<TABLE>
<CAPTION>
CONTENTS
<S> <C>
FRANKLIN GROWTH FUND 2
seeks capital appreciation by investing
primarily in common stocks or convertible
securities believed to offer favorable
possibilities for capital appreciation.
FRANKLIN DYNATECH FUND 4
seeks capital appreciation from a portfolio
of companies emphasizing technological
development in fast-growing industries
or in situations which management
considers undervalued.
FRANKLIN UTILITIES FUND 6
seeks both capital appreciation and
current income from a portfolio of public
utility securities.
FRANKLIN INCOME FUND 8
seeks to maximize income while maintaining
prospects for capital appreciation through a
diversified portfolio of securities.
FRANKLIN U.S. GOVERNMENT
SECURITIES FUND 10
seeks high current income from a portfolio
of U.S. government securities.
RESULTS OF SHAREHOLDER MEETING 14
STATEMENT OF INVESTMENTS 15
FINANCIAL STATEMENTS 34
</TABLE>
- --------------------------------------------------------------------------------
Mutual Funds, Annuities, and Other Investment Products:
- - are not FDIC insured;
- - are not deposits or obligations of, or guaranteed by, any financial
institution;
- - are subject to investment risks, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------
May 15, 1995
Fellow Shareholder:
Welcome to the 47th
semi-annual report of
Franklin Custodian
Funds, Inc., which
covers the six-month
period ended
March 31, 1995.
Charles B. Johnson
President
The six months covered
by this report were a reminder that volatility is a fundamental market
condition. In 1994, stocks delivered below-average returns and bonds had one of
their worst years in history. To date, 1995 has been a different story.
U.S. economic growth has fallen to a more sustainable level, inflation appears
to be under control, and interest rates seem to have stabilized for the time
being. Of even more importance to mutual fund owners, stock prices, as measured
by the Dow Jones Industrial Average(R), and long-term bond prices, as measured
by 30-year Treasuries, have risen substantially. The Dow Jones rose 8.18% from
3843.19 on September 30, 1994 to 4157.69 on March 31, 1995, and long-term bond
prices rose 4.11% during the same period.*
Of course, there can be no guarantee that these markets will continue to rise
steadily over the months to come. As you know, markets experience both ups and
downs, and volatility is a normal part of investing. This is why we have always
encouraged investors to focus on their
*Source: Dow Jones Industrial Average; Merrill Lynch Long-Term Bond Index.
Indices are unmanaged.
1
<PAGE>
long-term investment goals. History has proven that, over the long run, stocks
and bonds have delivered impressive financial results. As the charts below
demonstrate, if you concentrate on the long term, you need not be unduly
concerned about how the market rises and falls in the short term.
In addition, many financial experts agree that a technique called Dollar Cost
Averaging may be one of the best ways to take advantage of market downturns and
rallies. With Dollar Cost Averaging, you invest a fixed dollar amount at regular
intervals, regardless of the market's direction. By doing this, you
automatically buy more shares when the price is low and fewer shares when the
price is high. As a result, you can significantly reduce your average cost per
share.
Of course, no investment technique can assure a profit or completely protect
against loss. But Dollar Cost Averaging does provide you with a simple
investment strategy that can minimize the effects of market volatility and help
you make the most of your investment dollars.*
You can also deal with market fluctuations by diversifying your investments.
Mutual funds offer a level of diversification that would be almost impossible
for individual investors to achieve on their own. On the pages that follow,
you'll find detailed discussions of the five funds included in this report.
While each fund has a distinct investment objective, all of our managers are
dedicated to providing shareholders with careful selection, broad
diversification and constant professional supervision.
Periodically you should consult with your investment representative to make sure
you are invested in funds that match your long-term goals.
We welcome your questions, thank you for your support, and look forward to
serving you in the years to come.
Sincerely,
Charles B. Johnson
President
<TABLE>
<CAPTION>
HOW YOU SEE THE MARKET DEPENDS ON YOUR POINT OF VIEW
<S> <C>
Standard & Poor's 500 Stock Index(R) Standard & Poor's 500 Stock Index(R)
Monthly Total Returns 2-Year Rolling Total Returns
April 1955 - March 1995 April 1955 - March 1995
</TABLE>
GRAPHIC MATERIAL (1) OMITTED - SEE APPENDIX
GRAPHIC MATERIAL (2) OMITTED - SEE APPENDIX
** Total return assumes reinvestment of dividends and capital gains.
These charts are for illustrative purposes only, and do not represent the
performance of any Franklin or Templeton fund. An index includes no sales
charges or management expenses. Of course one cannot invest directly in an index
and past performance is not indicative of future results.
* When using this strategy, you should consider your financial ability to
continue purchases through periods of low price levels or changing economic
conditions. For more information on Dollar Cost Averaging, see your investment
advisor. Or call Franklin Templeton Fund Information toll free at 1-800/DIAL
BEN.
1
<PAGE>
FRANKLIN GROWTH FUND
During the six months under review, the U.S. economy's growth began to slow, and
the "soft landing" (moderate growth, low inflation) sought by the U.S. Federal
Reserve Board appeared possible. On February 23, 1995, a few weeks after the
Federal Reserve had raised interest rates for the seventh time in one year, the
Dow Jones Industrial Average achieved its first close above the 4000 level. It
ended the period on March 31 at 4157.69, an advance of 8.18% from its level at
the start of the reporting period.
The market's rise was reflected in the performance of your fund, which posted a
total return of +11.01% for the six-month period, as you can see from the
Performance Summary on page 3. For the year ended March 31, 1995, the Franklin
Growth Fund produced a total return of +20.43%, which earned it the #12 ranking
by Lipper Analytical Services, Inc., out of 501 funds in the Lipper growth stock
category.1
The fund's outstanding performance was due in part to the return to favor of
health care and pharmaceutical stocks. On March 31, 1995, these were the most
heavily weighted sectors in our portfolio, totaling 19.7% of total net assets.
Our two largest holdings in this area include the major American pharmaceutical
companies, Schering-Plough Corp. and Pfizer Corp.
