N-Q 1 fcfnq.txt PE 12/31/09 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY Investment Company Act file number 811-00537 ---------- FRANKLIN CUSTODIAN FUNDS -------------------------------------------------- (Exact name of registrant as specified in charter) ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 --------------------------------------------------- (Address of principal executive offices) (Zip code) CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 ------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 650 312-2000 -------------- Date of fiscal year end: 9/30 ----- Date of reporting period: 12/31/09 -------- Item 1. Schedule of Investments. Franklin Custodian Funds Franklin DynaTech Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED)
COUNTRY SHARES VALUE -------------- ---------- ------------ COMMON STOCKS 99.3% AEROSPACE & DEFENSE 1.6% Precision Castparts Corp. United States 100,000 $ 11,035,000 ------------ AIR FREIGHT & LOGISTICS 1.6% C.H. Robinson Worldwide Inc. United States 150,000 8,809,500 FedEx Corp. United States 20,000 1,669,000 ------------ 10,478,500 ------------ BIOTECHNOLOGY 4.4% (a) Amgen Inc. United States 50,000 2,828,500 (a) Celgene Corp. United States 250,000 13,920,000 (a) Gilead Sciences Inc. United States 300,000 12,984,000 ------------ 29,732,500 ------------ CAPITAL MARKETS 2.3% The Goldman Sachs Group Inc. United States 55,000 9,286,200 Invesco Ltd. United States 250,000 5,872,500 ------------ 15,158,700 ------------ CHEMICALS 2.9% Monsanto Co. United States 100,000 8,175,000 Sigma-Aldrich Corp. United States 225,000 11,369,250 ------------ 19,544,250 ------------ COMMERCIAL BANKS 0.2% Industrial and Commercial Bank of China Ltd., H China 2,000,000 1,661,142 ------------ COMMERCIAL SERVICES & SUPPLIES 0.8% (a) Stericycle Inc. United States 100,000 5,517,000 ------------ COMMUNICATIONS EQUIPMENT 4.8% (a) Cisco Systems Inc. United States 500,000 11,970,000 (a) Juniper Networks Inc. United States 100,000 2,667,000 QUALCOMM Inc. United States 300,000 13,878,000 ZTE Corp., H China 600,000 3,714,356 ------------ 32,229,356 ------------ COMPUTERS & PERIPHERALS 8.6% (a) Apple Inc. United States 200,000 42,172,000 Hewlett-Packard Co. United States 300,000 15,453,000 ------------ 57,625,000 ------------ CONSUMER FINANCE 0.6% American Express Co. United States 100,000 4,052,000 ------------ DIVERSIFIED FINANCIAL SERVICES 1.2% CME Group Inc. United States 25,000 8,398,750 ------------ ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS 1.1% (a) Dolby Laboratories Inc., A United States 150,000 7,159,500 ------------ ENERGY EQUIPMENT & SERVICES 5.8% (a) FMC Technologies Inc. United States 300,000 17,352,000 National Oilwell Varco Inc. United States 200,000 8,818,000 Schlumberger Ltd. United States 200,000 13,018,000 ------------ 39,188,000 ------------ HEALTH CARE EQUIPMENT & SUPPLIES 6.4% Alcon Inc. Switzerland 70,000 11,504,500 Baxter International Inc. United States 100,000 5,868,000 (a) Edwards Lifesciences Corp. United States 100,000 8,685,000 (a) Intuitive Surgical Inc. United States 30,000 9,099,600 Stryker Corp. United States 150,000 7,555,500 ------------ 42,712,600 ------------ HEALTH CARE PROVIDERS & SERVICES 2.3% (a) Express Scripts Inc. United States 150,000 12,967,500
Quarterly Statement of Investments See Notes to Statements of Investments. Franklin Custodian Funds Franklin DynaTech Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) (a) VCA Antech Inc. United States 100,000 $ 2,492,000 ------------ 15,459,500 ------------ HEALTH CARE TECHNOLOGY 1.8% (a) Cerner Corp. United States 150,000 12,366,000 ------------ INTERNET & CATALOG RETAIL 5.0% (a) Amazon.com Inc. United States 150,000 20,178,000 (a) Priceline.com Inc. United States 60,000 13,110,000 ------------ 33,288,000 ------------ INTERNET SOFTWARE & SERVICES 9.2% (a) Baidu Inc., ADR China 25,000 10,280,750 (a) Google Inc., A United States 50,200 31,122,996 (a) MercadoLibre Inc. Argentina 125,000 6,483,750 Tencent Holdings Ltd. China 650,000 14,125,514 ------------ 62,013,010 ------------ IT SERVICES 5.2% MasterCard Inc., A United States 50,000 12,799,000 Visa Inc., A United States 250,000 21,865,000 ------------ 34,664,000 ------------ LIFE SCIENCES TOOLS & SERVICES 2.3% (a) Thermo Fisher Scientific Inc. United States 125,000 5,961,250 (a) Waters Corp. United States 150,000 9,294,000 ------------ 15,255,250 ------------ MACHINERY 1.4% Flowserve Corp. United States 100,000 9,453,000 ------------ OIL, GAS & CONSUMABLE FUELS 1.4% Petroleo Brasileiro SA, ADR Brazil 200,000 9,536,000 ------------ PHARMACEUTICALS 6.1% Allergan Inc. United States 125,000 7,876,250 Johnson & Johnson United States 75,000 4,830,750 Roche Holding AG Switzerland 50,000 8,491,523 Teva Pharmaceutical Industries Ltd., ADR Israel 350,000 19,663,000 ------------ 40,861,523 ------------ PROFESSIONAL SERVICES 0.3% (a) Verisk Analytics Inc., A United States 59,900 1,813,772 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 9.0% ARM Holdings PLC, ADR United Kingdom 300,000 2,568,000 (a) Cree Inc. United States 50,000 2,818,500 (a) Hittite Microwave Corp. United States 100,000 4,075,000 Intel Corp. United States 1,125,000 22,950,000 (a) Lam Research Corp. United States 200,000 7,842,000 (a) Netlogic Microsystems Inc. United States 125,000 5,782,500 Power Integrations Inc. United States 125,000 4,545,000 (a) Silicon Laboratories Inc. United States 200,000 9,668,000 ------------ 60,249,000 ------------ SOFTWARE 11.1% (a) Activision Blizzard Inc. United States 250,000 2,777,500 (a) Adobe Systems Inc. United States 400,000 14,712,000 (a) ANSYS Inc. United States 200,000 8,692,000 (a) Check Point Software Technologies Ltd. Israel 125,000 4,235,000 (a) Concur Technologies Inc. United States 200,000 8,550,000 FactSet Research Systems Inc. United States 75,000 4,940,250 (a) Informatica Corp. United States 50,000 1,293,000 Microsoft Corp. United States 250,000 7,622,500 Oracle Corp. United States 250,000 6,135,000 (a) Salesforce.com Inc. United States 150,000 11,065,500 (a) Sybase Inc. United States 100,000 4,340,000 ------------ 74,362,750 ------------
Franklin Custodian Funds Franklin DynaTech Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) WIRELESS TELECOMMUNICATION SERVICES 1.9% America Movil SAB de CV, L, ADR Mexico 47,600 $ 2,236,248 (a) American Tower Corp., A United States 250,000 10,802,500 ------------ 13,038,748 ------------ TOTAL COMMON STOCKS (COST $353,423,074) 666,852,851 ------------ SHORT TERM INVESTMENTS (COST $7,981,360) 1.2% MONEY MARKET FUNDS 1.2% (b) Institutional Fiduciary Trust Money Market Portfolio, 0.00% United States 7,981,360 7,981,360 ------------ TOTAL INVESTMENTS (COST $361,404,434) 100.5% 674,834,211 OTHER ASSETS, LESS LIABILITIES (0.5)% (3,130,439) ------------ NET ASSETS 100.0% $671,703,772 ============
(a) Non-income producing. (b) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. Franklin Custodian Funds Franklin DynaTech Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) SELECTED PORTFOLIO ABBREVIATIONS ADR American Depository Receipt Franklin Custodian Funds Franklin Growth Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED)
SHARES VALUE ---------- -------------- COMMON STOCKS 99.8% AUTOMOBILES & COMPONENTS 2.2% (a) Ford Motor Co. 1,100,000 $ 11,000,000 Harley-Davidson Inc. 838,096 21,120,019 Johnson Controls Inc. 1,400,000 38,136,000 Toyota Motor Corp., ADR (Japan) 30,000 2,524,800 -------------- 72,780,819 -------------- BANKS 0.4% Wells Fargo & Co. 505,600 13,646,144 -------------- CAPITAL GOODS 22.1% 3M Co. 855,000 70,682,850 ABB Ltd., ADR (Switzerland) 850,000 16,235,000 The Boeing Co. 1,045,000 56,565,850 Caterpillar Inc. 200,000 11,398,000 Danaher Corp. 275,000 20,680,000 Deere & Co. 100,000 5,409,000 Emerson Electric Co. 1,000,000 42,600,000 General Dynamics Corp. 1,000,000 68,170,000 General Electric Co. 370,000 5,598,100 Illinois Tool Works Inc. 1,000,000 47,990,000 Ingersoll-Rand PLC. 1,002,000 35,811,480 Lockheed Martin Corp. 500,000 37,675,000 Northrop Grumman Corp. 1,000,000 55,850,000 Pall Corp. 500,000 18,100,000 Precision Castparts Corp. 240,000 26,484,000 Raytheon Co. 600,000 30,912,000 Rockwell Collins Inc. 350,000 19,376,000 (a) SunPower Corp., A 2,000 47,360 (a) SunPower Corp., B 48,000 1,005,600 Textron Inc. 1,050,000 19,750,500 (a) Thomas & Betts Corp. 500,000 17,895,000 United Technologies Corp. 850,000 58,998,500 W.W. Grainger Inc. 550,000 53,256,500 -------------- 720,490,740 -------------- COMMERCIAL & PROFESSIONAL SERVICES 1.8% Avery Dennison Corp. 462,000 16,858,380 Dun & Bradstreet Corp. 122,000 10,293,140 Equifax Inc. 400,000 12,356,000 Robert Half International Inc. 150,000 4,009,500 (a) Stericycle Inc. 100,000 5,517,000 (a) Verisk Analytics Inc., A 300,000 9,084,000 -------------- 58,118,020 -------------- CONSUMER DURABLES & APPAREL 1.3% NIKE Inc., B 75,000 4,955,250 VF Corp. 500,000 36,620,000 -------------- 41,575,250 -------------- CONSUMER SERVICES 1.6% (a) Apollo Group Inc., A 150,000 9,087,000 (a) Carnival Corp. 1,065,000 33,749,850 (a) Interval Leisure Group Inc. 60,020 748,449 Starwood Hotels & Resorts Worldwide Inc. 250,000 9,142,500 -------------- 52,727,799 -------------- DIVERSIFIED FINANCIALS 1.4% American Express Co. 242,300 9,817,996 BlackRock Inc. 100,000 23,220,000 JPMorgan Chase & Co. 334,300 13,930,281 -------------- 46,968,277 -------------- ENERGY 4.9% BP PLC, ADR (United Kingdom) 350,200 20,301,094
