665,029 734,802
GNMA I, SF, 8.25%, 3/15/27 - 11/15/27 ................................................ 418,310 458,117
GNMA I, SF, 8.50%, 12/15/09 - 6/15/25 ................................................ 26,324,524 29,257,191
GNMA II, 8.50%, 4/20/16 - 6/20/25 .................................................... 5,057,387 5,585,103
GNMA II, 8.75%, 3/20/17 - 7/20/17 .................................................... 122,791 136,700
GNMA I, SF, 9.00%, 10/15/04 - 7/15/23 ................................................ 34,016,733 38,162,998
GNMA II, 9.00%, 5/20/16 - 11/20/21 ................................................... 1,606,788 1,794,439
GNMA I, GP, 9.25%, 5/15/16 - 12/15/16 ................................................ 796,189 887,272
GNMA I, SF, 9.50%, 5/15/09 - 1/15/23 ................................................. 20,015,567 22,407,096
GNMA II, 9.50%, 8/20/17 - 4/20/25 .................................................... 1,212,607 1,354,922
GNMA I, GP, 10.00%, 11/15/09 - 8/15/13 ............................................... 817,258 905,632
GNMA I, SF, 10.00%, 4/15/12 - 3/15/25 ................................................ 24,141,536 27,385,129
GNMA II, 10.00%, 8/20/15 - 3/20/21 ................................................... 2,049,043 2,314,425
GNMA I, GP, 10.25%, 6/15/18 - 8/15/20 ................................................ 61,559 69,734
GNMA I, SF, 10.50%, 12/15/09 - 10/15/21 .............................................. 18,479,321 21,083,985
GNMA II, 10.50%, 9/20/13 - 3/20/21 ................................................... 4,884,251 5,545,709
GNMA I, GP, 11.00%, 12/15/09 - 1/15/11 ............................................... 1,575,167 1,768,657
GNMA I, SF, 11.00%, 11/15/09 - 5/15/21 ............................................... 17,915,895 20,416,050
GNMA II, 11.00%, 8/20/13 - 1/20/21 ................................................... 1,016,608 1,160,819
GNMA I, GP, 11.25%, 6/15/13 - 1/15/16 ................................................ 497,930 569,244
GNMA I, GP, 11.50%, 1/15/13 - 6/15/13 ................................................ 144,071 165,165
GNMA I, SF, 11.50%, 2/15/13 - 12/15/17 ............................................... 4,108,189 4,739,159
GNMA II, 11.50%, 8/20/13 - 2/20/18 ................................................... 430,720 494,991
GNMA I, GP, 11.75%, 7/15/13 - 12/15/15 ............................................... 96,861 111,234
GNMA I, GP, 12.00%, 3/15/11 - 1/15/13 ................................................ 51,840 59,409
GNMA I, SF, 12.00%, 5/15/11 - 7/15/18 ................................................ 19,285,626 22,373,186
GNMA II, 12.00%, 9/20/13 - 2/20/16 ................................................... 746,698 863,041
GNMA I, GP, 12.50%, 4/15/10 - 7/15/10 ................................................ 152,913 175,026
GNMA I, SF, 12.50%, 4/15/10 - 8/15/18 ................................................ 17,928,410 20,800,544

74 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

GNMA II, 12.50%, 10/20/13 - 11/20/15 ................................................. $ 783,505 $ 910,555
GNMA I, GP, 12.75%, 5/15/14 .......................................................... 6,916 8,058
GNMA I, SF, 13.00%, 7/15/10 - 1/15/16 ................................................ 19,750,717 23,117,959
GNMA II, 13.00%, 10/20/13 - 9/20/15 .................................................. 608,135 712,438
---------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ....................................... 8,298,784,453
b ALLOWANCE FOR PAYDOWNS ............................................................... (7,255,135)
---------------
TOTAL LONG TERM INVESTMENTS (COST $8,072,277,035) .................................... 8,291,529,318
---------------

----------------
SHARES
----------------
SHORT TERM INVESTMENT (COST $158,578,689) 1.8%
c Franklin Institutional Fiduciary Trust Money Market Portfolio ........................ 158,578,689 158,578,689
---------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT (COST $8,230,855,724) .................. 8,450,108,007
---------------

----------------
PRINCIPAL AMOUNT
----------------
REPURCHASE AGREEMENT (COST $214,885,000) 2.5%
d Barclays Capital Inc., 1.00%, 4/01/04 (Maturity Value $214,890,969) .................. $ 214,885,000 214,885,000
---------------
TOTAL INVESTMENTS (COST $8,445,740,724) 100.4% ....................................... 8,664,993,007
OTHER ASSETS, LESS LIABILITIES (.4)% ................................................. (33,311,141)
---------------
NET ASSETS 100.0% .................................................................... $8,631,681,866
---------------

<FN>
See glossary of terms on page 84.

a See Note 1(d) regarding securities purchased on a when-issued, delayed
delivery or TBA basis.
b See Note 1(e) regarding allowance for paydowns.
c See Note 6 regarding investments in the Franklin Institutional Fiduciary Trus
Money Market Portfolio.
d See Note 1(c) regarding repurchase agreements.
</FN>

Semiannual Report | See notes to financial statements. | 75

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS

FRANKLIN UTILITIES FUND

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)

Net asset value, beginning of period ..... $8.80 $7.96 $10.02 $10.89 $ 9.58 $11.36
-----------------------------------------------------------------------------------

Income from investment operations:

Net investment income a ................. .21 .42 .46 .46 .43 .48

Net realized and unrealized gains
(losses) ................................ .98 .85 (1.60) (.86) 1.69 (1.41)
-----------------------------------------------------------------------------------

Total from investment operations ......... 1.19 1.27 (1.14) (.40) 2.12 (.93)

Less distributions from:

Net investment income ................... (.20) (.43) (.45) (.45) (.45) (.52)

Net realized gains ...................... -- -- (.47) (.02) (.36) (.33)
-----------------------------------------------------------------------------------
Total distributions ...................... (.20) (.43) (.92) (.47) (.81) (.85)
-----------------------------------------------------------------------------------
Net asset value, end of period ........... $9.79 $8.80 $ 7.96 $10.02 $10.89 $ 9.58
-----------------------------------------------------------------------------------

Total return b ........................... 13.66% 16.38% (12.49)% (4.03)% 24.27% (8.54)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ........ $1,398,513 $1,259,886 $1,090,216 $1,349,027 $1,574,897 $1,594,862

Ratios to average net assets:

Expenses ................................ .81%c .83% .80% .79% .83% .80%

Net investment income ................... 4.58%c 5.00% 4.87% 4.26% 4.74% 4.60%

Portfolio turnover rate .................. 10.12% 25.81% 30.60% 34.03% 19.86% 33.99%

76 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN UTILITIES FUND (CONTINUED)

---------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999 D
---------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............. $8.80 $7.97 $10.02 $10.90 $ 9.59 $11.08
---------------------------------------------------------------------------

INCOME FROM INVESTMENT OPERATIONS:
Net investment incomea .......................... .19 .37 .41 .41 .38 .31

Net realized and unrealized gains (losses) ...... .98 .85 (1.58) (.87) 1.70 (1.44)
---------------------------------------------------------------------------
Total from investment operations ................. 1.17 1.22 (1.17) (.46) 2.08 (1.13)
---------------------------------------------------------------------------
Less distributions from:

Net investment income ........................... (.18) (.39) (.41) (.40) (.41) (.36)

Net realized gains .............................. -- -- (.47) (.02) (.36) --
---------------------------------------------------------------------------
Total distributions .............................. (.18) (.39) (.88) (.42) (.77) (.36)
---------------------------------------------------------------------------
Net asset value, end of period ................... $9.79 $8.80 $ 7.97 $10.02 $10.90 $ 9.59
---------------------------------------------------------------------------

Total return b ................................... 13.39% 15.88% (12.88)% (4.58)% 23.79% (10.37)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................ $117,469 $95,321 $32,802 $15,212 $8,819 $3,142

Ratios to average net assets:

Expenses ........................................ 1.32%c 1.34% 1.31% 1.30% 1.34% 1.31%c

Net investment income ........................... 4.07%c 4.49% 4.44% 3.74% 4.11% 4.12%c

Portfolio turnover rate .......................... 10.12% 25.81% 30.60% 34.03% 19.86% 33.99%

Semiannual Report | 77

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN UTILITIES FUND (CONTINUED)

---------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED SEPTEMBER 30,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
---------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............. $8.78 $7.95 $10.01 $10.88 $ 9.57 $11.35
---------------------------------------------------------------------------

Income from investment operations:

Net investment incomea .......................... .19 .36 .41 .41 .38 .43

Net realized and unrealized gains (losses) ...... .98 .86 (1.59) (.87) 1.69 (1.42)
---------------------------------------------------------------------------
Total from investment operations ................. 1.17 1.22 (1.18) (.46) 2.07 (.99)
---------------------------------------------------------------------------

LESS DISTRIBUTIONS FROM:
Net investment income ........................... (.18) (.39) (.41) (.39) (.40) (.46)

Net realized gains .............................. -- -- (.47) (.02) (.36) (.33)
---------------------------------------------------------------------------
Total distributions .............................. (.18) (.39) (.88) (.41) (.76) (.79)
---------------------------------------------------------------------------
Net asset value, end of period ................... $9.77 $8.78 $ 7.95 $10.01 $10.88 $ 9.57
---------------------------------------------------------------------------