Three companies within the fund's data processing holdings also performed
strongly during the six-month
FRANKLIN GROWTH FUND
Top 10 Holdings on March 31, 1995
<TABLE>
<CAPTION>
% OF TOTAL
COMPANY INDUSTRY NET ASSETS
- -----------------------------------------------------------------
<S> <C> <C>
Computer Sciences, Inc. Data Processing 3.78%
- -----------------------------------------------------------------
AMR Corp. Transportation 3.41%
- -----------------------------------------------------------------
Schering-Plough Corp. Pharmaceuticals 2.84%
- -----------------------------------------------------------------
Minnesota Mining & Diversified Manufacturers 2.77%
Manufacturing Corp.
- -----------------------------------------------------------------
Raytheon Co. Aerospace 2.74%
- -----------------------------------------------------------------
Delta Air Lines, Inc. Transportation 2.67%
- -----------------------------------------------------------------
AMP, Inc. Electronics 2.45%
- -----------------------------------------------------------------
Pfizer, Inc. Pharmaceuticals 2.33%
- -----------------------------------------------------------------
Dun & Bradstreet Corp. Business Services 2.18%
- -----------------------------------------------------------------
Automatic Data Data Processing 2.14%
Processing, Inc.
- -----------------------------------------------------------------
</TABLE>
FOR A DETAILED LISTING OF PORTFOLIO HOLDINGS, SEE PAGE 15 OF THIS REPORT.
GRAPHIC MATERIAL (3) OMITTED - SEE APPENDIX
(1)The fund was ranked #144 out of 231 growth stock funds for the five-year
period, and #49 out of 136 for the ten-year period ended March 31, 1995, as
measured by Lipper Analytical Services, Inc., a nationally recognized mutual
fund research organization. Lipper rankings do not include sales charges, and
may have been different if such charges had been considered. Past performance is
not predictive of future results.
2
<PAGE>
FRANKLIN DYNATECH FUND
During the six months under review, the U.S. economy continued to grow, although
at a slower pace than in the fund's previous reporting period. This slowdown,
which followed several interest rate increases by the Federal Reserve Board over
the past year, coupled with stronger-than-expected corporate earnings, provided
a favorable environment for your fund's holdings. As you can see from the
Performance Summary on page 5, the fund delivered a total return of +8.53% for
the six-month period ended March 31, 1995.
On March 31, 1995, the fund held stocks of 45 companies that are, or someday may
be, leaders within industries such as semiconductors, electronic equipment,
computers, telecommunications, medicine, and environmental services. Our largest
industry weighting was semiconductor manufacturers, which was the best
performing technology sector during the period under review. Major holdings
within this group include Intel Corp. and Xilinx, Inc.
During the reporting period, we continued to increase our exposure to the
growing computer software sector by adding a new position in Adobe Systems, a
leading manufacturer of software products that enable users to create, display,
and print electronic documents. In the related area of data services, the fund
initiated positions in Computer Sciences Corp. and First Financial Management.
Computer Sciences Corp. is a provider of systems integration, outsourcing and
management consulting services, while First Financial Management offers merchant
and consumer payment services, as well as data imaging and health care claims
processing services.
The fund also increased its exposure to the rapidly expanding area of
peripherals -- auxiliary devices that, along with semiconductor chips, are
embedded in
FRANKLIN DYNATECH FUND
Top 10 Holdings on March 31, 1995
Based on Total Net Assets
<TABLE>
<CAPTION>
% OF TOTAL
COMPANY INDUSTRY NET ASSETS
- ------------------------------------------------------------
<S> <C> <C>
1. Intel Corp. Semiconductor 12.02%
Manufacturers
- ------------------------------------------------------------
2. Motorola, Inc. Telecommunications 10.31%
- ------------------------------------------------------------
3. Microsoft Corp. Computer Software 4.32%
- ------------------------------------------------------------
4. Hewlett-Packard Co. Computer Hardware 4.06%
- ------------------------------------------------------------
5. Toys R Us, Inc. Specialty Retailers 3.73%
- ------------------------------------------------------------
6. WMX Environmental Services 2.97%
Technologies, Inc.
- ------------------------------------------------------------
7. Thermo Electron Precision Instruments 2.57%
Corp.
- ------------------------------------------------------------
8. Broderbund Computer Software 2.10%
Software, Inc.
- ------------------------------------------------------------
9. Compaq Computer Computer Hardware 2.09%
Corp.
- ------------------------------------------------------------
10. Xilinx, Inc. Semiconductor 1.83%
Manufacturers
- ------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 19 OF THIS REPORT.
GRAPHIC MATERIAL (4) OMITTED - SEE APPENDIX
4
<PAGE>
FRANKLIN UTILITIES FUND
We are pleased to report that the Franklin Utilities Fund enjoyed a strong
rebound during this six-month reporting period, which ended March 31, 1995.
Benefiting primarily from a rally in electric utilities stocks, the fund's
six-month total return was +7.74%, reflecting a 4.4% increase in its per share
net asset value from $8.33 on September 30, 1994, to $8.70 on March 31, 1995. As
shown in the performance summary on page 7, this total return measures the
change in value of an investment, assuming reinvestment of dividends and capital
gains distributions, and does not include the fund's maximum initial sales
charge.
As we reported in the fund's annual report dated September 30, 1994, utilities
stock prices declined during the first nine months of 1994, reflecting the
impact of rising interest rates, impending threats of increased market
competition and possible electric company dividend cuts (following the FPL,
Corp. dividend reduction in May of 1994). During that time, the Standard &
Poor's Utilities Index declined 20.9%, from 81.71 on December 31, 1993 to 64.57
on September 30, 1994.
Several factors contributed to the utilities stocks' rally. First, when prices
began to rebound in September, many of the fears surrounding increased
competition and possible dividend reductions had subsided, as it became apparent
that the electric industry's health remained intact.
A second factor was investor uncertainty in the broader stock market. Higher
interest rates, fears of higher inflation, lower corporate profitability and
volatility in overseas stock markets, led many broad stock market investors back
to utilities, which have been known for their historically high yields, stable
earnings, and dependable dividend streams.