Quarterly Statement of Investments See Notes to Statements of Investments. Franklin Custodian Funds Franklin Growth Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) ConocoPhillips 35,000 $ 1,787,450 Devon Energy Corp. 290,000 21,315,000 Exxon Mobil Corp. 70,000 4,773,300 (a) FMC Technologies Inc. 300,000 17,352,000 Halliburton Co. 600,000 18,054,000 National Oilwell Varco Inc. 175,000 7,715,750 Occidental Petroleum Corp. 200,000 16,270,000 Peabody Energy Corp. 350,000 15,823,500 Royal Dutch Shell PLC, A, ADR (Netherlands) 280,000 16,830,800 Schlumberger Ltd. 309,100 20,119,319 (a) Transocean Ltd. 15,222 1,260,382 -------------- 161,602,595 -------------- FOOD & STAPLES RETAILING 0.6% CVS Caremark Corp. 600,000 19,326,000 -------------- FOOD, BEVERAGE & TOBACCO 1.3% Bunge Ltd. 211,500 13,500,045 (a) Hansen Natural Corp. 300,000 11,520,000 PepsiCo Inc. 300,000 18,240,000 -------------- 43,260,045 -------------- HEALTH CARE EQUIPMENT & SERVICES 5.3% Aetna Inc. 300,000 9,510,000 Baxter International Inc. 400,000 23,472,000 Cardinal Health Inc. 300,000 9,672,000 (a) CareFusion Corp. 150,000 3,751,500 Covidien PLC 350,000 16,761,500 (a) Edwards Lifesciences Corp. 50,000 4,342,500 IMS Health Inc. 500,000 10,530,000 (a) Intuitive Surgical Inc. 34,000 10,312,880 (a) Medco Health Solutions Inc. 96,480 6,166,037 Medtronic Inc. 60,000 2,638,800 Quest Diagnostics Inc. 500,000 30,190,000 Teleflex Inc. 500,000 26,945,000 (a) Varian Medical Systems Inc. 300,000 14,055,000 (a) Zimmer Holdings Inc. 64,000 3,783,040 -------------- 172,130,257 -------------- HOUSEHOLD & PERSONAL PRODUCTS 0.6% The Procter & Gamble Co. 335,000 20,311,050 -------------- INSURANCE 1.0% Aflac Inc. 333,300 15,415,125 (a) Berkshire Hathaway Inc., A 184 18,252,800 -------------- 33,667,925 -------------- MATERIALS 3.1% Air Products and Chemicals Inc. 500,000 40,530,000 Ecolab Inc. 353,700 15,767,946 Martin Marietta Materials Inc. 90,000 8,046,900 Praxair Inc. 60,000 4,818,600 Randgold Resources Ltd., ADR (United Kingdom) 150,000 11,868,000 Sigma-Aldrich Corp. 400,000 20,212,000 -------------- 101,243,446 -------------- MEDIA 1.7% The Walt Disney Co. 1,687,290 54,415,102 -------------- PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 15.4% Abbott Laboratories 400,000 21,596,000 Allergan Inc. 997,300 62,839,873 (a) Amgen Inc. 932,000 52,723,240 (a) Biogen Idec Inc. 400,000 21,400,000 (a) Celgene Corp. 324,400 18,062,592 (a) Covance Inc. 200,000 10,914,000
Franklin Custodian Funds Franklin Growth Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) (a) Dionex Corp. 250,000 $ 18,467,500 Eli Lilly and Co. 400,000 14,284,000 (a) Gilead Sciences Inc. 250,000 10,820,000 Johnson & Johnson 1,181,010 76,068,854 Merck & Co. Inc. 788,350 28,806,309 (a) Mettler-Toledo International Inc. 50,000 5,249,500 (a) Millipore Corp. 400,000 28,940,000 Pfizer Inc. 2,761,000 50,222,590 Pharmaceutical Product Development Inc. 200,000 4,688,000 Roche Holding AG, ADR (Switzerland) 530,000 22,366,000 (a) Talecris Biotherapeutics Holdings Corp. 460,000 10,244,200 Teva Pharmaceutical Industries Ltd., ADR (Israel) 275,000 15,449,500 (a) Waters Corp. 500,000 30,980,000 -------------- 504,122,158 -------------- RETAILING 0.3% (a) Expedia Inc. 300,100 7,715,571 (a) HSN Inc. 60,020 1,211,804 (a) Ticketmaster Entertainment Inc. 60,020 733,444 -------------- 9,660,819 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 0.7% Intel Corp. 750,000 15,300,000 Texas Instruments Inc. 250,000 6,515,000 -------------- 21,815,000 -------------- SOFTWARE & SERVICES 8.7% (a) Adobe Systems Inc. 527,900 19,416,162 (a) Autodesk Inc. 800,000 20,328,000 Automatic Data Processing Inc. 700,000 29,974,000 (a) Computer Sciences Corp. 1,000,000 57,530,000 (a) Google Inc., A 76,300 47,304,474 (a) IAC/InterActiveCorp 150,050 3,073,024 MasterCard Inc., A 80,000 20,478,400 Microsoft Corp. 325,000 9,909,250 Oracle Corp. 500,000 12,270,000 Paychex Inc. 425,000 13,022,000 Visa Inc., A 291,900 25,529,574 (a) Yahoo! Inc. 1,600,000 26,848,000 -------------- 285,682,884 -------------- TECHNOLOGY HARDWARE & EQUIPMENT 15.3% (a) Agilent Technologies Inc. 1,150,000 35,730,500 (a) Apple Inc. 831,000 175,224,660 (a) Cisco Systems Inc. 2,695,000 64,518,300 (a) EMC Corp. 1,000,000 17,470,000 (a) FLIR Systems Inc. 350,000 11,452,000 Hewlett-Packard Co. 1,156,250 59,558,437 International Business Machines Corp. 580,000 75,922,000 (a) Logitech International SA (Switzerland) 150,000 2,565,000 Molex Inc. 71,483 1,540,459 Molex Inc., A 133,100 2,546,203 QUALCOMM Inc. 660,000 30,531,600 (a) Research In Motion Ltd. (Canada) 350,000 23,639,000 -------------- 500,698,159 -------------- TELECOMMUNICATION SERVICES 1.3% America Movil SAB de CV, L, ADR (Mexico) 259,300 12,181,914 (a) American Tower Corp., A 715,000 30,895,150 -------------- 43,077,064 -------------- TRANSPORTATION 7.5% (a) Air France-KLM, ADR (France) 600,000 9,390,000 (a) Alaska Air Group Inc. 600,000 20,736,000 (a) Allegiant Travel Co. 100,000 4,717,000 Arkansas Best Corp. 500,000 14,715,000 (a) British Airways PLC, ADR (United Kingdom) 600,000 18,360,000
Franklin Custodian Funds Franklin Growth Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) C.H. Robinson Worldwide Inc. 267,300 $ 15,698,529 Canadian National Railway Co. (Canada) 500,000 27,180,000 Canadian Pacific Railway Ltd. (Canada) 500,000 27,000,000 (a) Continental Airlines Inc., B 1,000,000 17,920,000 Expeditors International of Washington Inc. 404,200 14,037,866 Forward Air Corp. 495,333 12,408,092 Heartland Express Inc. 500,000 7,635,000 (a) Ryanair Holdings PLC, ADR (Ireland) 239,200 6,415,344 Southwest Airlines Co. 65,200 745,236 Union Pacific Corp. 600,000 38,340,000 Werner Enterprises Inc. 462,000 9,142,980 -------------- 244,441,047 -------------- UTILITIES 1.3% American Water Works Co. Inc. 700,000 15,687,000 FPL Group Inc. 200,000 10,564,000 International Power PLC (United Kingdom) 3,058,904 15,257,483 -------------- 41,508,483 -------------- TOTAL COMMON STOCKS (COST $1,728,032,205) 3,263,269,083 -------------- SHORT TERM INVESTMENTS (COST $5,769,899) 0.2% MONEY MARKET FUNDS 0.2% (b) Institutional Fiduciary Trust Money Market Portfolio, 0.00% 5,769,899 5,769,899 -------------- TOTAL INVESTMENTS (COST $1,733,802,104) 100.0% 3,269,038,982 OTHER ASSETS, LESS LIABILITIES (0.0)%(c) (1,329,801) -------------- NET ASSETS 100.0% $3,267,709,181 ==============
(a) Non-income producing. (b) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. (c) Rounds to less than 0.1% of net assets. Franklin Custodian Funds Franklin Growth Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) SELECTED PORTFOLIO ADR American Depository Receipt Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED)
SHARES/ COUNTRY WARRANTS VALUE -------------- --------------- --------------- COMMON STOCKS AND OTHER EQUITY INTERESTS 27.5% CONSUMER DISCRETIONARY 1.3% (a) Charter Communications Inc. United States 11,871,333 $ 421,432,321 (a) Charter Communications Inc., A United States 4,084,845 145,011,997 (a) Charter Communications Inc., wts., 4/01/14 United States 2,112,650 12,570,268 Target Corp. United States 2,000,000 96,740,000 --------------- 675,754,586 --------------- CONSUMER STAPLES 0.5% Diageo PLC United Kingdom 10,000,000 175,093,103 PepsiCo Inc. United States 1,000,000 60,800,000 --------------- 235,893,103 --------------- ENERGY 4.8% (a,b) Callon Petroleum Co. United States 2,299,688 3,449,532 (b) Canadian Oil Sands Trust Canada 25,847,400 735,476,130 ConocoPhillips United States 11,200,000 571,984,000 Exxon Mobil Corp. United States 12,600,000 859,194,000 Spectra Energy Corp. United States 12,500,000 256,375,000 --------------- 2,426,478,662 --------------- FINANCIALS 4.2% Bank of America Corp. United States 35,386,000 532,913,160 Barclays PLC United Kingdom 15,000,000 66,810,779 Citigroup Inc. United States 45,000,000 148,950,000 (b) Colony Financial Inc. United States 1,250,000 25,462,500 HSBC Holdings PLC United Kingdom 35,000,000 400,993,896 (a,b) iStar Financial Inc. United States 5,213,500 13,346,560 JPMorgan Chase & Co. United States 10,000,000 416,700,000 Wells Fargo & Co. United States 20,000,000 539,800,000 --------------- 2,144,976,895 --------------- HEALTH CARE 2.5% (c) Abbott Laboratories United States 1,739,800 93,931,802 Johnson & Johnson United States 5,000,000 322,050,000 (c) Merck & Co. Inc. United States 23,000,000 840,420,000 --------------- 1,256,401,802 --------------- INDUSTRIALS 0.0%(D) (a) Nortek Inc. United States 40,000 1,420,000 --------------- MATERIALS 0.6% AngloGold Ashanti Ltd., ADR South Africa 2,884,064 115,881,692 Newmont Mining Corp. United States 3,650,000 172,681,500 --------------- 288,563,192 --------------- TELECOMMUNICATION SERVICES 2.0% AT&T Inc. United States 18,250,000 511,547,500 Verizon Communications Inc. United States 9,000,000 298,170,000 Vodafone Group PLC United Kingdom 100,000,000 231,869,141 --------------- 1,041,586,641 --------------- UTILITIES 11.6% AGL Resources Inc. United States 3,000,000 109,410,000 Alliant Energy Corp. United States 662,257 20,039,897 Ameren Corp. United States 10,000,000 279,500,000 American Electric Power Co. Inc. United States 10,000,000 347,900,000 American Water Works Co. Inc. United States 1,388,400 31,114,044 CenterPoint Energy Inc. United States 6,000,000 87,060,000 Consolidated Edison Inc. United States 5,300,000 240,779,000 Dominion Resources Inc. United States 10,500,000 408,660,000 DTE Energy Co. United States 4,300,000 187,437,000 Duke Energy Corp. United States 33,500,000 576,535,000 FirstEnergy Corp. United States 3,000,000 139,350,000 FPL Group Inc. United States 6,000,000 316,920,000