Total return b ................................... 13.42% 15.77% (12.90)% (4.50)% 23.65% (9.06)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................ $276,294 $222,030 $67,428 $44,985 $37,837 $34,697

Ratios to average net assets:

Expenses ........................................ 1.32%c 1.34% 1.29% 1.30% 1.34% 1.31%

Net investment income ........................... 4.07%c 4.49% 4.43% 3.76% 4.22% 4.08%

Portfolio turnover rate .......................... 10.12% 25.81% 30.60% 34.03% 19.86% 33.99%

<FN>
a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
</FN>

78 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN UTILITIES FUND (CONTINUED)

-------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30,
CLASS R (UNAUDITED) 2003 2002 D
-------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .................... $8.79 $7.96 $9.81
-------------------------------------

Income from investment operations:

Net investment incomea ................................. .20 .37 .32

Net realized and unrealized gains (losses) ............. .98 .86 (1.85)
-------------------------------------
Total from investment operations ........................ 1.18 1.23 (1.53)
-------------------------------------
Less distributions from net investment income ........... (.19) (.40) (.32)
-------------------------------------
Net Asset Value, End of Period .......................... $9.78 $8.79 $7.96
-------------------------------------

Total return b .......................................... 13.48% 15.96% (16.01)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................... $1,246 $1,142 $142

Ratios to average net assets:

Expenses ............................................... 1.17%c 1.19% 1.16%c

Net investment income .................................. 4.22%c 4.64% 4.82%c

Portfolio turnover rate ................................. 10.12% 25.81% 30.60%

Semiannual Report | 79

Franklin Custodian Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN UTILITIES FUND (CONTINUED)

Net asset value, beginning of period ................ $8.84 $7.99 $10.05 $10.92 $ 9.61 $11.39
------------------------------------------------------------------------

Income from investment operations:

Net investment incomea ............................. .22 .42 .47 .48 .44 .51

Net realized and unrealized gains (losses) ......... .98 .87 (1.60) (.87) 1.69 (1.42)
------------------------------------------------------------------------
Total from investment operations .................... 1.20 1.29 (1.13) (.39) 2.13 (.91)
------------------------------------------------------------------------
Less distributions from:

Net investment income .............................. (.21) (.44) (.46) (.46) (.46) (.54)

Net realized gains ................................. -- -- (.47) (.02) (.36) (.33)
------------------------------------------------------------------------
Total distributions ................................. (.21) (.44) (.93) (.48) (.82) (.87)
------------------------------------------------------------------------
Net asset value, end of period ...................... $9.83 $8.84 $ 7.99 $10.05 $10.92 $ 9.61
------------------------------------------------------------------------

Total return b ...................................... 13.67% 16.61% (12.32)% (3.89)% 24.50% (8.48)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................... $62,015 $47,167 $15,664 $8,829 $9,234 $8,058

Ratios to average net assets:

Expenses ........................................... .67%c .69% .66% .65% .69% .66%

Net investment income .............................. 4.72%c 5.14% 5.07% 4.39% 4.87% 4.82%

Portfolio turnover rate ............................. 10.12% 25.81% 30.60% 34.03% 19.86% 33.99%

<FN>
a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c Annualized.
</FN>

80 | See notes to financial statements. | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN UTILITIES FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 83.3%

AGL Resources Inc. ................................................................. 500,000 $ 14,510,000
Allete Inc. ........................................................................ 1,300,000 45,617,000
Alliant Energy Corp. ............................................................... 800,000 20,848,000
Ameren Corp. ....................................................................... 850,000 39,176,500
American Electric Power Co. Inc. ................................................... 1,750,000 57,610,000
Atmos Energy Corp. ................................................................. 700,000 17,899,000
Central Vermont Public Service Corp. ............................................... 182,800 4,113,000
Cinergy Corp. ...................................................................... 1,500,000 61,335,000
Dominion Resources Inc. ............................................................ 850,000 54,655,000
DTE Energy Co. ..................................................................... 400,000 16,460,000
Edison International ............................................................... 1,400,000 34,006,000
Energy East Corp. .................................................................. 1,100,000 27,896,000
Entergy Corp. ...................................................................... 1,445,000 85,977,500
Equitable Resources Inc. ........................................................... 500,000 22,210,000
Exelon Corp. ....................................................................... 1,100,000 75,757,000
FirstEnergy Corp. .................................................................. 1,700,000 66,436,000
FPL Group Inc. ..................................................................... 1,200,000 80,220,000
Hawaiian Electric Industries Inc. .................................................. 200,000 10,368,000
KeySpan Corp. ...................................................................... 1,100,000 42,042,000
Kinder Morgan Inc. ................................................................. 300,000 18,906,000
National Grid Transco PLC (United Kingdom) ......................................... 5,000,000 39,651,909
Nicor Inc. ......................................................................... 550,000 19,376,500
NiSource Inc. ...................................................................... 2,600,000 55,250,000
ONEOK Inc. ......................................................................... 1,250,000 28,187,500
Pepco Holdings Inc. ................................................................ 1,900,000 38,836,000
a PG&E Corp. ......................................................................... 500,000 14,485,000
Pinnacle West Capital Corp. ........................................................ 725,000 28,528,750
PPL Corp. .......................................................................... 600,000 27,360,000
Progress Energy Inc. ............................................................... 1,500,000 70,620,000
Puget Energy Inc. .................................................................. 1,725,000 38,588,250
SBC Communications Inc. ............................................................ 1,300,000 31,902,000
Scottish & Southern Energy PLC (United Kingdom) .................................... 2,335,000 29,503,455
Scottish Power PLC (United Kingdom) ................................................ 6,000,000 41,985,995
Sempra Energy ...................................................................... 900,000 28,620,000
a Sierra Pacific Resources Co. ....................................................... 1,730,109 12,802,807
Southern Co. ....................................................................... 2,100,000 64,050,000
TECO Energy Inc. ................................................................... 200,000 2,926,000
TXU Corp. .......................................................................... 1,700,000 48,722,000
United Utilities PLC (United Kingdom) .............................................. 5,000,000 47,692,562
United Utilities PLC, A (United Kingdom) ........................................... 2,500,000 14,771,829
Vectren Corp. ...................................................................... 900,000 22,203,000
Verizon Communications Inc. ........................................................ 600,000 21,924,000
Xcel Energy Inc. ................................................................... 1,200,000 21,372,000
---------------
TOTAL COMMON STOCKS (COST $1,209,952,077) .......................................... 1,545,401,557
---------------

Semiannual Report | 81

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

Ameren Corp., 9.75%, cvt. pfd. ..................................................... 800,600 $ 22,516,875
American Electric Power Co. Inc., 9.25%, cvt. pfd. ................................. 450,000 21,217,500
CMS Energy Trust I, 7.75%, cvt. pfd. ............................................... 260,000 11,238,760
Dominion Resources Inc., 9.50%, cvt. pfd. .......................................... 627,000 35,212,320
Duke Energy Corp., 8.00%, cvt. pfd. ................................................ 1,500,000 22,725,000
PPL Capital Fund Trust I, 7.75%, cvt. pfd., E 1,661,000 36,840,980
Sierra Pacific Resources Co., 9.00%, cvt. pfd., PIES ............................... 148,000 5,498,200
TXU Corp., 8.75%, cvt. pfd. ........................................................ 400,000 14,648,000
---------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $176,123,386) ............................. 169,897,635
---------------

----------------
PRINCIPAL AMOUNT
----------------
BONDS 6.1%
CalEnergy Co. Inc., senior note, 8.48%, 9/15/28 .................................... $ 25,000,000 32,480,225
CMS Energy Corp., 9.875%, 10/15/07 ................................................. 8,500,000 9,413,750
Firstenergy Corp., senior note, 7.375%, 11/15/31 ................................... 25,000,000 27,971,950
Northeast Generation Co., senior note, 8.812%, 10/15/26 ............................ 7,500,000 8,493,038
Pacific Gas & Electric Co., 6.05%, 3/01/34 ......................................... 5,000,000 5,078,285
PPL Capital Funding, 8.375%, 6/15/07 ............................................... 15,000,000 17,305,560
Utilicorp United Inc., 9.95%, senior note, 2/01/11 ................................. 6,000,000 6,300,000
Utilicorp United Inc., senior note, 8.27%, 11/15/21 ................................ 6,100,000 5,596,750
---------------
TOTAL BONDS (COST $97,022,916) ..................................................... 112,639,558
---------------

CONVERTIBLE BOND (COST $9,000,000) .9%
Sierra Pacific Resources Co., cvt., 144A, 7.25%, 2/14/10 ........................... 9,000,000 17,133,750
---------------
TOTAL LONG TERM INVESTMENTS (COST $1,492,098,379) .................................. 1,845,072,500
---------------

---------------
SHARES
---------------
SHORT TERM INVESTMENT (COST $6,601,453) .4%
b Franklin Institutional Fiduciary Trust Money Market Portfolio ...................... 6,601,453 6,601,453
---------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $1,498,699,832) ............... 1,851,673,953
---------------