FRANKLIN UTILITIES FUND
Top Ten Holding on March 31, 1995
Based on Total Net Assets
<TABLE>
<CAPTION>
% OF TOTAL
COMPANY NET ASSETS
- -------------------------------------------------------
<S> <C>
Southern Company 4.57%
- -------------------------------------------------------
Duke Power CO. 4.16%
- -------------------------------------------------------
Dominion Resources, INC. 3.93%
- -------------------------------------------------------
General Public Utilities Corp. 3.97%
- -------------------------------------------------------
Texas Utilities Co. 3.89%
- -------------------------------------------------------
American Electric Power Co., Inc. 3.51%
- -------------------------------------------------------
Central & Southwest Corp. 3.60%
- -------------------------------------------------------
Pacific Gas & Electric 3.26%
- -------------------------------------------------------
Allegheny Power System, Inc. 3.21%
- -------------------------------------------------------
TECO Energy, Inc. 3.15%
- -------------------------------------------------------
</TABLE>
FOR A COMPLETE LISTING OF FUND HOLDINGS, SEE PAGE 21 OF THIS REPORT.
GRAPHIC MATERIAL (5) OMITTED - SEE APPENDIX
6
<PAGE>
FRANKLIN INCOME FUND
During the six months from September 30, 1994 to March 31, 1995, the U.S.
economy strengthened, but also showed some indications of a possible slowdown.
U.S. Gross Domestic Product, after increasing at an annualized rate of 5.1% in
the fourth quarter of 1994, slowed to 2.8% in the first quarter of 1995.(1) As
signs of reduced economic activity and contained inflation became apparent,
stock and bond prices began to rise, and several of the fund's defensive sectors
rebounded, most notably its utility and pharmaceutical stocks, and its U.S.
Treasury bond holdings. This served to offset the weaker performances of our
gold stock and foreign bond holdings and contributed to the fund's total return
of +1.85% for the six-month period, as shown in the Performance Summary on page
9.
As you know, the fund has the flexibility to invest in any combination of
stocks, bonds and cash as market opportunities warrant. At the end of the
reporting period, 57.7% of the fund's total net assets were invested in bonds,
34.8% in stocks, and the remaining 7.5% in cash. The fund's cash position
declined from 16.1% on September 31, 1994 to 7.5% on March 31, 1995, as we added
to our utility stock, U.S. Treasury bond, and corporate bond holdings.
The fund's bond holdings increased from 47.3% to 57.7% of total net assets over
the course of the reporting period. On March 31, 1995, these holdings consisted
of corporate bonds (29.5% of total net assets), U.S. Treasury bonds (16.3%), and
foreign bonds (11.9%). We initiated new corporate bond positions in issues such
as Westpoint Stevens, Inc. (textiles) and Harrah's Jazz Co. (gaming), which
offered attractive yields as well as the potential for appreciation due to
anticipated improvement in credit quality. Of course, investors should be aware
that the fund may invest a substantial amount of its assets in lower-rated
bonds, which may entail a greater degree of risk than investment-grade
bonds.(2) Our U.S. Treasury bond holdings were increased in November and
February with the addition of five- and seven-year Treasury notes. This helped
the fund's performance because the value of the notes appreciated as interest
rates subsequently declined.
We also increased the fund's foreign bond holdings by adding to its South
African and U.S. dollar-denominated Argentina Brady bond exposure. Recent
strength in the South African and Canadian bond markets offset much of the
weakness our Latin American bonds suffered after Mexico's currency devaluation
in December. On March 31, 1995, the fund's U.S. dollar and non-dollar Latin
American exposure represented 7% of total net assets.
With regard to the equity portion of the portfolio, electric utilities continued
to represent the largest sector at 14.9% of total net assets, followed by energy
at 5.3%. Due in
GRAPHIC MATERIAL (6) OMITTED - SEE APPENDIX
(1) Source: U.S. Commerce Dept.
(2) These and other risks are discussed in the fund's prospectus.
8
<PAGE>
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
Short-term interest rates continued to rise during the six-month reporting
period, as the Federal Reserve Open Market Committee raised the federal funds
rate for the sixth and seventh times in the past 13 months. After rising through
November of 1994, however, longer-term market rates began to decline. From
November 30, 1994, through March 31, 1995, for example, 30-year Treasury rates
fell to 7.44% from 7.99% and 10-year Treasuries to 7.20% from 7.91%. Two-year
Treasuries fell to 6.80% in March, after peaking at 7.69% at the end of
December.(1)
Other economic data recently released also seems to indicate that the Federal
Reserve Board may have successfully engineered its much sought-after "soft
landing." Economic growth has slowed and inflation remains under control. Stock
and bond markets have responded positively to this news -- in terms of total
return, the unmanaged Dow Jones Industrial Average(R) was up over 9% for the
first three months of 1995, and 10-year and 30-year Treasuries were up over 3%
and 4%, respectively, for the same period.(2)
The Government National Mortgage Association securities (Ginnie Maes) in which
the fund concentrates its investments also appreciated in value during the past
six months. As a result, we're pleased to report that the Franklin U.S.
Government Securities Fund recorded a cumulative total return of +5.54% for the
six months ended March 31, 1995. Total return measures the change in value of an
investment over the period indicated, and assumes reinvestment of dividends and
capital gains.
As mortgage-backed bonds, Ginnie Maes are susceptible to prepayment when
interest rates fall, since homeowners generally refinance their mortgages during
periods of declining rates. As short-term interest rates rose in 1994,
prepayments dropped dramatically. Long-term rates, however, have declined
recently and some acceleration of prepayments should be expected, although
prepayments are not anticipated to approach the levels seen in 1993.
Of concern for investors in GNMA mutual funds is the increased use by some funds
of exotic derivative securities. These types of securities gained popularity in
recent years as interest rates declined. Unfortunately, many of these securities
were new to the market and had no track record in a rising interest-rate
environment. When interest rates rose dramatically in 1994, many of these
securities plummeted in value. As a result, many mutual funds and other
investment vehicles that invested in these securities also saw their share
prices fall.
Fortunately for our shareholders, the Franklin U.S. Government Securities Fund
has never invested and does not currently invest in derivative securities,
including options and futures. Although the Government National Mortgage
Association has begun to issue real estate mortgage investment conduits (REMICs)
and collateralized mortgage obligations (CMOs) -- two popular types of
mortgage-backed derivatives -- we do not purchase these types of securities for
the fund.