Quarterly Statement of Investments See Notes to Statements of Investments Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) NiSource Inc. United States 2,900,000 $ 44,602,000 PG&E Corp. United States 10,200,000 455,430,000 Pinnacle West Capital Corp. United States 4,800,000 175,584,000 Portland General Electric Co. United States 2,950,000 60,209,500 PPL Corp. United States 1,000,000 32,310,000 Progress Energy Inc. United States 9,400,000 385,494,000 Public Service Enterprise Group Inc. United States 15,000,000 498,750,000 Sempra Energy United States 5,900,000 330,282,000 The Southern Co. United States 17,350,000 578,102,000 TECO Energy Inc. United States 10,000,000 162,200,000 Xcel Energy Inc. United States 19,000,000 403,180,000 --------------- 5,870,848,441 --------------- TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS (COST $12,263,694,456) 13,941,923,322 --------------- CONVERTIBLE PREFERRED STOCKS 2.7% CONSUMER DISCRETIONARY 0.1% (a) General Motors Corp., 6.25%, cvt. pfd., C United States 11,000,000 61,050,000 --------------- ENERGY 0.1% (a,b) Callon Petroleum Co., cvt. pfd. United States 188,157 2,775,316 (e) SandRidge Energy Inc., 8.50%, cvt. pfd., 144A United States 300,000 42,940,500 --------------- 45,715,816 --------------- FINANCIALS 1.9% Bank of America Corp., 7.25%, cvt. pfd., L United States 580,000 509,820,000 (a) Fannie Mae, 5.375%, cvt. pfd. United States 4,700 13,630,000 (a) Fannie Mae, 8.75%, cvt. pfd. United States 3,239,000 5,571,080 (a) Felcor Lodging Trust Inc., 7.80%, cvt. pfd., A United States 3,000,000 32,610,000 (a) Lehman Brothers Holdings Inc., 7.25%, cvt. pfd., P United States 1,000,650 4,002,600 (a) Lehman Brothers Holdings Inc., 8.75%, cvt. pfd., Q United States 550,000 2,172,500 Wells Fargo & Co., 7.50%, cvt. pfd., A United States 463,516 425,507,688 --------------- 993,313,868 --------------- HEALTH CARE 0.5% Tenet Healthcare Corp., 7.00%, cvt. pfd. United States 250,000 241,113,250 --------------- UTILITIES 0.1% FPL Group Inc., 8.375%, cvt. pfd. United States 975,000 51,109,500 --------------- TOTAL CONVERTIBLE PREFERRED STOCKS (COST $3,606,643,282) 1,392,302,434 --------------- EQUITY-LINKED SECURITIES 3.6% CONSUMER DISCRETIONARY 0.2% (e) JP Morgan Chase into Comcast Corp., 8.00%, 144A United States 5,000,000 86,228,500 --------------- ENERGY 1.5% (e) Barclays Bank PLC into Weatherford International Ltd., 12.00%, 144A United States 7,350,000 143,490,375 Credit Suisse into Halliburtun Co., 12.00% United States 4,000,000 95,212,000 Credit Suisse into Weatherford International Ltd., 11.00% United States 6,315,000 121,050,972 (e) Deutsche Bank AG into Chesapeake Energy Corp., 12.00%, 144A United States 6,200,000 167,635,600 (e) The Goldman Sachs Group Inc. into Devon Energy Corp., 10.55%, 144A United States 1,600,000 97,401,600 (e) The Goldman Sachs Group Inc. into XTO Energy Inc., 9.00%, 144A United States 3,600,000 160,648,200 --------------- 785,438,747 --------------- FINANCIALS 1.0% Barclays Bank PLC into Citigroup Inc., 17.00% United States 21,506,000 76,702,869 Credit Suisse into Bank of America Corp., 10.00% United States 6,310,000 99,580,003 Credit Suisse into Bank of America Corp., 11.10% United States 8,850,000 141,707,970 (e) JPMorgan Chase & Co. into Wells Fargo & Co., 10.00%, 144A United States 3,575,000 98,522,352
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) (e) Morgan Stanley into Bank of America Corp., 8.00%, 144A United States 5,685,000 $ 88,119,206 --------------- 504,632,400 --------------- INFORMATION TECHNOLOGY 0.5% (e) The Goldman Sachs Group Inc. into Intel Corp., 10.00%, 144A United States 7,500,000 140,467,500 (e) The Goldman Sachs Group Inc. into Xerox Corp., 12.00%, 144A United States 13,400,000 112,908,400 --------------- 253,375,900 --------------- MATERIALS 0.4% (e) The Goldman Sachs Group Inc. into Barrick Gold Corp., 12.5%, 144A United States 5,000,000 202,136,000 --------------- TOTAL EQUITY-LINKED SECURITIES (COST $1,800,211,215) 1,831,811,547 --------------- PREFERRED STOCKS 0.4% FINANCIALS 0.4% (a) Fannie Mae, 6.75%, pfd. United States 3,000,000 2,925,000 (a) Fannie Mae, 7.625%, pfd., R United States 2,399,400 2,231,442 (a) Fannie Mae, 8.25%, pfd. United States 11,784,000 12,962,400 (a) Freddie Mac, 8.375%, pfd., Z United States 16,608,000 17,438,400 (e) GMAC Inc., 7.00%, pfd., 144A United States 267,636 176,422,306 --------------- TOTAL PREFERRED STOCKS (COST $928,695,780) 211,979,548 ---------------
PRINCIPAL (f) AMOUNT --------------- (g) SENIOR FLOATING RATE INTERESTS 5.7% CONSUMER DISCRETIONARY 1.5% Clear Channel Communications Inc., Term Loan B, 3.881%, 11/13/15 United States 537,786,283 442,867,004 Dex Media West LLC, Term Loan B, 7.00%, 10/24/14 United States 9,416,463 8,725,925 Harrah's Operating Co. Inc., Incremental Term Loan, 9.50%, 10/01/16 United States 100,000,000 99,718,800 (h) Idearc Inc., Term Loan A, 5.75%, 11/17/13 United States 43,684,879 22,858,113 Term Loan B, 4.25%, 11/17/14 United States 24,146,182 12,641,541 Jarden Corp., Term Loan B-3, 2.751%, 1/24/12 United States 94,433,207 92,224,131 R.H. Donnelley Inc., Term Loan D-2, 6.75%, 6/30/11 United States 50,201,148 46,084,654 Univision Communications Inc., Initial Term Loan, 4.50%, 9/29/14 United States 20,000,000 17,450,000 --------------- 742,570,168 --------------- CONSUMER STAPLES 0.1% JohnsonDiversey Inc., Tranch B Dollar Term Loan, 3.50%, 11/24/15 United States 40,000,000 40,375,000 HEALTH CARE 0.3% Bausch and Lomb Inc., Delayed Draw Term Loan, 3.501%, 4/28/15 United States 8,315,392 7,938,605 Parent Term Loan, 3.501%, 4/28/15 United States 34,242,000 32,690,427 HCA Inc., Term Loan A-1, 1.501%, 11/19/12 United States 61,200,717 58,582,673 Term Loan B-1, 2.501%, 11/18/13 United States 56,515,435 54,092,336 --------------- 153,304,041 --------------- INDUSTRIALS 0.7% Allison Transmission Inc., Term Loan B, 2.99% - 3.04%, 8/07/14 United States 173,180,254 159,455,719 Altegrity Inc., Term Loan B, 3.253%, 2/21/15 United States 107,518,797 96,901,316 Ceva Group PLC, Dollar Pre-Refunded L/C Commitment, 3.251%, 8/01/12 United States 13,684,211 11,540,346 EGL Term Loans, 3.244%, 8/01/12 United States 113,698,684 95,601,606 --------------- 363,498,987 --------------- INFORMATION TECHNOLOGY 1.9% First Data Corp., Term Loan B-2, 2.999% - 3.001%, 9/24/14 United States 244,375,000 218,043,593
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) Term Loan B-3, 2.999% - 3.001%, 9/24/14 United States 327,609,492 $ 291,162,936 Freescale Semiconductor Inc., Incremental Term Loan, 12.50%, 12/15/14 United States 353,531,239 365,021,005 Term Loan, 1.985%, 12/01/13 United States 77,231,325 67,915,296 --------------- 942,142,830 --------------- MATERIALS 0.2% Novelis Corp., U.S. Term Loan, 2.24% - 2.26%, 7/07/14 United States 133,201,047 122,116,855 UTILITIES 1.0% Texas Competitive Electric Holdings Co. LLC, (i) Term Loan, 3.25%, 10/10/14 United States 105,000,000 84,577,500 Term Loan B-1, 3.735% - 3.751%, 10/10/14 United States 171,676,825 139,916,612 Term Loan B-2, 3.735% - 3.751%, 10/10/14 United States 100,428,557 82,037,577 Term Loan B-3, 3.735% - 3.751%, 10/10/14 United States 268,812,500 217,603,719 --------------- 524,135,408 --------------- TOTAL SENIOR FLOATING RATE INTERESTS (COST $3,454,826,170) 2,888,143,289 --------------- CORPORATE BONDS 56.3% CONSUMER DISCRETIONARY 14.7% Cablevision Systems Corp., senior note, (e) 144A, 8.625%, 9/15/17 United States 100,000,000 104,625,000 B, 8.00%, 4/15/12 United States 450,000,000 478,125,000 CBS Corp., senior note, 8.20%, 5/15/14 United States 15,000,000 17,068,095 8.875%, 5/15/19 United States 100,000,000 119,830,500 (e) CCH II LLC/CCH II Capital Corp., senior note, 144A, 13.50%, 11/30/16 United States 227,347,163 266,564,549 CCO Holdings LLC, senior note, 8.75%, 11/15/13 United States 80,000,000 82,500,000 (e) Cequel Communications Holdings I LLC, senior note, 144A, 8.625%, 11/15/17 United States 60,000,000 60,900,000 (e) Cinemark USA Inc., senior note, 144A, 8.625%, 6/15/19 United States 16,700,000 17,451,500 (e) Clear Channel Worldwide Holdings Inc., senior note, 144A, 9.25%, 12/15/17 United States 144,750,000 149,529,250 (e) CSC Holdings Inc., senior note, 144A, 8.50%, 4/15/14 United States 67,300,000 72,011,000 (h,j) Dex Media Inc., senior disc. note, 9.00%, 11/15/13 United States 290,000,000 74,675,000 senior note, B, 8.00%, 11/15/13 United States 95,600,000 24,617,000 (h,j) Dex Media West Finance, senior note, B, 8.50%, 8/15/10 United States 106,500,000 115,552,500 senior sub. note, 9.875%, 8/15/13 United States 114,100,000 36,226,750 DISH DBS Corp., senior note, 7.875%, 9/01/19 United States 188,000,000 198,105,000 Dollar General Corp., senior note, 10.625%, 7/15/15 United States 391,698,000 435,764,025 (k) senior sub. note, PIK, 11.875%, 7/15/17 United States 137,520,000 159,523,200 EchoStar DBS Corp., senior note, 7.75%, 5/31/15 United States 133,000,000 139,982,500 7.125%, 2/01/16 United States 265,000,000 271,956,250 Ford Motor Credit Co. LLC, 7.375%, 2/01/11 United States 365,000,000 373,212,500 8.00%, 6/01/14 United States 400,000,000 411,092,400 senior note, 9.75%, 9/15/10 United States 183,000,000 188,860,026 senior note, 9.875%, 8/10/11 United States 75,000,000 78,750,000 senior note, 7.25%, 10/25/11 United States 185,000,000 186,908,090 senior note, 7.50%, 8/01/12 United States 400,000,000 403,615,600 senior note, 7.00%, 10/01/13 United States 25,000,000 24,982,575 senior note, 8.70%, 10/01/14 United States 20,000,000 21,000,000 senior note, 12.00%, 5/15/15 United States 120,000,000 139,500,000 (g) senior note, FRN, 6.57%, 6/15/11 United States 190,000,000 187,662,555 (g) senior note, FRN, 3.034%, 1/13/12 United States 80,000,000 74,363,170 Hanesbrands Inc., senior note, 8.00%, 12/15/16 United States 25,300,000 25,900,875 (e) Harrah's Operating Co. Inc., senior secured note, 144A, 11.25%, 6/01/17 United States 50,000,000 52,562,500 (e) Harrah's Operating Escrow, senior secured note, 144A, 11.25%, 6/01/17 United States 100,000,000 105,125,000