82 | Semiannual Report

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN UTILITIES FUND PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 1.1%

c Barclays Capital Inc., 1.07%, 4/01/04 (Maturity Value $3,846,228) .................. $ 3,846,114 $ 3,846,114
Collateralized by U.S. Government Agency Securities
c Deutsche Bank Securities Inc., 1.10%, 4/01/04 (Maturity Value $3,870,236) .......... 3,870,118 3,870,118
Collateralized by U.S. Government Agency Securities
c Morgan Stanley & Co. Inc., 1.10%, 4/01/04 (Maturity Value $3,000,183) .............. 3,000,092 3,000,092
Collateralized by U.S. Government Agency Securities
c Goldman, Sachs & Co., 1.10%, 4/01/04 (Maturity Value $3,900,238) ................... 3,900,119 3,900,119
Collateralized by U.S. Government Agency Securities
c Bear, Stearns & Co. Inc., 1.08%, 4/01/04 (Maturity Value $1,364,082) ............... 1,364,041 1,364,041
Collateralized by U.S. Government Agency Securities
c JP Morgan Securities, 1.10%, 4/01/04 (Maturity Value $3,900,238) ................... 3,900,119 3,900,119
Collateralized by U.S. Government Agency Securities
---------------
TOTAL REPURCHASE AGREEMENTS (COST $19,880,603) ..................................... 19,880,603
---------------
TOTAL INVESTMENTS (COST $1,518,580,435) 100.9% ..................................... 1,871,554,556
OTHER ASSETS, LESS LIABILITIES (.9)% ............................................... (16,108,300)
---------------
NET ASSETS 100.0% .................................................................. $1,855,536,256
---------------

See glossary of terms on page 84.

a Non-income producing.
b See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
c Collateral for loaned securities. See Note 1(f).

Semiannual Report | See notes to financial statements. | 83

Franklin Custodian Funds, Inc.

STATEMENT OF INVESTMENTS, MARCH 31, 2004 (UNAUDITED) (CONTINUED)

GLOSSARY OF TERMS

FRN - Floating Rate Notes
GO - General Obligation
GP - Graduated Payment
PIES - Premium Income Equity Securities
PIK - Payment In Kind
PL - Project Loan
SF - Single Family

84 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
March 31, 2004 (unaudited)

------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
DYNATECH FUND GROWTH FUND INCOME FUND
------------------------------------------------
Assets:
Investments in securities:

Cost - Unaffiliated issuers ...................................... $541,702,105 $1,040,874,076 $17,850,635,401
Cost - Non-controlled affiliated issuers ......................... -- -- 27,963,167
------------------------------------------------
Value - Unaffiliated issuers a ................................... 740,190,058 2,091,366,319 19,272,383,818
Value - Non-controlled affiliated issuers ........................ -- -- 35,545,500
Repurchase agreements, at value and cost .......................... 2,351,143 -- 3,176,497,957
Cash -- 29,070 --
Receivables:
Investment securities sold ....................................... -- -- 18,723,953
Capital shares sold .............................................. 1,633,148 2,503,595 131,083,629
Dividends and interest ........................................... 375,108 1,552,258 166,423,286
------------------------------------------------
Total assets ................................................. 744,549,457 2,095,451,242 22,800,658,143
------------------------------------------------
Liabilities:
Payables:
Investment securities purchased .................................. -- 4,444,000 518,302,918
Capital shares redeemed .......................................... 687,258 2,978,574 27,997,592
Affiliates ....................................................... 796,648 2,334,606 20,741,436
Shareholders ..................................................... 198,564 879,614 4,162,248
Unaffiliated transfer agent fees ................................. 112,339 704,366 1,037,562
Payable upon return of securities loaned [Note 1(f)] .............. -- -- 76,563,680
Other liabilities ................................................. 23,473 318,248 582,549
------------------------------------------------
Total liabilities ............................................ 1,818,282 11,659,408 649,387,985
------------------------------------------------
Net assets, at value ........................................ $742,731,175 $2,083,791,834 $22,151,270,158
------------------------------------------------
Net assets consist of:
Undistributed net investment income (loss) (distributions in excess of
net investment income) ............................................ $ (1,695,818) $ (136,414) $ (113,286,391)
Net unrealized appreciation (depreciation) ........................ 198,487,953 1,050,492,243 1,429,330,750
Accumulated net realized gain (loss) .............................. (88,743,281) (243,481,000) 360,603,833
Capital shares .................................................... 634,682,321 1,276,917,005 20,474,621,966
------------------------------------------------
Net assets, at value ........................................ $742,731,175 $2,083,791,834 $22,151,270,158
------------------------------------------------

<FN>
a The Franklin Income Fund includes $74,730,322 of securities loaned. See Note 1(f).
</FN>

Semiannual Report | 85

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
March 31, 2004 (unaudited)

-----------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
DYNATECH FUND GROWTH FUND INCOME FUND
-----------------------------------------------
CLASS A:

Net assets, at value .............................................. $647,615,274 $1,572,474,756 $12,610,530,347
-----------------------------------------------
Shares outstanding ................................................ 28,465,190 51,861,372 5,237,510,993
-----------------------------------------------
Net asset value per share a ....................................... $22.75 $30.32 $2.41
-----------------------------------------------
Maximum offering price per share (net asset value per share / 94.25%,
94.25%, and 95.75%, respectively) ................................. $24.14 $32.17 $2.52
-----------------------------------------------
CLASS B:
Net assets, at value .............................................. $ 16,470,937 $ 121,983,682 $ 2,965,795,182
-----------------------------------------------
Shares outstanding ................................................ 740,598 4,117,980 1,235,474,231
-----------------------------------------------
Net asset value and maximum offering price per share a ............ $22.24 $29.62 $2.40
-----------------------------------------------
CLASS B1:
Net assets, at value .............................................. -- -- $ 524,312,684
-----------------------------------------------
Shares outstanding ................................................ -- -- 217,720,118
-----------------------------------------------
Net asset value and maximum offering price per share a ............ -- -- $2.41
-----------------------------------------------
CLASS C:
Net assets, at value .............................................. $ 78,644,964 $ 283,343,223 $ 5,531,927,503
-----------------------------------------------
Shares outstanding ................................................ 3,573,559 9,648,246 2,286,176,052
-----------------------------------------------
Net asset value and maximum offering price per share a ............ $22.01 $29.37 $2.42
-----------------------------------------------
CLASS R:
Net assets, at value .............................................. -- $ 19,199,287 $ 60,159,943
-----------------------------------------------
Shares outstanding ................................................ -- 636,441 25,183,934
-----------------------------------------------
Net asset value and maximum offering price per share a ............ -- $30.17 $2.39
-----------------------------------------------
ADVISOR CLASS:
Net assets, at value .............................................. -- $ 86,790,886 $ 458,544,499
-----------------------------------------------
Shares outstanding ................................................ -- 2,861,352 191,199,733
-----------------------------------------------
Net asset value and maximum offering price per share .............. -- $30.33 $2.40
-----------------------------------------------

<FN>
a Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
</FN>

86 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
March 31, 2004 (unaudited)

---------------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES FUND UTILITIES FUND
---------------------------------
Assets:
Investments in securities:

Cost ............................................................................... $8,230,855,724 $1,498,699,832
---------------------------------
Value a ............................................................................ 8,450,108,007 1,851,673,953
Repurchase agreements, at value and cost ............................................ 214,885,000 19,880,603
Cash ................................................................................ 1,999 --
Receivables:
Investment securities sold ......................................................... 264,104 1,113,240
Capital shares sold ................................................................ 11,390,708 3,905,404
Dividends and interest ............................................................. 38,973,073 4,181,470
---------------------------------
Total assets ................................................................... 8,715,622,891 1,880,754,670
---------------------------------
Liabilities:
Payables:
Investment securities purchased .................................................... 50,800,000 --
Capital shares redeemed ............................................................ 19,334,740 2,393,042
Affiliates ......................................................................... 6,431,866 1,477,504
Shareholders ....................................................................... 5,804,527 927,245
Unaffiliated transfer agent fees ................................................... 1,085,038 362,395
Payable upon return of securities loaned [Note 1(f)] ................................ -- 19,880,603
Other liabilities ................................................................... 484,854 177,625
---------------------------------
Total liabilities .............................................................. 83,941,025 25,218,414
---------------------------------
Net assets, at value .......................................................... $8,631,681,866 $1,855,536,256
---------------------------------
Net assets consist of:
Undistributed net investment income (distributions in excess of net investment income) $ (48,609,094) $ 2,980,733
Net unrealized appreciation (depreciation) .......................................... 219,252,283 352,974,121
Accumulated net realized gain (loss) ................................................ (381,907,137) (97,266,085)
Capital shares ...................................................................... 8,842,945,814 1,596,847,487
---------------------------------
Net assets, at value .......................................................... $8,631,681,866 $1,855,536,256
---------------------------------

<FN>
a The Franklin Utilities Fund includes $19,508,346 of securities loaned.
See Note 1(f).
</FN>

Semiannual Report | 87

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
March 31, 2004 (unaudited)

----------------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES FUND UTILITIES FUND
----------------------------------
CLASS A:

Net assets, at value .............................................................. $6,910,271,710 $1,398,513,005
----------------------------------
Shares outstanding ................................................................ 1,022,124,151 142,797,335
----------------------------------
Net asset value per share a ....................................................... $6.76 $9.79
----------------------------------
Maximum offering price per share (net asset value per share / 95.75%) ............. $7.06 $10.22
----------------------------------
CLASS B:
Net assets, at value .............................................................. $ 630,526,060 $ 117,468,795
----------------------------------
Shares outstanding ................................................................ 93,389,691 12,002,943
----------------------------------
Net asset value and maximum offering price per share a ............................ $6.75 $9.79
----------------------------------
CLASS C:
Net assets, at value .............................................................. $ 706,218,989 $ 276,293,635
----------------------------------
Shares outstanding ................................................................ 104,902,446 28,282,506
----------------------------------
Net asset value and maximum offering price per share a ............................ $6.73 $9.77
----------------------------------
CLASS R:
Net assets, at value .............................................................. $ 56,263,568 $ 1,246,008
----------------------------------
Shares outstanding ................................................................ 8,326,575 127,376
----------------------------------
Net asset value and maximum offering price per share a ............................ $6.76 $9.78
----------------------------------
ADVISOR CLASS:
Net assets, at value .............................................................. $ 328,401,539 $ 62,014,813
----------------------------------
Shares outstanding ................................................................ 48,480,904 6,308,502
----------------------------------
Net asset value and maximum offering price per share .............................. $6.77 $9.83
----------------------------------

<FN>
a Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
</FN>

88 | See notes to financial statements. | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF OPERATIONS
for the six months ended March 31, 2004 (unaudited)

---------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
DYNATECH FUND GROWTH FUND INCOME FUND
---------------------------------------------
Investment income:
Dividends:

Unaffiliated issuers ................................................. $ 2,082,055 $ 12,098,733 $ 218,525,345
Non-controlled affiliated issuers (Note 9) ........................... -- -- 4,647,578
Interest .............................................................. 19,818 -- 335,044,068
---------------------------------------------
Total investment income .......................................... 2,101,873 12,098,733 558,216,991
---------------------------------------------
Expenses:
Management fees (Note 3) .............................................. 1,698,702 4,707,871 42,771,563
Distribution fees (Note 3)
Class A .............................................................. 780,469 1,970,007 8,487,588
Class B .............................................................. 67,672 589,198 12,951,594
Class B1 ............................................................. -- -- 1,687,334
Class C .............................................................. 376,088 1,426,718 15,512,360
Class R .............................................................. -- 44,778 120,139
Transfer agent fees (Note 3) .......................................... 789,914 2,614,199 7,587,145
Custodian fees ........................................................ 2,472 8,704 156,520
Reports to shareholders ............................................... 35,924 288,590 354,599
Registration and filing fees .......................................... 18,259 49,851 1,042,705
Professional fees ..................................................... 17,511 28,068 87,031
Directors' fees and expenses .......................................... 2,786 5,516 54,857
Other ................................................................. 7,894 44,772 313,766
---------------------------------------------
Total expenses ................................................... 3,797,691 11,778,272 91,127,201
---------------------------------------------
Net investment income (loss) .................................... (1,695,818) 320,461 467,089,790
---------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers ................................................ (10,314,522) 8,526,968 408,445,567
Non-controlled affiliated issuers (Note 9) .......................... -- -- 3,170,018
Foreign currency transactions ........................................ (13) 1,376 (20,704)
---------------------------------------------
Net realized gain (loss) ........................................ (10,314,535) 8,528,344 411,594,881
Net unrealized appreciation (depreciation) on:
Investments .......................................................... 93,017,836 229,409,470 1,035,483,096
Translation of assets and liabilities denominated in foreign currencies -- -- (60,701)
---------------------------------------------
Net unrealized appreciation (depreciation) ...................... 93,017,836 229,409,470 1,035,422,395
---------------------------------------------
Net realized and unrealized gain (loss) ................................ 82,703,301 237,937,814 1,447,017,276
---------------------------------------------
Net increase (decrease) in net assets resulting from operations ........ $ 81,007,483 $238,258,275 $1,914,107,066
---------------------------------------------

Semiannual Report | 89

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF OPERATIONS (CONTINUED)
for the six months ended March 31, 2004 (unaudited)

--------------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES FUND UTILITIES FUND
--------------------------------
Investment income:

Dividends ............................................................... $ 566,189 $ 41,954,836
Interest ................................................................ 208,797,050 5,079,014
--------------------------------
Total investment income ............................................ 209,363,239 47,033,850
--------------------------------
Expenses:
Management fees (Note 3) ................................................ 19,636,091 4,073,103
Distribution fees (Note 3)
Class A ................................................................ 4,404,417 959,983
Class B ................................................................ 2,113,712 348,728
Class C ................................................................ 2,450,487 818,515
Class R ................................................................ 138,745 2,992
Transfer agent fees (Note 3) ............................................ 5,543,729 1,490,103
Custodian fees .......................................................... 47,770 37,580
Reports to shareholders ................................................. 303,252 78,619
Registration and filing fees ............................................ 210,778 98,770
Professional fees ....................................................... 81,687 32,585
Directors' fees and expenses ............................................ 19,699 4,883
Other ................................................................... 196,112 45,263
--------------------------------
Total expenses ..................................................... 35,146,479 7,991,124
--------------------------------
Net investment income ............................................. 174,216,760 39,042,726
--------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................ 5,799,251 190,563
Foreign currency transactions .......................................... -- 132,010
--------------------------------
Net realized gain (loss) .......................................... 5,799,251 322,573
Net unrealized appreciation (depreciation) on investments ............... (3,111,343) 182,031,921
--------------------------------
Net realized and unrealized gain (loss) .................................. 2,687,908 182,354,494
--------------------------------
Net increase (decrease) in net assets resulting from operations .......... $176,904,668 $221,397,220
--------------------------------

90 | See notes to financial statements. | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended March 31, 2004 (unaudited)
and the year ended September 30, 2003

---------------------------------------------------------------------------------
FRANKLIN DYNATECH FUND FRANKLIN GROWTH FUND
---------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003 MARCH 31, 2004 SEPTEMBER 30, 2003
---------------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:

Net investment income (loss) ......... $ (1,695,818) $ (2,654,387) $ 320,461 $ 2,903,913
Net realized gain (loss) from
investments and foreign currency
transactions ........................ (10,314,535) (16,748,652) 8,528,344 (76,197,267)
Net unrealized appreciation
(depreciation) on investments ....... 93,017,836 163,452,859 229,409,470 408,465,676
---------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations ..................... 81,007,483 144,049,820 238,258,275 335,172,322
Distributions to shareholders from:
Net investment income:
Class A ............................. -- -- (1,531,991) (2,180,220)
Class R ............................. -- -- -- (9,229)
Advisor Class ....................... -- -- (173,053) (137,491)
---------------------------------------------------------------------------------
Total distributions to shareholders ... -- -- (1,705,044) (2,326,940)
Capital share transactions: (Note 2)
Class A ............................. 17,534,018 18,073,256 (44,660,205) (78,190,367)
Class B ............................. 4,717,587 3,561,921 5,342,713 11,719,589
Class C ............................. 3,427,080 176,270 (8,262,063) (19,434,571)
Class R ............................. -- -- 2,488,155 10,272,806
Advisor Class ....................... -- -- 39,949,214 7,755,631
---------------------------------------------------------------------------------
Total capital share transactions ...... 25,678,685 21,811,447 (5,142,186) (67,876,912)
Net increase (decrease) in net
assets ......................... 106,686,168 165,861,267 231,411,045 264,968,470
Net assets:
Beginning of period ................... 636,045,007 470,183,740 1,852,380,789 1,587,412,319
---------------------------------------------------------------------------------
End of period ......................... $742,731,175 $636,045,007 $2,083,791,834 $1,852,380,789
---------------------------------------------------------------------------------
Undistributed net investment income
(loss) (distributions in excess of net
investment income) included in
net assets:
End of period ........................ $ (1,695,818) $ -- $ (136,414) $ 1,248,169
---------------------------------------------------------------------------------

Semiannual Report | 91

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
for the six months ended March 31, 2004 (unaudited)
and the year ended September 30, 2003

--------------------------------------------------------------------------------
FRANKLIN
FRANKLIN INCOME FUND U.S. GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003 MARCH 31, 2004 SEPTEMBER 30, 2003
--------------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:

Net investment income ................ $ 467,089,790 $ 735,666,186 $ 174,216,760 $ 385,176,849
Net realized gain (loss) from investments
and foreign currency transactions ... 411,594,881 202,185,840 5,799,251 6,367,829
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
denominated in foreign currencies ... 1,035,422,395 1,869,977,309 (3,111,343) (153,242,028)
--------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations ...................... 1,914,107,066 2,807,829,335 176,904,668 238,302,650
Distributions to shareholders from:
Net investment income:
Class A ............................. (365,292,191) (550,726,670) (200,224,072) (401,413,321)
Class B ............................. (72,633,905) (73,650,217) (16,800,977) (31,260,885)
Class B1 ............................ (15,782,415) (32,370,788) -- --
Class C ............................. (140,361,614) (160,832,793) (19,562,191) (41,821,072)
Class R ............................. (1,452,577) (1,320,431) (1,451,450) (1,798,291)
Advisor Class ....................... (7,670,676) (3,320,435) (8,888,933) (16,202,012)
Net realized gains:
Class A ............................. (55,089,253) (16,155,200) -- --
Class B ............................. (12,566,787) (1,716,893) -- --
Class B1 ............................ (2,636,951) (1,110,777) -- --
Class C ............................. (22,718,362) (4,321,592) -- --
Class R ............................. (216,296) (24,873) -- --
Advisor Class ....................... (943,558) (84,254) -- --
--------------------------------------------------------------------------------
Total distributions to shareholders ... (697,364,585) (845,634,923) (246,927,623) (492,495,581)
Capital share transactions: (Note 2)
Class A ............................. 2,257,045,721 2,373,919,438 (320,264,051) (238,733,117)
Class B ............................. 721,152,432 1,325,085,686 (43,086,546) 137,202,182
Class B1 ............................ (5,273,197) (12,337,854) -- --
Class C ............................. 1,473,704,567 1,810,160,408 (102,059,979) 36,448,805
Class R ............................. 20,990,288 26,634,343 2,632,689 41,088,097
Advisor Class ....................... 352,166,448 56,697,121 22,263,766 117,998,378
--------------------------------------------------------------------------------
Total capital share transactions ...... 4,819,786,259 5,580,159,142 (440,514,121) 94,004,345
Net increase (decrease) in net
assets .......................... 6,036,528,740 7,542,353,554 (510,537,076) (160,188,586)
Net assets:
Beginning of period ................... 16,114,741,418 8,572,387,864 9,142,218,942 9,302,407,528
--------------------------------------------------------------------------------
End of period ......................... $22,151,270,158 $16,114,741,418 $8,631,681,866 $9,142,218,942
--------------------------------------------------------------------------------
Undistributed net investment income
(distributions in excess of net investment
income) included in net assets:
End of period ........................ $ (113,286,391) $ 22,817,197 $ (48,609,094) $ 24,101,769
--------------------------------------------------------------------------------