As we've said in past reports, the fund continues to be managed as an income
fund. As such, we do not trade the fund's securities in hopes of capturing
capital gains, nor do we make risky interest rate bets on what MIGHT happen in
the Ginnie Mae market. Instead, we focus on providing our shareholders with a
high level of current income. Considering that over the last 15 years (January
1980 through December 1994) income has
GRAPHIC MATERIAL (7) OMITTED - SEE APPENDIX
(1) Source: Micropal
(2) Source: Dow Jones Industrial Average and Merrill Lynch Treasury Indices.
Total return of the DJIA includes reinvested dividends and is calculated by
Wilshire Associates, Inc. One cannot invest directly in an index.
10
<PAGE>
FRANKLIN U.S. GOVERNMENT SECURITIES FUND Continued
On March 31, 1995, 96.8% of the fund's assets were invested in GNMA securities,
with 2.7% invested in U.S. Treasury securities. The fund's average maturity
remained stable at 26 years, and its average life held steady at five to nine
years. The fund's average coupon rose slightly to 8.15% from 8.00% at the
beginning of the six-month reporting period.
GRAPHIC MATERIAL (8) OMITTED - SEE APPENDIX
As a result of the fund's higher income, the fund's monthly dividend was raised
to 4.1 cents per share from 4.0 cents per share, effective with the May 1995
distribution. Dividends will vary, depending on the fund's income, and past
distributions are not indicative of future trends.
The fund's 30-day yield also rose during the reporting period, increasing to
7.12% on March 31, 1995, from 6.99% on September 30, 1994. The fund's current
30-day standardized yield compared favorably with other types of investments, as
the chart to the left illustrates.
Looking forward, a number of factors will affect the performance of the overall
bond market, as well as the Ginnie Mae market. Investors appear to have accepted
the "soft landing" scenario, and markets have benefited from expectations of
slower, non-inflationary growth. Furthermore, both U.S. stock and bond markets
seem to be ignoring the potentially inflationary effects of a weak dollar --
perhaps because more pressing concerns in Canada, Sweden, Italy, and Mexico as
well as other parts of Latin America have helped highlight the relative quality
and liquidity of the dollar. However, in order to sustain economic growth,
progress must be made toward reducing the budget and trade deficits.
We foresee fairly steady interest rates for the coming six months. Economic
growth has already begun to slow as the effects of last year's higher interest
rates begin to be felt, providing impetus for the bond rally currently underway.
Inflation may accelerate due to the rapid growth during the past year. This
could require one more tightening by the Federal Reserve, but we believe we are
nearing the end of the Fed's aggressive intervention to control inflation. Given
these conditions, we believe the Franklin U.S. Government Securities Fund is
poised to perform well in 1995.
*Source: CDs -- Micropal; Average Ginnie Mae fund 30-day yield -- Lipper
Analytical Services; Money Market funds -- IBC/Donoghue All Taxable Money Market
Average. Franklin U.S. Government Securities Fund 30-day yield, calculated as
required by the SEC, is based on earnings of the fund's portfolio for the 30
days ended March 31, 1995. CDs are insured by the FDIC for up to $100,000 and
offer a fixed rate of return. Money funds attempt to maintain a stable net asset
value of $1.00 per share, while shares of the Franklin U.S. Government
Securities Fund will fluctuate with market conditions.
12
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
IMPORTANT NEWS FOR SHAREHOLDERS OF THE FRANKLIN GROWTH FUND,
UTILITIES FUND, INCOME FUND AND U.S. GOVERNMENT SECURITIES FUND
On May 1, 1995, Franklin Templeton added a second pricing structure for many of
its funds. Your Fund now offers two classes of shares designated as "Class I"
and "Class II." The primary differences between the two classes are outlined
below:
Class I Shares will continue to have the same pricing structure, which is the
standard front-end sales charge (with breakpoints) and annual 12b-1 Plan fees.
Class II Shares have a different pricing structure with a lower initial sales
charge than Class I shares; however, they have higher annual 12b-1 Plan fees.
Also, with certain exceptions, a contingent deferred sales charge (back-end
sales charge) will generally be assessed on Class II shares redeemed within
eighteen months of a purchase.
Each class of shares will bear, pro rata, all of the common expenses of the
Fund, (for example, management fees). The 12b-1 Plan fees for Class I and Class
II are different, and are assessed only with respect to the particular class.
The different expenses borne by each class of shares will result in different
net asset values, dividends and ultimately different total performance.
All Fund shares outstanding before May 1, 1995 have been designated as Class I
shares. PLEASE NOTE THERE HAVE BEEN NO CHANGES TO YOUR EXISTING CLASS I ACCOUNT.
The new development is only the addition of Class II shares, which are now
available with many of our funds.
Please note that neither your account nor its pricing structure has changed, but
you will notice the new "Class I" share designation on all future account
statements and fund correspondence.
In assessing whether your future investments should be in Class I or Class II
shares, we encourage you to consult your investment representative.
FRANKLIN CUSTODIAN FUNDS, INC.