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) Host Hotels & Resorts LP, senior note, (e) 144A, 9.00%, 5/15/17 United States 125,750,000 $ 136,595,937 K, 7.125%, 11/01/13 United States 85,500,000 87,316,875 M, 7.00%, 8/15/12 United States 15,500,000 15,829,375 O, 6.375%, 3/15/15 United States 240,000,000 236,400,000 Q, 6.75%, 6/01/16 United States 195,000,000 195,000,000 S, 6.875%, 11/01/14 United States 110,000,000 111,237,500 Jarden Corp., senior note, 8.00%, 5/01/16 United States 34,000,000 35,275,000 KB Home, senior note, 6.375%, 8/15/11 United States 8,346,000 8,387,730 5.75%, 2/01/14 United States 75,000,000 70,875,000 6.25%, 6/15/15 United States 90,000,000 84,375,000 9.10%, 9/15/17 United States 49,000,000 51,695,000 7.25%, 6/15/18 United States 70,500,000 67,327,500 Lamar Media Corp., senior note, 9.75%, 4/01/14 United States 30,000,000 33,262,500 (e) Limited Brands Inc., senior note, 144A, 8.50%, 6/15/19 United States 40,000,000 43,700,000 MGM MIRAGE, senior note, 8.50%, 9/15/10 United States 50,000,000 50,000,000 senior note, 6.75%, 4/01/13 United States 70,000,000 60,900,000 (e) senior note, 144A, 11.375%, 3/01/18 United States 25,000,000 22,500,000 senior secured note, 13.00%, 11/15/13 United States 70,000,000 80,850,000 Michaels Stores Inc., senior note, 10.00%, 11/01/14 United States 48,235,000 50,164,400 (h) General Motors Corp., senior deb., 8.375%, 7/15/33 United States 510,000,000 140,250,000 (e) QVC Inc., senior secured note, 144A, 7.50%, 10/01/19 United States 43,800,000 44,895,000 (h) R.H. Donnelley Corp., senior disc. note, A-1, 6.875%, 1/15/13 United States 142,000,000 14,022,500 senior disc. note, A-2, 6.875%, 1/15/13 United States 209,450,000 20,683,188 senior note, 6.875%, 1/15/13 United States 55,000,000 5,431,250 senior note, 8.875%, 10/15/17 United States 501,500,000 49,523,125 senior note, A-3, 8.875%, 1/15/16 United States 213,100,000 21,043,625 Regal Cinemas Corp., senior note, 8.625%, 7/15/19 United States 18,000,000 18,810,000 Starwood Hotels & Resorts Worldwide Inc., senior note, 7.875%, 10/15/14 United States 65,000,000 69,793,750 (e,) Univision Communications Inc., (k) senior note, 144A, PIK, 10.50%, 3/15/15 United States 278,912,500 245,791,641 senior secured note, 144A, 12.00%, 7/01/14 United States 26,500,000 29,348,750 (e) UPC Holding BV, senior note, 144A, 9.875%, 4/15/18 Netherlands 7,200,000 7,370,280 Visant Holding Corp., senior note, 8.75%, 12/01/13 United States 50,000,000 51,625,000 Wendy's/Arby's Restaurant LLC, senior note, 10.00%, 7/15/16 United States 37,500,000 41,062,500 (e) WMG Acquisition Corp., senior secured note, 144A, 9.50%, 6/15/16 United States 42,700,000 45,955,875 Wyndham Worldwide Corp., senior note, 9.875%, 5/01/14 United States 75,000,000 83,449,650 6.00%, 12/01/16 United States 21,727,000 20,268,619 --------------- 7,449,558,980 --------------- CONSUMER STAPLES 0.7% (e) Alliance One International Inc., senior note, 144A, 10.00%, 7/15/16 United States 33,100,000 34,920,500 (e) Dole Food Co. Inc., senior secured note, 144A, 8.00%, 10/01/16 United States 30,000,000 30,600,000 (e) JBS USA LLC, senior note, 144A, 11.625%, 5/01/14 United States 144,500,000 165,813,750 (e) JohnsonDiversey Inc., senior note, 144A, 8.25%, 11/15/19 United States 30,000,000 30,375,000 SUPERVALU Inc., senior note, 8.00%, 5/01/16 United States 108,500,000 110,670,000 --------------- 372,379,250 --------------- ENERGY 9.2% (e) Alon Refining Krotz Springs Inc., senior secured note, 144A, 13.50%, 10/15/14 United States 30,000,000 28,125,000 (e) Antero Resources Finance, senior note, 144A, 9.375%, 12/01/17 United States 92,650,000 94,966,250 Berry Petroleum Co., senior note, 10.25%, 6/01/14 United States 15,300,000 16,715,250 Bill Barrett Corp., senior note, 9.875%, 7/17/16 United States 15,000,000 16,050,000 (b) Callon Petroleum Co., senior secured note, 13.00%, 9/15/16 United States 83,625,000 62,718,750 Chesapeake Energy Corp., senior note, 7.625%, 7/15/13 United States 55,000,000 57,887,500 9.50%, 2/15/15 United States 220,000,000 242,550,000 6.50%, 8/15/17 United States 182,000,000 179,270,000 6.25%, 1/15/18 United States 165,000,000 159,225,000
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) 7.25%, 12/15/18 United States 188,065,000 $ 190,415,812 6.875%, 11/15/20 United States 158,000,000 153,260,000 El Paso Corp., senior note, 12.00%, 12/12/13 United States 176,600,000 207,946,500 7.25%, 4/01/18 United States 50,000,000 49,649,900 MTN, 7.75%, 1/15/32 United States 250,000,000 237,653,250 Encore Acquisition Co., senior sub. note, 9.50%, 5/01/16 United States 17,000,000 18,020,000 (e) Expro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16 United Kingdom 56,800,000 55,902,560 Forest Oil Corp., senior note, 7.25%, 6/15/19 United States 47,875,000 47,515,938 (e) 144A, 8.50%, 2/15/14 United States 115,000,000 120,750,000 (e) Holly Corp., senior note, 144A, 9.875%, 6/15/17 United States 35,000,000 37,012,500 Mariner Energy Inc., senior note, 7.50%, 4/15/13 United States 46,500,000 46,500,000 11.75%, 6/30/16 United States 25,800,000 28,896,000 8.00%, 5/15/17 United States 36,600,000 35,319,000 Newfield Exploration Co., senior sub. note, 6.625%, 4/15/16 United States 128,000,000 128,960,000 7.125%, 5/15/18 United States 12,600,000 12,789,000 OPTI Canada Inc., senior note, 7.875%, 12/15/14 Canada 75,000,000 61,875,000 Petrohawk Energy Corp., senior note, 9.125%, 7/15/13 United States 85,000,000 89,250,000 10.50%, 8/01/14 United States 129,050,000 141,632,375 7.875%, 6/01/15 United States 141,000,000 143,115,000 (e) Petroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14 Switzerland 95,000,000 89,079,631 7.00%, 5/01/17 Switzerland 35,000,000 31,413,575 9.375%, 9/15/19 Bermuda 80,840,000 79,471,806 Pioneer Natural Resources Co., 6.65%, 3/15/17 United States 25,000,000 24,781,675 senior bond, 6.875%, 5/01/18 United States 110,000,000 109,386,200 Plains Exploration & Production Co., senior note, 7.75%, 6/15/15 United States 95,500,000 97,648,750 10.00%, 3/01/16 United States 80,000,000 88,000,000 8.625%, 10/15/19 United States 50,000,000 51,625,000 Pride International Inc., senior note, 8.50%, 6/15/19 United States 33,000,000 38,280,000 Quicksilver Resources Inc., senior note, 11.75%, 1/01/16 United States 36,800,000 41,952,000 9.125%, 8/15/19 United States 90,000,000 94,050,000 Range Resources Corp., senior sub. note, 8.00%, 5/15/19 United States 40,000,000 43,000,000 Sabine Pass LNG LP, senior secured note, 7.25%, 11/30/13 United States 105,000,000 95,812,500 7.50%, 11/30/16 United States 280,000,000 234,500,000 SandRidge Energy Inc., senior note, (e) 144A, 9.875%, 5/15/16 United States 106,300,000 112,412,250 (e) 144A, 8.00%, 6/01/18 United States 126,745,000 125,160,687 (e) 144A, 8.75%, 1/15/20 United States 59,150,000 59,445,750 (g) FRN, 3.915%, 4/01/14 United States 68,925,000 61,862,462 (k) PIK, 8.625%, 4/01/15 United States 30,170,000 30,320,850 SEACOR Holdings Inc., senior note, 7.375%, 10/01/19 United States 35,000,000 35,493,080 SESI LLC, senior note, 6.875%, 6/01/14 United States 117,000,000 115,830,000 Tesoro Corp., (l) 7.50%, 7/17/12 United States 100,000,000 92,174,140 senior note, 6.50%, 6/01/17 United States 16,000,000 14,960,000 senior note, 9.75%, 6/01/19 United States 41,400,000 43,056,000 (e) W&T Offshore Inc., senior note, 144A, 8.25%, 6/15/14 United States 156,255,000 149,223,525 (e) Western Refining Inc., (g) senior note, 144A, FRN, 10.75% 6/15/14 United States 25,000,000 22,500,000 senior secured note, 144A, 11.25%, 6/15/17 United States 15,000,000 13,650,000 --------------- 4,659,060,466 --------------- FINANCIALS 6.9% Aflac Inc., senior note, 8.50%, 5/15/19 United States 13,200,000 15,231,520 (m) Bank of America Corp., pfd., sub. bond, M, 8.125%, Perpetual United States 100,000,000 96,399,000 Capital One Capital V, pfd., 10.25%, 8/15/39 United States 24,000,000 27,972,360
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) CB Richard Ellis Services Inc., senior sub. note, 11.625%, 6/15/17 United States 35,000,000 $ 39,025,000 Duke Realty LP, senior note, 6.25%, 5/15/13 United States 24,000,000 24,155,472 5.95%, 2/15/17 United States 37,500,000 35,043,651 6.50%, 1/15/18 United States 35,500,000 33,484,242 8.25%, 8/15/19 United States 59,400,000 62,173,564 (e) Dupont Fabros Technology LP, senior note, 144A, 8.50%, 12/15/17 United States 25,000,000 25,468,750 (e) FelCor Lodging Trust Inc., senior secured note, 144A, 10.00%, 10/01/14 United States 140,450,000 142,381,187 Forest City Enterprises Inc., senior note, 7.625%, 6/01/15 United States 42,250,000 38,025,000 (e) GMAC LLC, senior note, 144A, 7.75%, 1/19/10 United States 115,000,000 115,071,875 7.25%, 3/02/11 United States 148,000,000 148,000,000 6.875%, 9/15/11 United States 310,000,000 308,450,000 6.875%, 8/28/12 United States 170,000,000 168,300,000 HCP Inc., senior note, 6.30%, 9/15/16 United States 23,000,000 22,479,142 6.00%, 1/30/17 United States 33,325,000 31,406,380 5.625%, 5/01/17 United States 15,040,000 13,909,628 6.70%, 1/30/18 United States 70,500,000 68,851,242 G, 5.625%, 2/28/13 United States 25,615,000 25,721,379 (b) iStar Financial Inc., 8.625%, 6/01/13 United States 174,100,000 113,165,000 (e) senior secured note, 144A, 8.00%, 3/15/11 United States 6,142,000 5,527,800 (e) senior secured note, 144A, 10.00%, 6/15/14 United States 67,350,000 59,268,000 (m) JPMorgan Chase & Co., junior sub. note, 1, 7.90%, Perpetual United States 865,000,000 895,131,410 (h) Lehman Brothers Holdings Inc., senior note, 6.20%, 9/26/14 United States 286,300,000 57,260,000 I, 7.50%, 1/21/09 United States 900,000,000 56,700,000 (e) 144A, 7.50%, 12/03/08 United States 400,000,000 41,300,000 (e,g) Liberty Mutual Group, junior sub. note, 144A, FRN, 10.75%, 6/15/88 United States 100,000,000 107,000,000 (e) Reynolds Group Escrow, senior secured note, 144A, 7.75%, 10/15/16 United Kingdom 40,000,000 41,100,000 (e) UPC Germany GmbH, senior note, 144A, 9.625%, 12/01/19 Germany 23,100,000EUR 33,562,494 senior secured bond, 144A, 8.125%, 12/01/17 Germany 52,700,000 53,490,500 senior secured note, 144A, 8.125%, 12/01/17 Germany 43,900,000EUR 64,018,921 (m) Wells Fargo Capital XIII, pfd., 7.70%, Perpetual United States 44,500,000 43,387,500 (m) Wells Fargo Capital XV, pfd., 9.75%, Perpetual United States 449,600,000 483,320,000 --------------- 3,495,781,017 --------------- HEALTH CARE 6.5% (e) Apria Healthcare Group Inc., senior secured note, 144A, 11.25%, 11/01/14 United States 32,300,000 35,610,750 12.375%, 11/01/14 United States 14,000,000 15,470,000 Community Health Systems Inc., senior sub. note, 8.875%, 7/15/15 United States 375,000,000 389,062,500 DaVita Inc., senior note, 6.625%, 3/15/13 United States 50,000,000 50,375,000 senior sub. note, 7.25%, 3/15/15 United States 90,000,000 90,675,000 HCA Inc., 6.75%, 7/15/13 United States 62,320,000 61,696,800 6.375%, 1/15/15 United States 169,455,000 160,770,431 senior note, 6.50%, 2/15/16 United States 195,000,000 186,225,000 senior secured note, 9.25%, 11/15/16 United States 300,000,000 322,875,000 (e) senior secured note, 144A, 8.50%, 4/15/19 United States 160,000,000 173,200,000 (e) senior secured note, 144A, 7.875%, 2/15/20 United States 165,000,000 172,218,750 (e,k) Quintiles Transnational Corp., senior note, 144A, PIK, 9.50%, 12/30/14 United States 150,000,000 151,125,000 (e) Talecris Biotherapeutics Holdings Corp., senior note, 144A, 7.75%, 11/15/16 United States 36,250,000 36,975,000 Tenet Healthcare Corp., senior note, 7.375%, 2/01/13 United States 446,365,000 449,712,738 (e) senior note, 144A, 9.00%, 05/01/15 United States 300,000,000 325,500,000