92 | Semiannual Report

Franklin Custodian Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
for the six months ended March 31, 2004 (unaudited)
and the year ended September 30, 2003

-------------------------------------
FRANKLIN UTILITIES FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
-------------------------------------
Increase (decrease) in net assets:
Operations:

Net investment income .................................................... $ 39,042,726 $ 68,169,572
Net realized gain (loss) from investments and foreign currency transactions 322,573 (62,932,757)
Net unrealized appreciation (depreciation) on investments ................ 182,031,921 202,226,165
-------------------------------------
Net increase (decrease) in net assets resulting from operations ...... 221,397,220 207,462,980
Distributions to shareholders from:
Net investment income:
Class A ................................................................. (28,639,778) (59,182,929)
Class B ................................................................. (2,079,532) (3,015,514)
Class C ................................................................. (4,878,804) (6,581,692)
Class R ................................................................. (23,993) (38,182)
Advisor Class ........................................................... (1,214,127) (1,485,977)
-------------------------------------
Total distributions to shareholders ....................................... (36,836,234) (70,304,294)
Capital share transactions: (Note 2)
Class A ................................................................. (2,267,664) 55,030,287
Class B ................................................................. 10,773,283 56,154,888
Class C ................................................................. 27,698,446 141,064,759
Class R ................................................................. (19,919) 924,022
Advisor Class ........................................................... 9,244,302 28,963,358
-------------------------------------
Total capital share transactions .......................................... 45,428,448 282,137,314
Net increase (decrease) in net assets ................................ 229,989,434 419,296,000
Net assets:
Beginning of period ....................................................... 1,625,546,822 1,206,250,822
-------------------------------------
End of period ............................................................. $1,855,536,256 $1,625,546,822
-------------------------------------
Undistributed net investment income included in net assets:
End of period ............................................................. $ 2,980,733 $ 774,241
-------------------------------------

Semiannual Report | See notes to financial statements. | 93

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Custodian Funds, Inc. (the Company) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company, consisting of
five series (the Funds). The Funds and their investment objectives are:

- ---------------------------------------------------------------------------------------------------------
CAPITAL GROWTH GROWTH AND INCOME CURRENT INCOME
- ---------------------------------------------------------------------------------------------------------

Franklin DynaTech Fund Franklin Income Fund Franklin U.S. Government Securities Fund
Franklin Growth Fund Franklin Utilities Fund

The following summarizes the Funds' significant accounting policies.

A. SECURITY VALUATION

Securities listed or traded on a recognized national exchange are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing price. Over-the-counter securities and listed securities
for which no sale is reported are valued within the range of the latest quoted
bid and asked prices. Debt securities are valued by independent pricing services
or market makers under procedures approved by the Board of Directors. Foreign
securities are valued at the close of trading of the foreign exchange or the
NYSE, whichever is earlier. If events occur that materially affect the values of
securities after the prices or foreign exchange rates are determined but prior
to 4:00 PM ET or the close of trading on the NYSE, whichever is earlier, or if
market quotations are deemed not readily available or reliable, the securities
(including restricted securities) will be valued at fair value as determined
following procedures approved by the Board of Directors. Investments in open-end
mutual funds are valued at the closing net asset value.

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. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.

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.

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.

94 | Semiannual Report

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. REPURCHASE AGREEMENTS

The Funds may enter into a joint repurchase agreement whereby their uninvested
cash balance is deposited into a joint cash account to be 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. The Funds
may enter into repurchase agreements which are accounted for as a loan by the
Fund to the seller, collateralized by securities which are delivered to the
Fund's custodian. The market value, including accrued interest, of the initial
collateralization is required to be at least 102% of the dollar amount invested
by the Funds, with the value of the underlying securities marked to market daily
to maintain coverage of at least 100%. At March 31, 2004, all repurchase
agreements held by the Funds had been entered into on that date.

D. SECURITIES PURCHASED ON A WHEN-ISSUED, DELAYED DELIVERY, OR TBA BASIS

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

E. ALLOWANCE FOR PAYDOWNS

The Franklin U.S. Government Securities Fund provides estimates, based on
historical experience, for anticipated paydowns. The allowance is recorded as a
reduction or increase to net assets as noted on the Statement of Investments and
is included in the unrealized appreciation/depreciation shown on the
accompanying financial statements.

F. SECURITIES LENDING

The Franklin Income Fund and the Franklin Utilities Fund loan securities to
certain brokers for which they received cash collateral against the loaned
securities in an amount equal to at least 102% of the market value of the loaned
securities. The collateral is invested in short-term instruments as noted in the
Statement of Investments. These funds received interest income of $252,287 and
$734,896, respectively, from the investment of cash collateral, adjusted by
lender fees and broker rebates. The funds bear the risk of loss with respect to
the investment of the collateral. The securities lending agent has agreed to
indemnify the funds in the case of default of any securities borrower.

G. INCOME TAXES

No provision has been made for income taxes because each fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.

Semiannual Report | 95

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H. 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. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.

Common expenses incurred by the Company are allocated among the Funds based on
the ratio of net assets of each fund to the combined net assets. Other expenses
are charged to each fund on a specific identification basis.

Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.

I. ACCOUNTING ESTIMATES

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

J. GUARANTEES AND INDEMNIFICATIONS

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

2. CAPITAL STOCK

The classes of shares offered within each of the funds are indicated below. Each
class of shares differs by its initial sales load, contingent deferred sales
charges, distribution fees, voting rights on matters affecting a single class
and its exchange privilege.

- ---------------------------------------------------------------------------------------------------------
CLASS A, CLASS B CLASS A, CLASS B, CLASS C, CLASS A, CLASS B, CLASS B1,
& CLASS C CLASS R & ADVISOR CLASS CLASS C, CLASS R & ADVISOR CLASS
- ---------------------------------------------------------------------------------------------------------

Franklin DynaTech Fund Franklin Growth Fund Franklin Income Fund
Franklin U.S. Government Securities Fund
Franklin Utilities Fund

96 | Semiannual Report

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

At March 31, 2004, there were 32 billion shares authorized ($.01 par value),
allocated to the Funds as follows (in millions):

----------------------------------------------------------
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN U.S. GOVERNMENT FRANKLIN
DYNATECH GROWTH INCOME SECURITIES UTILITIES
FUND FUND FUND FUND FUND
----------------------------------------------------------

Class A ................................... 250 250 7,600 2,500 400
Class B ................................... 500 750 2,000 1,000 750
Class B1 .................................. -- -- 1,000 -- --
Class C ................................... 250 250 3,600 2,500 400
Class R ................................... -- 1,000 1,000 1,000 1,000
Advisor Class ............................. -- 1,000 1,000 1,000 1,000

Transactions in the Funds' shares were as follows:

--------------------------------------------------------------
FRANKLIN DYNATECH FUND FRANKLIN GROWTH FUND
--------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------
CLASS A SHARES:
Six months ended March 31, 2004

Shares sold ....................... 4,508,756 $100,829,106 3,521,261 $ 105,135,097
Shares issued in reinvestment of
distributions .................... -- -- 47,974 1,399,409
Shares redeemed ................... (3,737,821) (83,295,088) (5,074,112) (151,194,711)
--------------------------------------------------------------
Net increase (decrease) ........... 770,935 $ 17,534,018 (1,504,877) $ (44,660,205)
--------------------------------------------------------------
Year ended September 30, 2003
Shares sold ....................... 5,979,321 $110,050,574 7,379,824 $ 183,219,424
Shares issued in reinvestment of
distributions .................... -- -- 79,146 1,984,183
Shares redeemed ................... (5,174,158) (91,977,318) (10,859,570) (263,393,974)
--------------------------------------------------------------
Net increase (decrease) ........... 805,163 $ 18,073,256 (3,400,600) $ (78,190,367)
--------------------------------------------------------------
CLASS B SHARES:
Six months ended March 31, 2004
Shares sold ....................... 260,757 $ 5,726,720 464,717 $ 13,496,731
Shares redeemed ................... (45,879) (1,009,133) (279,076) (8,154,018)
--------------------------------------------------------------
Net increase (decrease) ........... 214,878 $ 4,717,587 185,641 $ 5,342,713
--------------------------------------------------------------
Year ended September 30, 2003
Shares sold ....................... 299,381 $ 5,444,460 1,190,166 $ 28,759,271
Shares redeemed ................... (107,026) (1,882,539) (721,310) (17,039,682)
--------------------------------------------------------------
Net increase (decrease) ........... 192,355 $ 3,561,921 468,856 $ 11,719,589
--------------------------------------------------------------