SPECIAL MEETING OF SHAREHOLDERS
At a special meeting of shareholders of the Franklin Custodian Funds, Inc. held
on March 20, 1995, shareholders of the Funds voted on an amendment to the Funds'
Articles of Incorporation to permit the issuance of additional classes of shares
and to make other conforming changes. The proposal was approved by shareholders
and the vote was as follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN
----------- ------------- ----------- -----------
<S> <C> <C> <C>
Franklin Growth Fund 18,014,768 1,052,764 1,584,756
Franklin Utilities Fund 150,816,331 9,878,977 10,976,520
Franklin DynaTech Fund 3,551,271 292,008 195,175
Income Fund 1,136,813,541 68,673,898 80,214,077
U.S. Government Securities Series 893,338,983 53,759,182 59,281,814
</TABLE>
At the same meeting the shareholders also voted on the approval of an amendment
to the Income Series' investment policies to permit the Income Series to invest
in trade claims The proposal was approved by shareholders and the vote was as
follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
------------- ----------- ----------
<S> <C> <C>
1,079,089,102 121,405,677 85,206,438
</TABLE>
14
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES GROWTH FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 97.2%
AEROSPACE 8.1%
200,000 Boeing Co. ............................................................................ $10,775,000
162,600 Lockheed Corp. ........................................................................ 8,597,475
221,000 Raytheon Co. .......................................................................... 16,105,375
50,000 Rockwell International Corp. .......................................................... 1,950,000
120,000 Thiokol Corp. ......................................................................... 3,405,000
100,000 United Technologies Corp. ............................................................. 6,912,500
-----------
47,745,350
-----------
AUTO PARTS .6%
90,000 Genuine Parts Co. ..................................................................... 3,588,750
-----------
BIOTECHNOLOGY 2.2%
100,000 a Amgen, Inc. ........................................................................... 6,737,500
120,000 a Genentech, Inc. ....................................................................... 5,625,000
20,000 a Immunex Corp. ......................................................................... 345,000
8,000 a Therapeutic Discovery Corp. ........................................................... 51,000
-----------
12,758,500
-----------
BUSINESS SERVICES 5.6%
110,000 Avery Dennison Corp. .................................................................. 4,386,250
244,000 Dun & Bradstreet Corp. ................................................................ 12,840,500
200,000 Equifax, Inc. ......................................................................... 6,750,000
250,000 Kelly Services, Inc., Class A ......................................................... 9,000,000
345,300a,e,f,g Programming & Systems, Inc. ........................................................... 6,906
-----------
32,983,656
-----------
CHEMICALS 4.6%
200,000 Air Products & Chemicals, Inc. ........................................................ 10,425,000
25,000 Eastman Chemical Co. .................................................................. 1,390,625
20,000 Loctite Corp. ......................................................................... 962,500
116,000 Mallinckrodt Group, Inc. .............................................................. 3,915,000
100,000 NCH Corp. ............................................................................. 6,337,500
100,000 Sigma-Aldrich Corp. ................................................................... 3,875,000
-----------
26,905,625
-----------
COMMUNICATIONS & ENTERTAINMENT 7.4%
300,000 American Greetings Corp., Class A ..................................................... 8,962,500
100,000 Capital Cities/ABC, Inc. .............................................................. 8,825,000
200,000 Disney (Walt) Co. ..................................................................... 10,675,000
100,000 a Intervisual Books, Inc. ............................................................... 193,750
10,000 a King World Productions, Inc. .......................................................... 393,750
300,000 Time Warner, Inc. ..................................................................... 11,325,000
200,000 Turner Broadcasting Systems, Class A .................................................. 3,400,000
-----------
43,775,000
-----------
COSMETICS .2%
12,700 International Flavors and Fragrances, Inc. ............................................ 655,638
50,000 a Perrigo Co. ........................................................................... 581,250
-----------
1,236,888
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
VALUE
SHARES GROWTH FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
DATA PROCESSING 9.0%
200,000 Automatic Data Processing, Inc. ....................................................... $12,600,000
450,000 a Computer Sciences Corp. ............................................................... 22,218,750
140,000 International Business Machines Corp. ................................................. 11,462,500
210,000 Wallace Computer Services, Inc. ....................................................... 6,746,250
-----------
53,027,500
-----------
DIVERSIFIED MANUFACTURERS 3.7%
280,000 Minnesota Mining & Manufacturing Co. .................................................. 16,275,000
100,000 National Service Industries, Inc. ..................................................... 2,700,000
66,600 Teleflex, Inc. ........................................................................ 2,680,650
-----------
21,655,650
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT 6.9%
30,000 a American Power Conversion Corp. ....................................................... 491,250
400,000 AMP, Inc. ............................................................................. 14,400,000
40,000 Emerson Electric Co. .................................................................. 2,660,000
90,000 Hewlett-Packard Co. ................................................................... 10,833,750
60,000 Molex, Inc. ........................................................................... 2,145,000
60,000 Molex, Inc., Class A .................................................................. 2,025,000
200,000 Raychem Corp. ......................................................................... 8,125,000
-----------
40,680,000
-----------
ENERGY/ENERGY SERVICES 5.2%
90,000 Atlantic Richfield Co. ................................................................ 10,350,000
300,000 Coastal Co. ........................................................................... 8,625,000
40,000 Murphy Oil Corp. ...................................................................... 1,725,000
70,000 Royal Dutch Petroleum Co., New York Shares ............................................ 8,400,000
30,000 Schlumberger, Ltd. .................................................................... 1,788,750
-----------
30,888,750
-----------
ENVIRONMENTAL PROTECTION & PURIFICATION 8.1%
100,000 Betz Laboratories, Inc. ............................................................... 4,375,000
165,000 Browning-Ferris Industries, Inc. ...................................................... 5,610,000
230,000 a Ionics, Inc. .......................................................................... 6,900,000
200,000 Millipore Corp. ....................................................................... 11,150,000
256,500 a Osmonics, Inc. ........................................................................ 4,232,250
209,100 Pall Corp. ............................................................................ 4,391,100
270,000 Wheelabrator Technology, Inc. ......................................................... 3,678,750
210,000 WMX Technologies, Inc. ................................................................ 5,775,000
100,000 Zurn Industries, Inc. ................................................................. 1,837,500
-----------
47,949,600
-----------
FOOD/CONFECTIONERY 1.1%
129,100 Hershey Foods Corp. ................................................................... 6,600,238
-----------
HEALTH CARE - DIVERSIFIED 10.1%
200,000 Abbott Laboratories ................................................................... 7,125,000
200,000 Allergan, Inc. ........................................................................ 5,900,000
100,000 a Alza Corp., Class A ................................................................... 2,125,000
150,000 American Home Products Corp. .......................................................... 10,687,500
250,000 Baxter International, Inc. ............................................................ 8,187,500
62,500 Caremark International, Inc. .......................................................... 1,234,375
100,000 a Forest Laboratories, Inc., Class A .................................................... 4,762,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
VALUE
SHARES GROWTH FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
HEALTH CARE - DIVERSIFIED (CONT.)