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) (e) senior note, 144A, 10.00%, 5/01/18 United States 300,000,000 $ 337,500,000 (g) senior note, FRN, 9.25%, 2/01/15 United States 115,000,000 123,050,000 (e) senior secured note, 144A, 8.875%, 7/01/19 United States 30,000,000 32,700,000 (g,k) US Oncology Holdings Inc., senior note, PIK, FRN, 6.428%, 3/15/12 United States 87,311,000 82,072,340 US Oncology Inc., senior note, 10.75%, 8/15/14 United States 15,000,000 15,825,000 senior secured note, 9.125%, 8/15/17 United States 40,000,000 42,200,000 Vanguard Health Holding Co. I LLC, senior sub. note, 11.25%, 10/01/15 United States 23,900,000 25,274,250 --------------- 3,280,113,559 --------------- INDUSTRIALS 4.4% (e) Altegrity Inc., senior note, 144A, 10.50%, 11/01/15 United States 20,600,000 18,488,500 (e) American Airlines Inc., senior secured note, 144A, 10.50%, 10/15/12 United States 67,500,000 71,043,750 (e) Case New Holland Inc., senior note, 144A, 7.75%, 9/01/13 United States 201,050,000 206,578,875 (e) Ceva Group PLC, senior secured note, 144A, 10.00%, 9/01/14 United Kingdom 125,000,000 117,561,189 12.00%, 9/01/14 United Kingdom 77,878,703 76,720,027 11.625%, 10/01/16 United Kingdom 11,800,000 12,168,750 (e) Delta Air Lines Inc., senior secured note, 144A, 9.50%, 9/15/14 United States 83,150,000 86,891,750 11.75%, 3/15/15 United States 130,000,000 130,650,000 Greenbrier Cos. Inc., senior note, 8.375%, 5/15/15 United States 31,706,000 26,355,612 Hertz Corp., senior note, 8.875%, 1/01/14 United States 445,000,000 457,237,500 senior sub. note, 10.50%, 1/01/16 United States 140,000,000 150,150,000 (e,k) JohnsonDiversey Holdings Inc., senior note, 144A, PIK, 10.50%, 5/15/20 United States 49,200,000 49,692,000 Navistar International Corp., senior note, 8.25%, 11/01/21 United States 33,300,000 34,299,000 Nortek Inc., senior secured note, 11.00%, 12/15/13 United States 40,177,777 42,186,666 RBS Global & Rexnord Corp., (e) 144A, 9.50%, 8/01/14 United States 98,206,000 98,942,545 senior note, 9.50%, 8/01/14 United States 173,274,000 174,573,555 senior sub. note, 11.75%, 8/01/16 United States 97,000,000 96,515,000 (e) RSC Equipment Rental/RSC Holdings, senior note, 144A, 10.25%, 11/15/19 United States 58,000,000 58,507,500 (e) RSC Equipment Rental Inc., senior secured note, 144A, 10.00%, 7/15/17 United States 30,000,000 32,775,000 Terex Corp., senior sub. note, 8.00%, 11/15/17 United States 185,000,000 178,987,500 (e) Transdigm Inc., senior sub. note, 144A, 7.75%, 7/15/14 United States 50,000,000 50,937,500 United Rentals North America Inc., senior sub. note, 7.75%, 11/15/13 United States 47,725,000 44,861,500 --------------- 2,216,123,719 --------------- INFORMATION TECHNOLOGY 3.1% (e) Advanced Micro Devices Inc., senior note, 144A, 8.125%, 12/15/17 United States 65,700,000 65,782,125 Ceridian Corp., senior note, 11.50%, 11/15/15 United States 75,000,000 71,906,250 First Data Corp., senior note, 9.875%, 9/24/15 United States 270,000,000 253,125,000 Flextronics International Ltd., senior sub. note, 6.25%, 11/15/14 Singapore 75,000,000 74,250,000 Freescale Semiconductor Inc., senior note, 8.875%, 12/15/14 United States 290,000,000 267,525,000 10.125%, 12/15/16 United States 162,500,000 131,625,000 (e) Intelsat Jackson Holding LTD, senior note, 144A, 8.50%, 11/01/19 Bermuda 30,000,000 31,050,000 Jabil Circuit Inc., senior note, 7.75%, 7/15/16 United States 45,400,000 47,897,000 Lucent Technologies Inc., 6.45%, 3/15/29 United States 180,000,000 129,825,000 Sanmina-SCI Corp., senior sub. note, 6.75%, 3/01/13 United States 150,000,000 148,687,500 8.125%, 3/01/16 United States 100,000,000 100,250,000 SunGard Data Systems Inc., senior note, 9.125%, 8/15/13 United States 35,000,000 36,050,000 senior note, 10.625%, 5/15/15 United States 55,000,000 60,843,750 senior sub. note, 10.25%, 8/15/15 United States 85,000,000 90,950,000 (e) ViaSat Inc., senior note, 144A, 8.875%, 9/15/16 United States 49,250,000 51,712,500 --------------- 1,561,479,125 ---------------
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) MATERIALS 2.9% (e) Ashland Inc., senior note, 144A, 9.125%, 6/01/17 United States 35,000,000 $ 38,500,000 Ball Corp., senior note, 7.125%, 9/01/16 United States 15,400,000 15,862,000 7.375%, 9/01/19 United States 14,800,000 15,281,000 Boise Cascade LLC, senior sub. note, 7.125%, 10/15/14 United States 15,000,000 13,593,750 (e) Cemex Finance LLC, senior secured note, 144A, 9.50%, 12/14/16 United States 50,000,000 51,782,165 Freeport-McMoRan Copper & Gold Inc., senior note, 8.25%, 4/01/15 United States 82,400,000 89,911,996 8.375%, 4/01/17 United States 110,000,000 120,615,110 (e) Headwaters Inc., senior note, 144A, 11.375%, 11/01/14 United States 15,000,000 15,712,500 Huntsman International LLC, (e) senior note, 144A, 5.50%, 6/30/16 United States 96,000,000 85,680,000 senior sub. note, 7.875%, 11/15/14 United States 33,500,000 32,913,750 sub. senior note, 7.375%, 1/01/15 United States 15,000,000 14,475,000 (e) Ineos Group Holdings PLC, senior sub. note, 144A, 7.875%, 2/15/16 United Kingdom 180,000,000EUR 164,998,494 (e) Nalco Co., senior note, 144A, 8.25%, 5/15/17 United States 34,650,000 36,988,875 Nalco Finance Holdings, senior note, 9.00%, 2/01/14 United States 380,000,000 389,500,000 NewPage Corp., senior secured note, 10.00%, 5/01/12 United States 55,300,000 39,816,000 (e) 144A, 11.375%, 12/31/14 United States 35,150,000 35,677,250 Owens-Brockway Glass Container Inc., senior note, 7.375%, 5/15/16 United States 51,850,000 53,794,375 Teck Resources Ltd., senior note, 9.75%, 5/15/14 Canada 61,900,000 71,726,625 senior secured note, 10.25%, 5/15/16 Canada 81,300,000 95,121,000 senior secured note, 10.75%, 5/15/19 Canada 66,675,000 80,010,000 --------------- 1,461,959,890 --------------- TELECOMMUNICATION SERVICES 1.8% (e) CC Holdings GS V LLC, senior secured note, 144A, 7.75%, 5/01/17 United States 72,250,000 77,307,500 (e) Clearwire Communications LLC/Finance, senior sec. note, 144A, 12.00%, 12/01/15 United States 50,000,000 51,250,000 (e) Clearwire Corp., senior secured note, 144A, 12.00%, 12/01/15 United States 145,000,000 147,900,000 Cricket Communications Inc., senior note, 9.375%, 11/01/14 United States 65,000,000 65,650,000 senior secured note, 7.75%, 5/15/16 United States 30,000,000 30,075,000 Crown Castle International Corp., senior bond, 7.125%, 11/01/19 United States 41,200,000 40,994,000 senior note, 9.00%, 1/15/15 United States 55,000,000 58,850,000 (e) Digicel Group Ltd., senior note, 144A, 8.875%, 1/15/15 Jamaica 65,000,000 63,943,750 Qwest Corp., senior note, 8.375%, 5/01/16 United States 87,750,000 94,550,625 Sprint Nextel Corp., senior note, 8.375%, 8/15/17 United States 80,200,000 82,205,000 Virgin Media Finance PLC, senior note, 1, 9.50%, 8/15/16 United Kingdom 74,800,000 80,690,500 (e) Wind Acquisition Finance SA, senior note, 144A, 11.75%, 7/15/17 Italy 53,500,000 58,448,750 (e) Windstream Corp., senior note, 144A, 7.875%, 11/01/17 United States 70,750,000 70,219,375 --------------- 922,084,500 --------------- UTILITIES 6.1% The AES Corp., senior note, 8.00%, 10/15/17 United States 61,000,000 62,906,250 (e) Calpine Construction Finance, senior secured note, 144A, 8.00%, 6/01/16 United States 100,000,000 103,500,000 (a, l) Calpine Corp., Escrow Account, 8.50%, 7/15/10 United States 125,000,000 -- CMS Energy Corp., senior note, 8.75%, 6/15/19 United States 61,850,000 68,006,673 Dynegy Holdings Inc., senior note, 7.50%, 6/01/15 United States 170,000,000 159,800,000 8.375%, 5/01/16 United States 250,000,000 238,750,000 7.75%, 6/01/19 United States 105,000,000 91,612,500 (e) 144A, 7.50%, 6/01/15 United States 115,000,000 106,375,000 Energy Future Holdings Corp., senior note, 10.875%, 11/01/17 United States 187,500,000 154,218,750 P, 5.55%, 11/15/14 United States 396,220,000 282,979,531 (k) PIK, 12.00%, 11/01/17 United States 344,500,000 245,456,250 (e) Intergen NV, senior secured note, 144A, 9.00%, 6/30/17 Netherlands 80,000,000 83,800,000
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) Public Service Co. of New Mexico, senior note, 7.95%, 5/15/18 United States 55,000,000 $ 57,661,835 Reliant Energy Inc., senior note, 7.625%, 6/15/14 United States 150,000,000 149,250,000 7.875%, 6/15/17 United States 175,000,000 172,812,500 Texas Competitive Electric Holdings Co. LLC, senior note, A, 10.25%, 11/01/15 United States 695,000,000 566,425,000 B, 10.25%, 11/01/15 United States 284,250,000 231,663,750 (k, n) PIK, 10.50%, 11/01/16 United States 425,000,000 301,750,000 --------------- 3,076,968,039 --------------- TOTAL CORPORATE BONDS (COST $28,637,728,681) 28,495,508,545 --------------- CONVERTIBLE BONDS 1.1% CONSUMER DISCRETIONARY 0.5% (e) Host Hotels & Resorts LP, cvt., senior note, 144A, 2.625%, 4/15/12 United States 120,956,000 114,001,030 (e) Liberty Global Inc., cvt., senior sub. note, 144A, 4.50%, 11/15/16 United States 122,750,000 133,797,500 --------------- 247,798,530 --------------- FINANCIALS 0.3% (b,g) iStar Financial Inc., cvt., senior note, FRN, 0.79%, 10/01/12 United States 250,000,000 137,825,000 --------------- INFORMATION TECHNOLOGY 0.2% Advanced Micro Devices Inc., cvt., senior note, 6.00%, 5/01/15 United States 10,000,000 9,050,000 (e) 144A, 5.75%, 8/15/12 United States 84,550,000 83,810,187 --------------- 92,860,187 --------------- UTILITIES 0.1% CMS Energy Corp., cvt., senior note, 5.50%, 6/15/29 United States 50,000,000 61,375,000 --------------- TOTAL CONVERTIBLE BONDS (COST $609,223,372) 539,858,717 --------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $51,301,022,956) 49,301,527,402 --------------- SHORT TERM INVESTMENTS 1.7% U.S. GOVERNMENT AND AGENCY SECURITIES 0.3% (o) FHLB, 1/04/10 - 2/17/10 United States 72,700,000 72,698,672 (o) FHLMC, 1/05/10 - 2/05/10 United States 51,773,000 51,772,659 (o) FNMA, 1/19/10 - 2/10/10 United States 5,408,000 5,407,938 --------------- TOTAL U.S. GOVERNMENT AND AGENCY AGENCIES (COST $129,879,533) 129,879,269 --------------- TOTAL INVESTMENTS BEFORE MONEY MARKET FUNDS AND REPURCHASE AGREEMENTS (COST $51,430,902,489) 49,431,406,671 ---------------