Semiannual Report | 97

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

-------------------------------------------------------------
FRANKLIN DYNATECH FUND FRANKLIN GROWTH FUND
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------
CLASS C SHARES:
Six months ended March 31, 2004

Shares sold ........................ 527,851 $ 11,457,588 779,893 $ 22,479,414
Shares redeemed .................... (372,297) (8,030,508) (1,063,791) (30,741,477)
-------------------------------------------------------------
Net increase (decrease) ............ 155,554 $ 3,427,080 (283,898) $ (8,262,063)
-------------------------------------------------------------
Year ended September 30, 2003
Shares sold ........................ 775,065 $ 13,737,768 1,813,481 $ 43,685,324
Shares redeemed .................... (802,705) (13,561,498) (2,679,771) (63,119,895)
-------------------------------------------------------------
Net increase (decrease) ............ (27,640) $ 176,270 (866,290) $(19,434,571)
-------------------------------------------------------------
CLASS R SHARES:
Six months ended March 31, 2004
Shares sold ........................ 153,912 $ 4,542,257
Shares redeemed .................... (69,335) (2,054,102)
-------------------------
Net increase (decrease) ............ 84,577 $ 2,488,155
-------------------------
Year ended September 30, 2003
Shares sold ........................ 502,954 $ 12,216,083
Shares issued in reinvestment of
distributions ..................... 365 9,135
Shares redeemed .................... (78,318) (1,952,412)
-------------------------
Net increase (decrease) ............ 425,001 $ 10,272,806
-------------------------
ADVISOR CLASS SHARES:
Six months ended March 31, 2004
Shares sold ........................ 1,383,132 $ 41,544,956
Shares issued in reinvestment of
distributions ..................... 5,745 167,517
Shares redeemed .................... (59,372) (1,763,259)
-------------------------
Net increase (decrease) ............ 1,329,505 $ 39,949,214
-------------------------
Year ended September 30, 2003
Shares sold ........................ 580,561 $ 14,712,785
Shares issued in reinvestment of
distributions ..................... 5,208 130,503
Shares redeemed .................... (297,671) (7,087,657)
-------------------------
Net increase (decrease) ............ 288,098 $ 7,755,631
-------------------------

98 | Semiannual Report

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

------------------------------------------------------------------
FRANKLIN U.S. GOVERNMENT
FRANKLIN INCOME FUND SECURITIES FUND
------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------
CLASS A SHARES:
Six months ended March 31, 2004

Shares sold .................... 1,125,321,173 $2,663,121,994 50,408,078 $ 340,330,089
Shares issued in reinvestment of
distributions ................. 113,546,357 266,308,250 18,442,816 124,012,850
Shares redeemed ................ (283,513,601) (672,384,523) (116,250,826) (784,606,990)
------------------------------------------------------------------
Net increase (decrease) ........ 955,353,929 $2,257,045,721 (47,399,932) $ (320,264,051)
------------------------------------------------------------------
Year ended September 30, 2003
Shares sold .................... 1,420,460,711 $2,978,192,401 178,073,164 $ 1,232,868,939
Shares issued in reinvestment of
distributions ................. 166,636,905 340,980,517 35,293,588 243,128,476
Shares redeemed ................ (462,636,792) (945,253,480) (248,820,975) (1,714,730,532)
------------------------------------------------------------------
Net increase (decrease) ........ 1,124,460,824 $2,373,919,438 (35,454,223) $ (238,733,117)
------------------------------------------------------------------
CLASS B SHARES:
Six months ended March 31, 2004
Shares sold .................... 327,665,941 $ 770,426,203 5,580,528 $ 37,626,509
Shares issued in reinvestment of
distributions ................. 22,956,901 53,756,840 1,741,841 11,700,227
Shares redeemed ................ (43,514,212) (103,030,611) (13,706,705) (92,413,282)
------------------------------------------------------------------
Net increase (decrease) ........ 307,108,630 $ 721,152,432 (6,384,336) $ (43,086,546)
------------------------------------------------------------------
Year ended September 30, 2003
Shares sold .................... 663,029,400 $1,384,557,403 41,548,785 $ 287,642,126
Shares issued in reinvestment of
distributions ................. 21,203,582 43,812,599 3,141,416 21,609,158
Shares redeemed ................ (50,454,482) (103,284,316) (25,090,330) (172,049,102)
------------------------------------------------------------------
Net increase (decrease) ........ 633,778,500 $1,325,085,686 19,599,871 $ 137,202,182
------------------------------------------------------------------
CLASS B1 SHARES:
Six months ended March 31, 2004
Shares sold .................... 3,832,870 $ 9,033,038
Shares issued in reinvestment of
distributions ................. 4,504,733 10,557,695
Shares redeemed ................ (10,482,464) (24,863,930)
------------------------------
Net increase (decrease) ........ (2,144,861) $ (5,273,197)
------------------------------
Year ended September 30, 2003
Shares sold .................... 12,538,502 $ 25,859,856
Shares issued in reinvestment of
distributions ................. 8,955,929 18,230,536
Shares redeemed ................ (27,953,932) (56,428,246)
------------------------------
Net increase (decrease) ........ (6,459,501) $ (12,337,854)
------------------------------

Semiannual Report | 99

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

-----------------------------------------------------------------
FRANKLIN U.S. GOVERNMENT
FRANKLIN INCOME FUND SECURITIES FUND
-----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------
CLASS C SHARES:
Six months ended March 31, 2004

Shares sold ..................... 695,434,825 $1,650,253,726 9,470,918 $ 63,675,463
Shares issued in reinvestment of
distributions .................. 45,392,478 107,159,750 1,900,165 12,725,989
Shares redeemed ................. (118,756,184) (283,708,909) (26,550,858) (178,461,431)
-----------------------------------------------------------------
Net increase (decrease) ......... 622,071,119 $1,473,704,567 (15,179,775) $(102,059,979)
-----------------------------------------------------------------
Year ended September 30, 2003
Shares sold ..................... 951,930,027 $2,009,359,415 57,357,026 $ 396,061,501
Shares issued in reinvestment of
distributions .................. 50,130,794 103,732,412 4,055,220 27,836,743
Shares redeemed ................. (147,253,703) (302,931,419) (56,619,048) (387,449,439)
-----------------------------------------------------------------
Net increase (decrease) ......... 854,807,118 $1,810,160,408 4,793,198 $ 36,448,805
-----------------------------------------------------------------
CLASS R SHARES:
Six months ended March 31, 2004
Shares sold ..................... 10,776,335 $ 25,411,518 2,241,880 $ 15,128,009
Shares issued in reinvestment of
distributions .................. 687,670 1,604,290 215,019 1,445,454
Shares redeemed ................. (2,586,290) (6,025,520) (2,066,591) (13,940,774)
-----------------------------------------------------------------
Net increase (decrease) ......... 8,877,715 $ 20,990,288 390,308 $ 2,632,689
-----------------------------------------------------------------
Year ended September 30, 2003
Shares sold ..................... 14,633,211 $ 30,251,574 8,174,860 $ 56,511,590
Shares issued in reinvestment of
distributions .................. 632,563 1,303,713 261,116 1,791,684
Shares redeemed ................. (2,327,993) (4,920,944) (2,508,245) (17,215,177)
-----------------------------------------------------------------
Net increase (decrease) ......... 12,937,781 $ 26,634,343 5,927,731 $ 41,088,097
-----------------------------------------------------------------
ADVISOR CLASS SHARES:
Six months ended March 31, 2004
Shares sold ..................... 149,593,846 $ 353,985,022 4,591,861 $ 31,087,087
Shares issued in reinvestment of
distributions .................. 3,095,478 7,311,419 1,083,525 7,298,373
Shares redeemed ................. (3,856,861) (9,129,993) (2,380,231) (16,121,694)
-----------------------------------------------------------------
Net increase (decrease) ......... 148,832,463 $ 352,166,448 3,295,155 $ 22,263,766
-----------------------------------------------------------------
Year ended September 30, 2003
Shares sold ..................... 29,225,067 $ 63,085,044 21,146,530 $ 147,068,753
Shares issued in reinvestment of
distributions .................. 1,253,004 2,564,820 1,903,612 13,126,237
Shares redeemed ................. (4,343,162) (8,952,743) (6,189,973) (42,196,612)
-----------------------------------------------------------------
Net increase (decrease) ......... 26,134,909 $ 56,697,121 16,860,169 $ 117,998,378
-----------------------------------------------------------------

100 | Semiannual Report

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

----------------------------
FRANKLIN UTILITIES FUND
----------------------------
SHARES AMOUNT
----------------------------
CLASS A SHARES:
Six months ended March 31, 2004