200,000 Johnson & Johnson, Inc. ............................................................... $ 11,900,000
200,000 a Respironics, Inc. ..................................................................... 2,875,000
200,000 U.S. Surgical Corp. ................................................................... 4,550,000
------------
59,346,875
------------
IMAGING/PHOTOGRAPHY 1.6%
150,000 Eastman Kodak Co. ..................................................................... 7,968,750
38,000 Polaroid Corp. ........................................................................ 1,320,500
------------
9,289,250
------------
PHARMACEUTICALS 9.6%
160,000 Bristol-Myers Squibb Co. .............................................................. 10,080,000
100,000 Lilly (Eli) & Co. ..................................................................... 7,312,500
200,000 Merck & Co., Inc. ..................................................................... 8,525,000
160,000 Pfizer, Inc. .......................................................................... 13,720,000
225,000 Schering-Plough Corp. ................................................................. 16,734,375
------------
56,371,875
------------
RETAILERS 1.9%
22,000 Natures Sunshine Products, Inc. ....................................................... 247,500
300,000 Tiffany & Co. ......................................................................... 9,300,000
58,218 Weis Markets, Inc. .................................................................... 1,484,559
------------
11,032,059
------------
TELECOMMUNICATIONS 2.1%
225,000 a Cabletron Systems, Inc. ............................................................... 10,096,874
20,000 a Cisco Systems, Inc. ................................................................... 762,500
200,000 a Network Computing Devices ............................................................. 1,350,000
------------
12,209,374
------------
TRANSPORTATION 9.2%
150,000 a Alaska Air Group, Inc. ................................................................ 2,381,250
310,000 a AMR Corp. ............................................................................. 20,072,500
250,000 Delta Air Lines, Inc. ................................................................. 15,687,500
87,500 a UAL Corp. ............................................................................. 9,187,500
120,000 Union Pacific Corp. ................................................................... 6,600,000
------------
53,928,750
------------
TOTAL COMMON STOCKS (COST $391,179,688) ......................................... 571,973,690
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
- -----------
<S> <C> <C>
k,l RECEIVABLES FROM REPURCHASE AGREEMENTS 2.1%
$12,041,179 Joint Repurchase Agreement, 6.27%, 04/03/95 (Maturity Value $12,134,438 (COST $12,128,101)
Collateral: U.S. Treasury Notes, 5.00% - 9.25%, 08/31/96 - 12/31/99 ................. 12,128,101
------------
TOTAL INVESTMENTS (COST $403,307,789) 99.3% ................................ 584,101,791
OTHER ASSETS AND LIABILITIES, NET .7% ...................................... 4,404,818
------------
NET ASSETS 100.0% .......................................................... $588,506,609
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
VALUE
GROWTH FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
At March 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $403,307,789 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ...................................................... $193,039,306
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ...................................................... (12,245,304)
------------
Net unrealized appreciation ......................................................... $180,794,002
============
</TABLE>
a Non-income producing.
e See Note 1 regarding securities valued by the Board of Directors.
f See Note 10 regarding holdings of 5% voting securities.
g Trading suspended.
k Face amount for repurchase agreements is for the underlying collateral.
l See Note 1(g) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES DYNATECH FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 70.9%
COMPUTER HARDWARE 6.6%
45,000 aCompaq Computer Corp. ....................................................................... $ 1,552,500
10,000 aEMC Corp. ................................................................................... 167,500
25,000 Hewlett-Packard Co. ......................................................................... 3,009,375
10,000 aRead-Rite Corp. ............................................................................. 191,250
-----------
4,920,625
-----------
COMPUTER SOFTWARE 9.2%
10,000 Adobe Systems, Inc. ......................................................................... 495,000
30,000 aBroderbund Software, Inc. ................................................................... 1,556,250
5,000 aComputer Sciences Corp. ..................................................................... 246,875
5,000 First Financial Management Corp. ............................................................ 361,250
45,000 aMicrosoft Corp. ............................................................................. 3,200,625
15,000 aOracle Systems Corp. ........................................................................ 468,750
5,000 aSpectrum Holobyte, Inc. ..................................................................... 80,313
10,000 aSybase, Inc. ................................................................................ 400,000
-----------
6,809,063
-----------
ENVIRONMENTAL SERVICES 3.9%
20,000 Browning-Ferris Industries, Inc. ............................................................ 680,000
80,000 WMX Technologies, Inc. ...................................................................... 2,200,000
-----------
2,880,000
-----------
MEDIA/PROGRAMMING 1.6%
20,000 News Corp. Ltd., ADR ........................................................................ 382,500
19,500 aTele-Communications, Inc. ................................................................... 409,500
10,000 Time Warner, Inc. ........................................................................... 377,500
-----------
1,169,500
-----------
MEDICAL SERVICES 4.1%
15,000 Columbia/HCA Healthcare Corp. ............................................................... 645,000
40,000 aHumana, Inc. ................................................................................ 1,025,000
5,000 Medtronic, Inc. ............................................................................. 346,875
5,000 aQuorum Health Group, Inc. ................................................................... 103,750
20,000 United Healthcare Corp. ..................................................................... 935,000
-----------
3,055,625
-----------
NETWORKING 3.6%
30,000 aCisco Systems, Inc. ......................................................................... 1,143,750
20,000 ECI Telecommunications Limited Designs ...................................................... 297,500
20,000 a3Com Corp. .................................................................................. 1,132,500
1,400 aTivoli Systems, Inc. ........................................................................ 51,800
-----------
2,625,550
-----------
PHARMACEUTICAL MANUFACTURERS 3.7%
5,000 aElan Corp., Plc., ADR ....................................................................... 186,250
15,000 Merck & Co., Inc. ........................................................................... 639,375
10,000 Schering-Plough Corp. ....................................................................... 743,750
15,000 Warner-Lambert Co. .......................................................................... 1,173,750
-----------
2,743,125
-----------
PRECISION INSTRUMENTS/TEST EQUIPMENT 4.1%
10,000 Schlumberger, Ltd. .......................................................................... 596,250
20,000 Sensormatic Electrics Corp. ................................................................. 560,000