SHARES --------------- MONEY MARKET FUNDS (COST $206,950,835) 0.4% (p) Institutional Fiduciary Trust Money Market Portfolio, 0.00% United States 206,950,835 206,950,835 INVESTMENTS FROM CASH COLLATERAL RECEIVED FOR LOANED SECURITIES 0.0%(d) MONEY MARKET FUNDS 0.0%(d) (q) Bank of New York Institutional Cash Reserve Fund, Series A, 0.01% United States 11,188,302 11,188,302 (a) Bank of New York Institutional Cash Reserve Fund, Series B United States 451,668 361,334 --------------- TOTAL MONEY MARKET FUNDS (COST $11,639,970) 11,549,636 ---------------
Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL (f) AMOUNT --------------- REPURCHASE AGREEMENTS (COST $517,442,274) 1.0% United States $ 517,442,274 517,442,274 (r) Joint Repurchase Agreement, 0.003%, 1/04/10 (Maturity Value $517,442,454) Banc of America Securities LLC (Maturity Value $60,794,314) BNP Paribas Securities Corp. (Maturity Value $121,583,455) Credit Suisse Securities (USA) LLC (Maturity Value $101,325,581) Deutsche Bank Securities Inc. (Maturity Value $31,093,117) HSBC Securities (USA) Inc. (Maturity Value $101,325,581) Morgan Stanley & Co. Inc. (Maturity Value $81,057,360) UBS Securities LLC (Maturity Value $20,263,046) Collateralized by U.S. Government Agency Securities, 0.50% - 7.625%, 3/30/10 - 2/09/28; (o)U.S. Government Agency Discount Notes, 9/21/10; (o)U.S. Treasury Bills, 8/26/10 - 12/16/10; and U.S. Treasury Notes, 0.875% - 4.25%, 5/31/11 - 11/15/14 --------------- TOTAL SHORT TERM INVESTMENTS (COST $865,912,612) 865,822,014 --------------- TOTAL INVESTMENTS (COST $52,166,935,568) 99.0% 50,167,349,416 OPTIONS WRITTEN (0.0)%(d) (323,811) OTHER ASSETS, LESS LIABILITIES 1.0% 485,759,463 --------------- NET ASSETS 100.0% $50,652,785,068 ===============
SHARES --------------- OPTIONS WRITTEN (0.0)%(d) CALL OPTIONS (0.0)% (d) HEALTH CARE (0.0)%(d) Abbott Laboratories, Feb. 57.50 Calls, 2/20/10 United States 7,398 (184,950) Merck & Co. Inc., Feb. 40 Calls, 2/20/10 United States 3,753 (138,861) --------------- TOTAL OPTIONS WRITTEN (PREMIUM RECEIVED $454,307) (323,811) ---------------
(a) Non-income producing. (b) See Note 5 regarding holdings of 5% voting securities. (c) A portion or all of the security is held in connection with written option contracts open at year end. (d) Rounds to less than 0.1% of net assets. (e) Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust's Board of Trustees. At December 31, 2009, the aggregate value of these securities was $9,479,103,019, representing 18.71% of net assets. (f) The principal amount is stated in U.S. dollars unless otherwise indicated. (g) The coupon rate shown represents the rate at period end. (h) Defaulted security or security for which income has been deemed uncollectible. (i) Security purchased on a delayed delivery basis. (j) See Note 6 regarding other considerations. (k) Income may be received in additional securities and/or cash. (l) Security has been deemed illiquid because it may not be able to be sold within seven days. At December 31, 2009, the aggregate value of these securities was $92,174,140, representing 0.18% of net assets. (m) Perpetual security with no stated maturity date. (n) A portion or all of the security is on loan at December 31, 2009. (o) The security is traded on a discount basis with no stated coupon rate. (p) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. (q) The rate shown is the annualized seven-day yield at period end. (r) Investment is through participation in a joint account with other funds managed by the investment manager or an affiliate of the investment manager. At December 31, 2009, all repurchase agreements had been entered into on that date. Franklin Custodian Funds Franklin Income Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) CURRENCY ABBREVIATIONS EUR Euro PORTFOLIO ABBREVIATIONS ADR American Depository Receipt FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corp. FNMA Federal National Mortgage Association FRN Floating Rate Note L/C Letter of Credit MTN Medium Term Note PIK Payment-In-Kind Franklin Custodian Funds Franklin U.S. Government Securities Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED)
PRINCIPAL AMOUNT VALUE -------------- -------------- MORTGAGE-BACKED SECURITIES 98.1% GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) FIXED RATE 98.1% GNMA GP 30 Year, 8.25%, 3/15/17 - 10/15/17 $ 93,455 $ 103,107 GNMA GP 30 Year, 9.25%, 5/15/16 - 12/15/16 205,301 226,756 GNMA GP 30 Year, 11.00%, 3/15/10 - 11/15/10 33,570 34,595 GNMA GP 30 Year, 11.25%, 7/15/13 - 12/15/15 155,462 173,014 GNMA GP 30 Year, 11.50%, 2/15/13 - 5/15/13 22,130 24,489 GNMA GP 30 Year, 11.75%, 7/15/13 - 8/15/13 25,173 27,767 GNMA GP 30 Year, 12.00%, 3/15/11 - 12/15/12 6,503 7,037 GNMA GP 30 Year, 12.50%, 5/15/10 - 6/15/10 1,910 1,964 GNMA GP 30 Year, 12.75%, 5/15/14 3,867 4,431 GNMA I SF 15 Year, 6.50%, 5/15/18 868,854 939,199 GNMA I SF 30 Year, 4.50%, 3/15/39 110,705,050 111,009,713 (a) GNMA I SF 30 Year, 4.50%, 1/01/39 - 11/15/39 1,133,474,910 1,136,478,611 GNMA I SF 30 Year, 5.00%, 8/15/39 184,074,777 189,509,632 GNMA I SF 30 Year, 5.00%, 11/15/39 92,150,608 94,955,066 (a) GNMA I SF 30 Year, 5.00%, 2/15/33 - 1/01/40 1,807,103,087 1,865,069,140 GNMA I SF 30 Year, 5.50%, 2/15/39 148,599,284 155,896,677 GNMA I SF 30 Year, 5.50%, 5/15/28 - 11/15/39 1,487,326,892 1,564,360,240 GNMA I SF 30 Year, 6.00%, 10/15/23 - 2/15/39 1,172,608,846 1,244,728,202 GNMA I SF 30 Year, 6.50%, 5/15/23 - 2/15/38 281,666,656 302,199,659 GNMA I SF 30 Year, 6.75%, 3/15/26 39,023 43,040 GNMA I SF 30 Year, 7.00%, 4/15/16 - 9/15/32 151,189,223 167,902,779 GNMA I SF 30 Year, 7.25%, 11/15/25 - 1/15/26 521,620 582,739 GNMA I SF 30 Year, 7.50%, 7/15/16 - 8/15/33 49,072,657 55,027,587 GNMA I SF 30 Year, 7.70%, 1/15/21 - 1/15/22 381,540 433,085 GNMA I SF 30 Year, 8.00%, 11/15/15 - 9/15/30 29,324,602 33,284,435 GNMA I SF 30 Year, 8.50%, 5/15/16 - 6/15/25 6,513,006 7,409,014 GNMA I SF 30 Year, 9.00%, 9/15/13 - 7/15/23 7,811,951 8,815,909 GNMA I SF 30 Year, 9.50%, 5/15/16 - 8/15/22 4,759,660 5,449,055 GNMA I SF 30 Year, 10.00%, 2/15/16 - 3/15/25 6,385,150 7,198,487 GNMA I SF 30 Year, 10.50%, 2/15/12 - 10/15/21 4,739,954 5,292,486 GNMA I SF 30 Year, 11.00%, 2/15/10 - 5/15/21 3,039,558 3,374,395 GNMA I SF 30 Year, 11.50%, 3/15/13 - 2/15/16 849,648 945,167 GNMA I SF 30 Year, 12.00%, 5/15/11 - 1/15/18 4,203,039 4,712,427 GNMA I SF 30 Year, 12.50%, 4/15/10 - 1/15/16 2,639,778 2,974,827 GNMA I SF 30 Year, 13.00%, 1/15/11 - 9/15/15 3,095,444 3,491,337 GNMA II GP 30 Year, 8.75%, 3/20/17 - 7/20/17 37,529 41,581 GNMA II GP 30 Year, 11.50%, 8/20/13 10,395 11,471 GNMA II SF 30 Year, 4.50%, 5/20/33 - 11/20/39 111,031,423 111,291,316 GNMA II SF 30 Year, 4.50%, 12/20/39 137,546,750 137,668,070 GNMA II SF 30 Year, 5.00%, 9/20/33 152,448,581 157,923,498 GNMA II SF 30 Year, 5.00%, 7/20/33 - 12/20/39 266,949,589 275,847,241 GNMA II SF 30 Year, 5.50%, 12/20/34 100,570,773 105,926,419 GNMA II SF 30 Year, 5.50%, 6/20/34 - 3/20/39 582,530,337 612,639,726 GNMA II SF 30 Year, 6.00%, 10/20/23 - 12/20/38 602,794,454 640,684,630 GNMA II SF 30 Year, 6.50%, 6/20/24 - 1/20/39 165,747,115 177,598,834 GNMA II SF 30 Year, 7.00%, 2/20/28 - 7/20/33 27,479,221 30,518,831 GNMA II SF 30 Year, 7.50%, 10/20/22 - 4/20/32 5,101,135 5,724,527 GNMA II SF 30 Year, 8.00%, 8/20/16 - 6/20/30 2,490,201 2,827,171 GNMA II SF 30 Year, 8.50%, 4/20/16 - 6/20/25 1,252,242 1,416,303 GNMA II SF 30 Year, 9.00%, 8/20/16 - 11/20/21 428,006 484,087 GNMA II SF 30 Year, 9.50%, 3/20/18 - 4/20/25 251,474 287,824 GNMA II SF 30 Year, 10.00%, 8/20/15 - 3/20/21 472,021 532,517 GNMA II SF 30 Year, 10.50%, 9/20/13 - 3/20/21 1,305,626 1,448,765 GNMA II SF 30 Year, 11.00%, 8/20/13 - 1/20/21 192,599 214,209 GNMA II SF 30 Year, 11.50%, 9/20/13 - 2/20/18 107,386 119,093 GNMA II SF 30 Year, 12.00%, 9/20/13 - 2/20/16 182,209 203,348 GNMA II SF 30 Year, 12.50%, 10/20/13 - 11/20/15 122,250 138,382 GNMA II SF 30 Year, 13.00%, 10/20/13 - 9/20/15 117,572 135,270 -------------- TOTAL MORTGAGE-BACKED SECURITIES (COST $9,001,483,822) 9,236,369,181 --------------
Quarterly Statement of Investments See Notes to Statements of Investments Franklin Custodian Funds Franklin U.S. Government Securities Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) SHORT TERM INVESTMENTS 2.3% U.S. GOVERNMENT AND AGENCY SECURITIES (COST $7,000,000) 0.1% (b) U.S. Treasury Bill, 1/28/10 $ 7,000,000 $ 6,999,853 -------------- TOTAL INVESTMENTS BEFORE MONEY MARKET FUNDS (COST $ 9,008,483,822) 9,243,369,034 --------------
SHARES -------------- MONEY MARKET FUNDS (COST $206,950,835) 2.2% (c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% 206,950,835 206,950,835 -------------- TOTAL INVESTMENTS (COST $9,215,434,657) 100.4% 9,450,319,869 OTHER ASSETS, LESS LIABILITIES (0.4)% (33,243,310) -------------- NET ASSETS 100.0% $9,417,076,559 ==============
(a) A portion or all of the security purchased on a to-be-announced basis. (b) The security is traded on a discount basis with no stated coupon rate. (c) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. Franklin Custodian Funds Franklin U.S. Government Securities Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED) ABBREVIATIONS SELECTED PORTFOLIO GP Graduated Payment SF Single Family Franklin Custodian Funds Franklin Utilities Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED)