Shares sold ........................................................ 9,065,317 $ 84,912,335
Shares issued in reinvestment of distributions ..................... 2,286,271 21,464,865
Shares redeemed .................................................... (11,661,694) (108,644,864)
----------------------------
Net increase (decrease) ............................................ (310,106) $ (2,267,664)
----------------------------
Year ended September 30, 2003
Shares sold ........................................................ 25,175,427 $ 211,667,227
Shares issued in reinvestment of distributions ..................... 5,384,148 44,381,490
Shares redeemed .................................................... (24,337,215) (201,018,430)
----------------------------
Net increase (decrease) ............................................ 6,222,360 $ 55,030,287
----------------------------
CLASS B SHARES:
Six months ended March 31, 2004
Shares sold ........................................................ 1,778,518 $ 16,484,771
Shares issued in reinvestment of distributions ..................... 114,559 1,075,959
Shares redeemed .................................................... (723,457) (6,787,447)
----------------------------
Net increase (decrease) ............................................ 1,169,620 $ 10,773,283
----------------------------
Year ended September 30, 2003
Shares sold ........................................................ 7,731,921 $ 64,628,039
Shares issued in reinvestment of distributions ..................... 177,803 1,479,606
Shares redeemed .................................................... (1,194,549) (9,952,757)
----------------------------
Net increase (decrease) ............................................ 6,715,175 $ 56,154,888
----------------------------
CLASS C SHARES:
Six months ended March 31, 2004
Shares sold ........................................................ 5,335,491 $ 49,496,396
Shares issued in reinvestment of distributions ..................... 265,670 2,490,769
Shares redeemed .................................................... (2,596,034) (24,288,719)
----------------------------
Net increase (decrease) ............................................ 3,005,127 $ 27,698,446
----------------------------
Year ended September 30, 2003
Shares sold ........................................................ 19,436,624 $ 163,113,516
Shares issued in reinvestment of distributions ..................... 415,191 3,452,384
Shares redeemed .................................................... (3,052,249) (25,501,141)
----------------------------
Net increase (decrease) ............................................ 16,799,566 $ 141,064,759
----------------------------
CLASS R SHARES:
Six months ended March 31, 2004
Shares sold ........................................................ 50,613 $ 477,890
Shares issued in reinvestment of distributions ..................... 2,506 23,519
Shares redeemed .................................................... (55,617) (521,328)
----------------------------
Net increase (decrease) ............................................ (2,498) $ (19,919)
----------------------------
Year ended September 30, 2003
Shares sold ........................................................ 125,002 $ 1,034,190
Shares issued in reinvestment of distributions ..................... 4,296 35,809
Shares redeemed .................................................... (17,198) (145,977)
----------------------------
Net increase (decrease) ............................................ 112,100 $ 924,022
----------------------------

Semiannual Report | 101

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

--------------------------
FRANKLIN UTILITIES FUND
--------------------------
SHARES AMOUNT
--------------------------
ADVISOR CLASS SHARES:
Six months ended March 31, 2004

Shares sold .......................................................... 2,126,696 $ 20,104,118
Shares issued in reinvestment of distributions ....................... 77,743 733,113
Shares redeemed ...................................................... (1,234,238) (11,592,929)
--------------------------
Net increase (decrease) .............................................. 970,201 $ 9,244,302
--------------------------
Year ended September 30, 2003
Shares sold .......................................................... 3,596,924 $ 30,787,970
Shares issued in reinvestment of distributions ....................... 162,041 1,358,329
Shares redeemed ...................................................... (380,448) (3,182,941)
--------------------------
Net increase (decrease) .............................................. 3,378,517 $ 28,963,358
--------------------------

3. TRANSACTIONS WITH AFFILIATES

Certain officers and directors of the Funds are also officers or directors of
the following entities:

- --------------------------------------------------------------------------------
ENTITY AFFILIATION
- --------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Investment Advisory Services Inc. Investment manager
(Investment Advisory)
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin/Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services LLC
(Investor Services) Transfer agent

The Funds, except the Franklin Growth Fund, pay an investment management fee to
Advisers, and the Franklin Growth Fund pays an investment management fee to
Investment Advisory, based on the month-end net assets of the Funds as follows:

- ----------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- ----------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% Over $250 million, up to and including $10 billion
.440% Over $10 billion, up to and including $12.5 billion
.420% Over $12.5 billion, up to and including $15 billion
.400% Over $15 billion, up to and including $17.5 billion
.380% Over $17.5 billion, up to and including $20 billion
.360% In excess of $20 billion

Under an agreement with Advisers and Investment Advisory, FT Services provides
administrative services to the Funds. The fee is paid by Advisers and Investment
Advisory based on average daily net assets, and is not an additional expense of
the Funds.

102 | Semiannual Report

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

The Funds reimburse Distributors for costs incurred in marketing the Funds'
shares under a Rule 12b-1 plan up to a certain percentage per year of their
average daily net assets of each class as follows:

--------------------------------------------------------
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN U.S. GOVERNMENT FRANKLIN
DYNATECH GROWTH INCOME SECURITIES UTILITIES
FUND FUND FUND FUND FUND
--------------------------------------------------------
Class A .............. .25% .25% .15% .15% .15%
Class B .............. 1.00% 1.00% 1.00% .65% .65%
Class B1 ............. -- -- .65% -- --
Class C .............. 1.00% 1.00% .65% .65% .65%
Class R .............. -- .50% .50% .50% .50%

Distributors has advised the Funds it paid net commissions on sales of the
Funds' shares, and received contingent deferred sales charges for the period as
follows:

------------------------------------
FRANKLIN FRANKLIN FRANKLIN
DYNATECH GROWTH INCOME
FUND FUND FUND
------------------------------------
Net commissions paid ..................... $167,302 $454,020 $39,019,724
Contingent deferred sales charges ........ $ 18,514 $124,555 $ 2,507,678

------------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES UTILITIES
FUND FUND
------------------------------
Net commissions paid ........................... $1,418,142 $756,849
Contingent deferred sales charges .............. $1,070,583 $134,231

The Funds paid transfer agent fees as noted in the Statement of Operations of
which the following amounts were paid to Investor Services:

----------------------------------------
FRANKLIN FRANKLIN FRANKLIN
DYNATECH GROWTH INCOME
FUND FUND FUND
----------------------------------------
Transfer agent fees .................. $626,219 $1,935,896 $5,057,149

------------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES UTILITIES
FUND FUND
------------------------------
Transfer agent fees .................. $3,800,955 $928,270

Included in professional fees are legal fees of $43,850 that were paid to a law
firm in which a partner is an officer of the Funds.

Semiannual Report | 103

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. INCOME TAXES

At September 30, 2003, the following funds had tax basis capital losses which
may be carried over to offset future capital gains. Such losses expire as
follows:

-----------------------------
FRANKLIN FRANKLIN
DYNATECH GROWTH
FUND FUND
-----------------------------
Capital loss carryovers expiring in:
2007 ......................................... $ 677,592 $ --
2008 ......................................... 394,928 --
2009 ......................................... 1,170,048 --
2010 ......................................... 6,843,771 --
2011 ......................................... 47,180,600 206,696,356
-----------------------------
$ 56,266,939 $ 206,696,356
-----------------------------

-----------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES UTILITIES
FUND FUND
-----------------------------
Capital loss carryovers expiring in:
2004 ......................................... $ 57,539,178 $ --
2005 ......................................... 50,054,906 --
2006 ......................................... 28,279,472 --
2007 ......................................... 18,954,412 --
2008 ......................................... 21,105,846 --
2009 ......................................... 46,256,951 --
2010 ......................................... 11,768,551 --
2011 ......................................... 33,556,845 54,600,730
-----------------------------
$ 267,516,161 $ 54,600,730
-----------------------------

On September 30, 2003, the Franklin U.S. Government Securities Fund had expired
capital loss carryovers of $3,698,366, which were reclassified to paid-in
capital.

At September 30, 2003, the following funds had deferred capital losses occurring
subsequent to October 31, 2002. For tax purposes, such losses will be reflected
in the year ending September 30, 2004.

-------------------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
DYNATECH GROWTH U.S. GOVERNMENT UTILITIES
FUND FUND SECURITIES FUND FUND
-------------------------------------------------------------
$16,459,129 $45,312,989 $120,190,227 $21,478,885

At September 30, 2003, the Franklin Income Fund had deferred currency losses
occurring subsequent to October 31, 2002 of $5,927,510. For tax purposes, such
losses will be reflected in the year ending September 30, 2004.

104 | Semiannual Report

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. INCOME TAXES (CONTINUED)

Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of defaulted securities, paydown losses,
foreign currency transactions, and bond discounts and premiums.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, paydown losses, foreign
currency transactions, and bond discounts and premiums.