37,500 aThermo Electron Corp. ....................................................................... 1,907,813
-----------
3,064,063
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
VALUE
SHARES DYNATECH FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
SEMICONDUCTOR/MANUFACTURER 13.8%
105,000 Intel Corp. ................................................................................. $ 8,911,874
20,000 aXilinx, Inc. ................................................................................ 1,355,000
-----------
10,266,874
-----------
SPECIALTY PHARMACEUTICALS 1.2%
15,000 aNoven Pharmaceuticals, Inc. ................................................................. 127,500
20,000 Sigma-Aldrich Corp. ......................................................................... 775,000
-----------
902,500
-----------
SPECIALTY RETAILERS 4.3%
10,000 Home Depot, Inc. ............................................................................ 442,500
108,000 aToys R Us, Inc. ............................................................................. 2,767,500
-----------
3,210,000
-----------
TELECOMMUNICATIONS 12.4%
5,000 aAirTouch Communications ..................................................................... 136,250
25,000 AT&T Co. .................................................................................... 1,293,750
10,000 aGrupo Iusacell, SA de C.V., ADR ............................................................. 118,750
140,000 Motorola, Inc. .............................................................................. 7,647,500
-----------
9,196,250
-----------
TRANSPORTATION .9%
10,000 aAMR Corp. ................................................................................... 647,500
-----------
MISCELLANEOUS 1.5%
25,000 Duracell International, Inc. ................................................................ 1,118,750
-----------
TOTAL COMMON STOCKS (COST $22,056,241) ................................................ 52,609,425
-----------
PREFERRED STOCKS .2%
10,000 News Corp., Ltd., $4.00 pfd., ADR (COST $166,395) ........................................... 172,500
-----------
TOTAL COMMON STOCKS AND PREFERRED STOCKS (COST $22,222,636) ........................... 52,781,925
-----------
<CAPTION>
FACE
VALUE
- -----------
<S> <C> <C>
kRECEIVABLES FROM REPURCHASE AGREEMENTS 28.9%
$3,500,000 Fuji Securities, Inc., 6.25%, 04/03/95 (Maturity Value $9,004,688)
Collateral: U.S. Treasury Notes, 7.375%, 05/15/96 .......................................... 9,000,000
9,000,000 Nikko Securities Co. International, Inc., 6.15%, 04/03/95 (Maturity Value $3,501,794)
Collateral: U.S. Treasury Notes, 5.125%, 03/31/98 .......................................... 3,500,000
8,843,718 lJoint Repurchase Agreement, 6.27%, 04/03/95 (Maturity Value $8,912,158)
Collateral: U.S. Treasury Notes, 5.00% - 9.25%, 08/31/96 - 12/31/99 ........................ 8,907,504
-----------
TOTAL RECEIVABLES FROM REPURCHASE AGREEMENTS (COST $21,407,504) ....................... 21,407,504
-----------
TOTAL INVESTMENTS (COST $43,630,140) 100.0% ...................................... 74,189,429
LIABILITIES IN EXCESS OF OTHER ASSETS, NET ........................................ (28,395)
-----------
NET ASSETS 100.0% ................................................................ $74,161,034
===========
At March 31, 1995, the net unrealized appreciation based on the cost of investment
for income tax purposes of $43,630,140 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $30,985,277
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (425,988)
-----------
Net unrealized appreciation ............................................................... $30,559,289
===========
</TABLE>
a Non-income producing.
k Face amount for repurchase agreements is for the underlying collateral.
l See Note 1(g) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES UTILITIES FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 83.3%
1,236,900 aAirTouch Communications, Inc. ........................................................... $ 33,705,525
3,708,900 Allegheny Power System, Inc. ............................................................ 83,913,863
2,886,100 American Electric Power Co., Inc. ....................................................... 91,633,675
3,878,000 Central & South West Corp. .............................................................. 94,041,500
10,000 Central Louisiana Electric, Inc. ........................................................ 223,750
2,353,300 CINergy Corp. ........................................................................... 58,538,338
1,306,690 CIPSCO, Inc. ............................................................................ 37,404,001
1,967,800 Delmarva Power & Light Co. .............................................................. 38,864,050
2,853,950 Dominion Resources, Inc. ................................................................ 102,742,200
444,200 DPL, Inc. ............................................................................... 9,272,675
2,822,900 Duke Power Co. .......................................................................... 108,681,650
3,134,000 Entergy Corp. ........................................................................... 65,422,250
2,220,175 Florida Progress Corp. .................................................................. 66,882,772
1,951,000 FPL Group, Inc. ......................................................................... 70,967,625
3,562,000 General Public Utilities Corp. .......................................................... 103,743,250
2,364,100 GTE Corp. ............................................................................... 78,606,325
863,050 Hawaiian Electric Industries, Inc. ...................................................... 28,912,175
22,000 Ipalco Enterprises, Inc. ................................................................ 701,250
36,000 Kansas City Power & Light Co. ........................................................... 819,000
802,200 Midwest Resources, Inc. ................................................................. 11,331,075
28,000 Montana Power Co. ....................................................................... 637,000
661,700 Nevada Power Co. ........................................................................ 13,316,713
2,062,950 New England Electric System ............................................................. 63,693,581
1,204,050 New York State Electric & Gas Corp. ..................................................... 25,736,569
1,160,300 NIPSCO Industries, Inc. ................................................................. 36,114,338
3,426,850 Pacific Gas & Electric Co. .............................................................. 85,242,894
1,336,900 Pacific Telesis Group ................................................................... 40,441,225
2,195,900 PacifiCorp .............................................................................. 42,545,563
190,000 Panhandle Eastern Co. ................................................................... 4,370,000
3,376,000 Pennsylvania Power & Light Co. .......................................................... 66,254,000
1,336,970 Pinnacle West Capital Corp. ............................................................. 27,909,249
1,389,500 Puget Sound Power & Light Co. ........................................................... 29,179,500
3,125,600 San Diego Gas & Electric Co. ............................................................ 64,856,200
1,834,400 SCANA Corp. ............................................................................. 76,586,200
4,081,700 SCEcorp. ................................................................................ 63,776,563
350,000 Sierra Pacific Resources ................................................................ 6,912,500
5,857,000 Southern Co. ............................................................................ 119,336,375
525,110 Southern Indiana Gas & Electric Co. ..................................................... 15,162,551