COUNTRY SHARES VALUE -------------- --------- -------------- COMMON STOCKS 93.9% DIVERSIFIED TELECOMMUNICATION SERVICES 2.6% AT&T Inc. United States 1,200,000 $ 33,636,000 Verizon Communications Inc. United States 800,000 26,504,000 -------------- 60,140,000 -------------- ELECTRIC UTILITIES 46.8% Allegheny Energy Inc. United States 1,000,000 23,480,000 American Electric Power Co. Inc. United States 2,400,000 83,496,000 Cleco Corp. United States 1,000,000 27,330,000 Duke Energy Corp. United States 3,800,000 65,398,000 Edison International United States 1,800,000 62,604,000 Entergy Corp. United States 1,100,000 90,024,000 Exelon Corp. United States 2,000,000 97,740,000 FirstEnergy Corp. United States 1,700,000 78,965,000 FPL Group Inc. United States 1,100,000 58,102,000 Great Plains Energy Inc. United States 767,400 14,879,886 Hawaiian Electric Industries Inc. United States 600,000 12,540,000 Northeast Utilities United States 900,000 23,211,000 NV Energy Inc. United States 5,200,000 64,376,000 Pinnacle West Capital Corp. United States 600,000 21,948,000 PNM Resources Inc. United States 2,203,653 27,876,210 Portland General Electric Co. United States 1,413,200 28,843,412 PPL Corp. United States 2,600,000 84,006,000 Progress Energy Inc. United States 1,500,000 61,515,000 Scottish and Southern Energy PLC United Kingdom 1,500,000 28,081,122 The Southern Co. United States 2,700,000 89,964,000 Westar Energy Inc. United States 1,080,600 23,470,632 -------------- 1,067,850,262 -------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 2.6% Constellation Energy Group United States 1,700,000 59,789,000 -------------- MULTI-UTILITIES 37.1% Alliant Energy Corp. United States 1,500,000 45,390,000 Ameren Corp. United States 800,000 22,360,000 CenterPoint Energy Inc. United States 3,700,000 53,687,000 CMS Energy Corp. United States 1,200,000 18,792,000 Consolidated Edison Inc. United States 900,000 40,887,000 Dominion Resources Inc. United States 1,400,000 54,488,000 DTE Energy Co. United States 500,000 21,795,000 GDF Suez France 700,000 30,346,026 National Grid PLC United Kingdom 4,987,755 54,663,159 NiSource Inc. United States 1,300,000 19,994,000 PG&E Corp. United States 2,100,000 93,765,000 Public Service Enterprise Group Inc. United States 2,400,000 79,800,000 RWE AG Germany 300,000 29,300,352 SCANA Corp. United States 775,000 29,202,000 Sempra Energy United States 1,800,000 100,764,000 TECO Energy Inc. United States 700,000 11,354,000 United Utilities Group PLC United Kingdom 2,960,189 23,763,783 Vectren Corp. United States 700,000 17,276,000 Wisconsin Energy Corp. United States 900,000 44,847,000 Xcel Energy Inc. United States 2,600,000 55,172,000 -------------- 847,646,320 -------------- OIL, GAS & CONSUMABLE FUELS 3.0% Spectra Energy Corp. United States 2,197,600 45,072,776 The Williams Cos. Inc. United States 1,105,190 23,297,405 -------------- 68,370,181 -------------- WATER UTILITIES 1.8% American Water Works Co. Inc. United States 1,800,000 40,338,000 -------------- TOTAL COMMON STOCKS (COST $1,601,247,248) 2,144,133,763 --------------
Quarterly Statement of Investments See Notes to Statements of Investments Franklin Custodian Funds Franklin Utilities Fund STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT ----------- CORPORATE BONDS 3.3% ELECTRIC UTILITIES 1.6% MidAmerican Energy Holdings Co., senior note, 8.48%, 9/15/28 United States $25,000,000 $ 30,724,875 Northeast Generation Co., senior secured note, B-1, 8.812%, 10/15/26 United States 7,142,579 6,100,905 -------------- 36,825,780 -------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 1.1% Energy Future Holdings Corp., senior note, P, 5.55%, 11/15/14 United States 32,300,000 23,068,595 R, 6.55%, 11/15/34 United States 5,700,000 2,671,140 -------------- 25,739,735 -------------- MULTI-UTILITIES 0.6% Aquila Inc., senior note, 9.95%, 2/01/11 United States 6,000,000 6,272,982 8.27%, 11/15/21 United States 6,100,000 6,191,933 -------------- 12,464,915 -------------- TOTAL CORPORATE BONDS (COST $77,616,721) 75,030,430 -------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $1,678,863,969) 2,219,164,193 --------------
SHARES ----------- SHORT TERM INVESTMENTS (COST $54,730,366) 2.4% MONEY MARKET FUNDS 2.4% (a) Institutional Fiduciary Trust Money Market Portfolio, 0.00% United States 54,730,366 54,730,366 -------------- TOTAL INVESTMENTS (COST $1,733,594,335) 99.6% 2,273,894,559 OTHER ASSETS, LESS LIABILITIES 0.4% 8,810,920 -------------- NET ASSETS 100.0% $2,282,705,479 ==============
(a) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. FRANKLIN CUSTODIAN FUNDS Notes to Statements of Investments (unaudited) 1. ORGANIZATION Franklin Custodian Funds (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of five funds (Funds). 2. SECURITY VALUATION Equity and other securities listed on a securities exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter securities and listed securities for which there is no reported sale are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds and non-registered money market funds are valued at the closing net asset value. Repurchase agreements are valued at cost which approximates market value. Corporate debt securities, government securities, mortgage backed securities, asset-backed securities, collateralized debt obligations and other debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Funds may utilize independent pricing services, quotations from bond dealers, and information with respect to bond and note transactions, to assist in determining a current market value for each security. The Funds' pricing services may use valuation models or matrix pricing which considers information with respect to comparable bond and note transactions, quotations from bond dealers, or by reference to other securities that are considered comparable in such characteristics as rating, interest rate and maturity date, option adjusted spread models, prepayment projections, interest rate spreads and yield curves, to determine current value. Debt securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Senior secured corporate loans with floating or variable interest rates generally trade in the over-the-counter market rather than on a securities exchange. The Funds may utilize independent pricing services, quotations from loan dealers and other financial institutions, and information with respect to bond and note transactions, to assist in determining a current market value for each security. The Funds' pricing services use independent market quotations from loan dealers or financial institutions and may incorporate valuation methodologies that consider multiple bond characteristics such as dealer quotes, issuer type, coupon, maturity, weighted average maturity, interest rate spreads and yield curves, cash flow and credit risk/quality analysis, to determine current value. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. If no sale is reported at that time, the foreign equity security will be valued within the range of the most recent quoted bid and ask prices. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. The Funds have procedures to determine the fair value of individual securities and other assets for which market prices are not readily available or which may not be reliably priced. Methods for valuing these securities may include: fundamental analysis based upon the underlying investment book value, anticipated future cash flows, market changes in comparable or similar securities, matrix pricing, discounts from market prices of similar securities, or discounts applied due to the nature and duration of restrictions on the disposition of the securities. Due to the inherent uncertainty of valuations of such securities, the fair values may differ significantly from the values that would have been used had a ready market for such investments existed. Occasionally, events occur between the time at which trading in a security is completed and the close of the NYSE that might call into question the availability (including the reliability) of the value of a portfolio security held by the fund. The investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services. All security valuation procedures are approved by the Funds' Board of Trustees. 3. DERIVATIVE FINANCIAL INSTRUMENTS Certain funds may invest in derivative financial instruments (derivatives) in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and the potential for market movements. Derivatives are marked to market daily based upon quotations from market makers or the Fund's independent pricing services and the Fund's net benefit or obligation under the contract, as measured by the fair market value of the contract, is included in net assets. The Franklin Income Fund generally purchases or writes option contracts in order to manage or gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of a particular security, currency or index, or notional amount of a swap (swaption), at a specified price. Options purchased are recorded as an asset while options written are recorded as a liability. Upon exercise of an option, the acquisition cost or sales proceeds of the security is adjusted by any premium paid or received. Upon expiration of an option, any premium paid or received is recorded as a realized loss or gain. Upon closing an option other than through expiration or exercise, the difference between the premium and the cost to close the position is recorded as a realized gain or loss. 4. INCOME TAXES At December 31, 2009, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
FRANKLIN FRANKLIN FRANKLIN DYNATECH FUND GROWTH FUND INCOME FUND ------------- -------------- --------------- Cost of investments $361,742,986 $1,744,106,429 $52,347,987,962 ------------ -------------- --------------- Unrealized appreciation $314,120,511 $1,594,465,847 $ 5,154,318,268 Unrealized depreciation (1,029,286) (69,533,294) (7,334,956,814) ------------ -------------- --------------- Net unrealized appreciation (depreciation) $313,091,225 $1,524,932,553 $(2,180,638,546) ============ ============== ===============
FRANKLIN U.S. GOVERNMENT SECURITIES FRANKLIN FUND UTILITIES FUND --------------- -------------- Cost of investments $9,215,434,657 $1,731,500,102 -------------- ------------- Unrealized appreciation $ 262,566,877 $ 600,868,717 Unrealized depreciation (27,681,665) (58,474,260) -------------- ------------- Net unrealized appreciation (depreciation) $ 234,885,212 $ 542,394,457 ============== =============
5. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES Investments in "affiliated companies" for the Franklin Income Fund for the three months ended December 31, 2009, were as shown below.