At March 31, 2004, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was as follows:

----------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
DYNATECH GROWTH INCOME
FUND FUND FUND
----------------------------------------------
Cost of investments ........... $549,755,926 $1,040,874,076 $21,093,734,304
----------------------------------------------
Unrealized appreciation ....... $235,754,287 $1,076,766,146 $ 2,185,914,525
Unrealized depreciation ....... (42,969,012) (26,273,903) (795,221,554)
----------------------------------------------
Net unrealized appreciation
(depreciation) ................ $192,785,275 $1,050,492,243 $ 1,390,692,971
----------------------------------------------

-------------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES UTILITIES
FUND FUND
-------------------------------
Cost of investments ......................... $8,445,740,724 $1,539,488,769
-------------------------------
Unrealized appreciation ..................... $ 234,017,527 $ 374,360,164
Unrealized depreciation ..................... (14,765,244) (42,294,377)
-------------------------------
Net unrealized appreciation (depreciation) .. $ 219,252,283 $ 332,065,787
-------------------------------

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments and securities sold short (excluding
short-term securities) for the period ended March 31, 2004 were as follows:

--------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
DYNATECH GROWTH INCOME
FUND FUND FUND
--------------------------------------------
Purchases ...................... $ 51,275,188 $ 18,584,490 $7,431,452,573
Sales .......................... $ 10,185,412 $ 17,114,270 $3,388,374,278

------------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES UTILITIES
FUND FUND
------------------------------
Purchases ................................... $ 1,511,667,375 $ 241,633,258
Sales ....................................... $ 2,159,114,161 $ 174,543,438

Semiannual Report | 105

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. INVESTMENTS IN THE FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET
PORTFOLIO

The Funds may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Funds are reduced on assets invested in
the Sweep Money Fund, in an amount not to exceed the management fees paid by the
Sweep Money Fund.

The Funds earned dividend income from investment in the Sweep Money Fund for the
period ended March 31, 2004, as follows:

---------------------------------
FRANKLIN FRANKLIN FRANKLIN
DYNATECH GROWTH INCOME
FUND FUND FUND
---------------------------------
Dividend income ............................ $113,119 $118,047 $582,110

--------------------------
FRANKLIN
U.S. GOVERNMENT FRANKLIN
SECURITIES UTILITIES
FUND FUND
--------------------------
Dividend income ................................... $566,189 $39,724

7. CREDIT RISK AND DEFAULTED SECURITIES

The Franklin Income Fund has 31.2% of its portfolio invested in below investment
grade and comparable quality unrated high yield securities, which tend to be
more sensitive to economic conditions than higher rated securities. The risk of
loss due to default by the issuer may be significantly greater for the holders
of high yielding securities because such securities are generally unsecured and
are often subordinated to other creditors of the issuer.

The fund held defaulted and/or other securities for which the income has been
deemed uncollectible. The fund discontinues accruing income on these securities
and provides an estimate for losses on interest receivable. At March 31, 2004,
the value of these securities was $253,108,000, representing 1.14% of the fund's
net assets. For information as to specific securities, see the accompanying
Statement of Investments.

106 | Semiannual Report

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. RESTRICTED SECURITIES

At March 31, 2004, investments in securities included issues that are restricted
or illiquid. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Directors as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. At March 31, 2004, the Franklin Income
Fund held an investment in a restricted and illiquid security that was valued
under approved methods by the Directors, as follows:

- ------------------------------------------------------------------------------------------------------
SHARES/ ACQUISITION
WARRANTS ISSUER DATE COST VALUE
- ------------------------------------------------------------------------------------------------------

1,537,500 Callon Petroleum Company, wts.,
12/08/10 (.03% of net assets) ........ 12/08/03 $5,734,875 $5,677,987

9. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The Investment Company Act of 1940 defines "affiliated companies" to include
investments in portfolio companies in which a fund owns 5% or more of the
outstanding voting securities. Investments in "affiliated companies" for the
Franklin Income Fund at March 31, 2004 were as shown below.

- ----------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES HELD SHARES HELD VALUE REALIZED
AT BEGINNING GROSS GROSS AT END AT END DIVIDEND GAIN
NAME OF ISSUER OF PERIOD ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME (LOSS)
- ----------------------------------------------------------------------------------------------------------------

Mission Resources Corp. . -- 3,330,000 -- 3,330,000 $10,822,500 $ -- $ --
Mission Resources Corp., 144A,
9.75%, 12/08/10 ........ 47,000,000 -- 22,400,000 24,600,000 24,723,000 -- (323,035)
TECO Energy Inc. ........ 11,879,500 -- 2,879,500 9,000,000 a 3,990,000 9,354,264
TECO Energy Inc., ACES,
9.50%, cvt. pfd. ....... 831,000 -- 831,000 -- -- 657,578 (5,861,211)
-----------------------------------
TOTAL NON-CONTROLLED
AFFILIATED ISSUERS ..................................................... $35,545,500 $4,647,578 $3,170,018
-----------------------------------

<FN>
a As of 3/31/04, no longer an affiliate
</FN>

10. REGULATORY MATTERS

MASSACHUSETTS ADMINISTRATIVE PROCEEDING

On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 14, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.

Semiannual Report | 107

Franklin Custodian Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

10. REGULATORY MATTERS (CONTINUED)

GOVERNMENTAL INVESTIGATIONS

As part of ongoing investigations by the U.S. Securities and Exchange Commission
(SEC), the U.S. Attorney for the Northern District of California, the New York
Attorney General, the California Attorney General, the U.S. Attorney for the
District of Massachusetts, the Florida Department of Financial Services and the
Commissioner of Securities, the West Virginia Attorney General and the Vermont
Department of Banking, Insurance, Securities, and Health Care Administration,
relating to certain practices in the mutual fund industry, including late
trading, market timing and payments to securities dealers who sell Fund shares,
the Company, as well as certain current or former executives and employees of
the Company, have received requests for information and/or subpoenas to testify
or produce documents. The Company and its current employees are providing
documents and information in response to these requests and subpoenas. In
addition, the Company has responded to requests for similar kinds of information
from regulatory authorities in some of the foreign countries where the Company
conducts its global asset management business.

The staff of the SEC has informed the Company that it intends to recommend that
the SEC authorize a civil injunctive action against Franklin Advisers, Inc. The
SEC's investigation is focused on the activities that are the subject of the
Mass. Proceeding described above and other instances of alleged market timing by
a limited number of third parties that ended in 2000. The Company currently
believes that the charges the SEC staff is contemplating are unwarranted. There
are discussions underway with the SEC staff in an effort to resolve the issues
raised in their investigation.

In response to requests for information and subpoenas from the SEC and the
California Attorney General, the Company has provided documents and testimony
has been taken relating to payments to security dealers who sell Fund shares.
Effective November 28, 2003, the Company determined not to direct any further
brokerage commissions where the allocation is based, not only on best execution,
but also on the sale of Fund shares.

OTHER LEGAL PROCEEDINGS

The Funds, in addition to other entities within Franklin Templeton Investments,
including the Company and certain of its subsidiaries, other funds, and current
and former officers, employees, and directors have been named in multiple
lawsuits in different federal courts in Nevada, California, Illinois, New York,
New Jersey, and Florida, alleging violations of various federal securities laws
and seeking, among other things, monetary damages and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain funds managed by Company
subsidiaries, resulting in alleged market timing activity. The majority of these
lawsuits duplicate, in whole or in part, the allegations asserted in the Mass.
Proceeding detailed above. The lawsuits are styled as class actions or
derivative actions.

108 | Semiannual Report

Franklin Custodian Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

10. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS (CONTINUED)

In addition, the Company and its subsidiaries, as well as certain current and
former officers, employees, and directors have been named in multiple lawsuits
alleging violations of various securities laws and pendent state law claims
relating to the disclosure of directed brokerage payments and payment of
allegedly excessive commissions and advisory fees. These lawsuits are styled as
class actions and derivative actions.

Management strongly believes that the claims made in each of these lawsuits are
without merit and intends to vigorously defend against them.

The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or class actions or other
lawsuits. The impact, if any, of these matters on the Funds is uncertain at this
time. If it is determined that the Company bears responsibility for any unlawful
or inappropriate conduct that caused losses to the Funds, it is committed to
making the Funds or their shareholders whole, as appropriate.

Semiannual Report | 109

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund'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 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.

Semiannual Report | 110

This page intentionally left blank.

Literature Request

For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1

VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4

SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
Asset Allocation
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund

TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Money Fund 5, 6
Franklin Short-Intermediate U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund

TAX-FREE INCOME 7
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 8
Tax-Exempt Money Fund 5, 6

LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC 7
Alabama
Arizona
California 9
Colorado
Connecticut
Florida 9
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 8
Michigan 8
Minnesota 8
Missouri
New Jersey
New York 9
North Carolina
Ohio 8
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 10

1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
2. The fund is only open to existing shareholders as well as select retirement
plans.
3. The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.
4. Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.
5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
7. For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
8. Portfolio of insured municipal securities.
9. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).
10. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

02/04 Not part of the semiannual report

[LOGO]
FRANKLIN[R] TEMPLETON[R] One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906

WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at
franklintempleton.com. See inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN CUSTODIAN FUNDS, INC.

INVESTMENT MANAGER
Franklin Advisers, Inc.

DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES
1-800/632-2301

Authorized for distribution only when accompanied or preceded
by a prospectus. Investors should carefully consider a fund's
investment goals, risks, charges and expenses before investing. The prospectus
contains this and other information; please read it carefully before investing.

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

FCF S2004 05/04

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.

(d) N/A

(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers 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 experts are Edith E. Holiday and Harris J.
Ashton, and they are "independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A

ITEM 9. 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 Directors that would require disclosure herein.

ITEM 10. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

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

(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 11. EXHIBITS.

(A) Code of Ethics for Principal Executive and Senior Financial Officers.

(B)(1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Diomedes Tam-Loo, Chief Financial Officer

(B)(2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Diomedes Tam-Loo, Chief Financial 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, INC.

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date May 11, 2004

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/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date May 11, 2004

By /s/Diomedes Tam-Loo
Chief Financial Officer
Date May 11, 2004