NUMBER OF SHARES/ NUMBER OF PRINCIPAL SHARES/ HELD PRINCIPAL REALIZED AT HELD VALUE CAPITAL BEGINNING GROSS GROSS AT END AT END INVESTMENT GAIN NAME OF ISSUER OF PERIOD ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME (LOSS) -------------- ----------- ---------- ---------- ----------- -------------- ----------- ------------ FRANKLIN INCOME FUND NON-CONTROLLED AFFILIATES Ameren Corp. 12,100,000 -- 2,100,000 10,000,000 --(a) 4,469,850 (52,260,712) Ameren Corp., senior note, 8.875%, 5/15/14 58,200,000 -- 58,200,000 -- --(a) 4,620,078 7,173,310 Callon Petroleum Co. -- 2,299,688 -- 2,299,688 3,449,532 -- -- Callon Petroleum Co., cvt pfd -- 188,157 -- 188,157 2,775,316 -- -- Callon Petroleum Co., senior secured note, 13.00%, 9/15/16 -- 83,625,000 -- 83,625,000 62,718,750 1,117,323 -- Canadian Oil Sands Trust 25,847,400 -- -- 25,847,400 735,476,130 7,318,203 -- Colony Financial Inc. 1,250,000 -- -- 1,250,000 25,462,500 87,500 -- iStar Financial Inc. 5,213,500 -- -- 5,213,500 13,346,560 -- -- iStar Financial Inc., 8.625%, 6/01/13 169,100,000 5,000,000 -- 174,100,000 113,165,000 3,605,705 -- iStar Financial Inc.,senior secured note, 144A, 8.00%, 3/15/11 -- 6,142,000 -- 6,142,000 5,527,800 143,313 -- iStar Financial Inc., senior secured note,144A, 10.00%, 6/15/14 54,850,000 12,500,000 -- 67,350,000 59,268,000 1,302,846 -- iStar Financial Inc., cvt., senior note, FRN, 0.79%, 10/01/12 250,000,000 -- -- 250,000,000 137,825,000 504,524 -- -------------- ----------- ------------ TOTAL AFFILIATED SECURITIES (2.29% of Net Assets) $1,159,014,588 $23,169,342 $(45,087,402) ============== =========== ============
(a) As of December 31, 2009, no longer an affiliate. 6. OTHER CONSIDERATIONS From time to time, officers, directors or employees of the Franklin Income Fund's Investment Manager may have discussions or enter into agreements with issuers, underwriters or creditors' committees which, pursuant to the fund's policies and requirements of applicable securities laws, could prevent the fund from trading in the securities of such company for limited or extended periods of time. 7. FAIR VALUE MEASUREMENTS The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds' own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds' investments and are summarized in the following fair value hierarchy: - Level 1 - quoted prices in active markets for identical securities - Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.) - Level 3 - significant unobservable inputs (including the fund's own assumptions in determining the fair value of investments) The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used as of December 31, 2009 , in valuing the Funds' assets and liabilities carried at fair value:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL --------------- --------------- ----------- --------------- FRANKLIN DYNATECH FUND ASSETS: Investments in Securities: Equity Investments(a) $ 666,852,851 $-- $-- $ 666,852,851 Short Term Investments 7,981,360 -- -- 7,981,360 --------------- --------------- ----------- --------------- Total investments in securities $ 674,834,211 $-- $-- $ 674,834,211 --------------- --------------- ----------- --------------- FRANKLIN GROWTH FUND ASSETS: Investments in Securities: Equity Investments(a) $ 3,263,269,083 $ -- $ -- $ 3,263,269,083 Short Term Investments 5,769,899 -- -- 5,769,899 --------------- --------------- ----------- --------------- Total investments in securities $ 3,269,038,982 $ -- $ -- $ 3,269,038,982 --------------- --------------- ----------- --------------- FRANKLIN INCOME FUND ASSETS: Investments in Securities: Equity Investments:(b) Energy $ 2,426,478,662 $ 45,715,816 $ -- $ 2,472,194,478 Financials 3,152,474,425 197,795,886 -- 3,350,270,311 Health Care 1,256,401,802 241,113,250 -- 1,497,515,052 Industrials -- 1,420,000 -- 1,420,000 Utilities 5,870,848,441 51,109,500 -- 5,921,957,941 Other Equity Investments(a) 2,302,847,522 -- -- 2,302,847,522 Equity-Linked Securities -- 1,831,811,547 -- 1,831,811,547 Senior Floating Rate Interests -- 2,888,143,289 -- 2,888,143,289 Corporate Bonds -- 28,403,334,405 92,174,140(c) 28,495,508,545 Convertible Bonds -- 539,858,717 -- 539,858,717 Short Term Investments 218,139,137 647,682,877 -- 865,822,014 --------------- --------------- ----------- --------------- Total investments in securities $15,227,189,989 $34,847,985,287 $92,174,140 $50,167,349,416 --------------- --------------- ----------- --------------- LIABILITIES: Options Written 323,811 -- -- 323,811
FRANKLIN U.S. GOVERNMENT SECURITIES FUND ASSETS: Investments in Securities: Mortgage-Backed Securities $ -- $ 9,236,369,181 $ -- $ 9,236,369,181 Short Term Investments 213,950,688 -- -- 213,950,688 --------------- --------------- ----------- --------------- Total investments in securities $ 213,950,688 $ 9,236,369,181 $ -- $ 9,450,319,869 --------------- --------------- ----------- --------------- FRANKLIN UTILITIES FUND ASSETS: Investments in Securities: Equity Investments(a) $ 2,144,133,763 $ -- $ -- $ 2,144,133,763 Corporate Bonds -- 75,030,430 -- 75,030,430 Short Term Investments 54,730,366 -- -- 54,730,366 --------------- --------------- ----------- --------------- Total investments in securities $ 2,198,864,129 $ 75,030,430 $ -- $ 2,273,894,559 --------------- --------------- ----------- ---------------
(a) For detailed industry descriptions, see the accompanying Statements of Investments. (b) Includes common and preferred stock as well as other equity investments. (c) Includes security determined to have no value at December 31, 2009. At December 31, 2009, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining the Funds' fair value, were as follows:
NET CHANGE IN UNREALIZED NET NET CHANGE IN TRANSFER APPRECIATION BALANCE AT REALIZED UNREALIZED NET IN (DEPRECIATION) BEGINNING GAIN APPRECIATION PURCHASES (OUT) OF BALANCE AT ON ASSETS HELD OF YEAR (LOSS) (DEPRECIATION) (SALES) LEVEL 3 END OF PERIOD AT PERIOD END ---------- -------- -------------- ----------- -------- ------------- --------------- FRANKLIN INCOME FUND ASSETS Corporate Bonds $-- $-- $(75,860) $92,250,000 $-- $92,174,140 $(75,860)
8. NEW ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2010-6, FAIR VALUE MEASUREMENTS AND DISCLOSURES (TOPIC 820): IMPROVING DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS. ASU No. 2010-6 enhances and clarifies existing fair value measurement disclosure requirements and is effective for interim and annual periods beginning after December 15, 2009. The Funds are currently evaluating the impact, if any, of applying the provisions of ASU No. 2010-6. 9. SUBSEQUENT EVENTS The Funds have evaluated subsequent events through February 22, 2010, the issuance date of the financial statements and determined that no events have occurred that require disclosure. For information on the Funds' policy regarding other significant accounting policies, please refer to the Funds' most recent semiannual or annual shareholder report. Item 2. 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 Quarterly Schedule of Portfolio Holdings on Form N-Q, 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 Quarterly Schedule of Portfolio Holdings on Form N-Q. Item 3. Exhibits. (a) Certification pursuant to Section 30a-2 under the Investment Company Act of 1940 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRANKLIN CUSTODIAN FUNDS By /s/LAURA F. FERGERSON -------------------------- Laura F. Fergerson Chief Executive Officer - Finance and Administration Date February 25, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/LAURA F. FERGERSON -------------------------- Laura F. Fergerson Chief Executive Officer - Finance and Administration Date February 25, 2010 By /s/GASTON GARDEY ------------------ Gaston Gardey Chief Financial Officer and Chief Accounting Officer Date February 25, 2010