10,000 Southwestern Bell Corp. ................................................................. 421,250
799,100 Southwestern Public Service Co. ......................................................... 22,274,913
3,922,400 TECO Energy, Inc. ....................................................................... 82,370,400
385,000 Telecom de Argentina, SA, ADR ........................................................... 16,651,250
750,000 Telefonica de Argentina, SA, ADR ........................................................ 18,093,750
935,000 Telefonos de Mexico, ADR ................................................................ 26,647,500
3,204,550 Texas Utilities Co. ..................................................................... 101,744,463
34,800 Unitil Corp. ............................................................................ 569,850
549,000 Williams Companies, Inc. ................................................................ 16,813,125
793,200 Wisconsin Energy Corp. .................................................................. 21,515,550
--------------
TOTAL COMMON STOCKS (COST $2,216,077,804) ......................................... 2,175,580,021
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT UTILITIES FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS 9.0%
$ 9,900,000 Alabama Power Co., 8.75%, 12/01/21 ...................................................... $ 10,175,735
4,950,000 Alabama Power Co., 8.50%, 05/01/22 ...................................................... 4,956,846
10,500,000 Arizona Public Service Co., 10.25%, 05/15/20 ............................................ 11,638,757
14,500,000 Arizona Public Service Co., 9.00%, 12/15/21 ............................................. 14,690,371
10,000,000 Cincinnati Gas & Electric Co., 8.50%, 09/01/22 .......................................... 9,966,960
13,000,000 Commonwealth Edison Co., 9.125%, 01/15/14 ............................................... 13,108,342
2,000,000 Commonwealth Edison Co., 8.875%, 10/01/21 ............................................... 1,984,498
5,000,000 Commonwealth Edison Co., 8.50%, 07/15/22 ................................................ 4,813,054
10,000,000 Commonwealth Edison Co., 8.375%, 09/15/22 ............................................... 9,501,900
5,000,000 Duquesne Light Co., 8.375%, 05/15/24 .................................................... 4,896,744
19,000,000 Enron Corp., 7.00%, 08/15/23 ............................................................ 15,919,054
5,000,000 Gulf States Utilities Co., 9.72%, 07/01/98 .............................................. 5,164,514
11,000,000 cHidro Electrica Alicuras, 8.375%, 03/15/99 .............................................. 7,975,000
10,000,000 Illinois Power Co., 8.00%, 02/15/23 ..................................................... 9,195,360
15,000,000 Long Island Lighting Co., 9.75%, 05/01/21 ............................................... 14,492,010
10,000,000 Louisiana Power & Light Co., 8.50%, 07/01/22 ............................................ 9,712,250
16,033,830 Midland CoGeneration Venture, 10.33%, 07/23/02 .......................................... 15,868,216
7,500,000 Niagara Mohawk Power Corp., 9.50%, 03/01/21 ............................................. 7,547,414
5,000,000 Niagara Mohawk Power Corp., 8.75%, 04/01/22 ............................................. 4,737,360
8,000,000 Ohio Edison Co., 8.75%, 06/15/22 ........................................................ 7,826,328
20,000,000 Panhandle Eastern Co., 7.20%, 08/15/24 .................................................. 17,234,400
15,000,000 Philadelphia Electric Co., 8.75%, 04/01/22 .............................................. 15,053,820
10,000,000 Texas Utilities Co., 8.75%, 11/01/23 .................................................... 10,068,130
10,000,000 Texas Utilities Co., 8.50%, 08/01/24 .................................................... 9,835,730
--------------
TOTAL CORPORATE BONDS (COST $286,808,332) ......................................... 236,362,793
--------------
GOVERNMENT SECURITIES 3.6%
80,000,000 U.S. Treasury Bonds, 8.00%, 11/15/21 .................................................... 84,124,960
10,000,000 U.S. Treasury Bonds, 7.25%, 08/15/22 .................................................... 9,703,120
--------------
TOTAL GOVERNMENT SECURITIES (COST $90,174,244) .................................... 93,828,080
--------------
TOTAL COMMON STOCKS, CORPORATE BONDS AND GOVERNMENT
SECURITIES (COST $2,593,060,380) ................................................. 2,505,770,894
--------------
jSHORT TERM INVESTMENTS
COMMERCIAL PAPER 2.7%
20,000,000 American Express Credit Corp., 6.03%, 04/17/95 .......................................... 19,943,000
30,000,000 Associates Corp. of North America, 6.02%, 04/28/95 - 05/01/95 ........................... 29,849,600
10,000,000 Svenska Handelsbanken, Inc., 6.06%, 05/08/95 ............................................ 9,936,000
10,000,000 Westpac Banking Corp., 6.03%, 05/15/95 .................................................. 9,924,600
--------------
TOTAL COMMERCIAL PAPER (COST $69,664,933) ......................................... 69,653,200
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $2,662,725,313) .............. 2,575,424,094
--------------
kRECEIVABLES FROM REPURCHASE AGREEMENTS 1.8%
25,363,000 Lehman Government Securities, Inc., 6.27%, 04/03/95 (Maturity Value $25,376,252)
Collateral: U.S. Treasury Bills, 09/21/95 .............................................. 25,363,000
21,625,957 lJoint Repurchase Agreement, 6.27%, 04/03/95 (Maturity Value $21,793,787)
Collateral: U.S. Treasury Notes, 5.00% - 9.25%, 08/31/96 - 12/31/99 .................... 21,782,406
--------------
TOTAL RECEIVABLES FROM REPURCHASE AGREEMENTS (COST $47,145,406) ................... 47,145,406
--------------
TOTAL INVESTMENTS (COST $2,709,870,719) 100.4% ............................... 2,622,569,500
LIABILITIES IN EXCESS OF OTHER ASSETS, NET (.4)% ............................. (9,806,580)
--------------
NET ASSETS 100.0% ............................................................ $2,612,762,920
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
VALUE
UTILITIES FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
At March 31, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $2,709,870,719 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ........................................................ $ 124,248,610
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ........................................................ (211,549,829)
---------------
Net unrealized depreciation ........................................................... $ (87,301,219)
===============
</TABLE>
a Non-income producing.
c See Note 7 regarding Rule 144A securities.
i Certain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
k Face amount for repurchase agreements is for the underlying collateral.
l See Note 1(g) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES/ VALUE
WARRANTS INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 23.8%
CONGLOMERATES
33,652 aGillett Holdings, Inc., Class 2 ..................................................... $ 673,040
------------
CONSUMER PRODUCTS 1.1%
850,000 Philip Morris Cos., Inc. ............................................................ 55,462,500
498,750 a,cSpecialty Food Corp. ................................................................ 1,246,875
------------
56,709,375
------------
ENERGY .7%
125,000 Atlantic Richfield Co. (ARCO) ....................................................... 14,375,000
400,000 Pennzoil Co. ........................................................................ 18,950,000
------------
33,325,000
------------
FINANCIAL SERVICES .1%
125,000 First Union Corp. of North Carolina ................................................. 5,421,875
HOME BUILDERS .1% ------------
348,978 aNVR, Inc. ........................................................................... 2,050,246
175,758 aWalter Industries, Inc., Class A, (in bankruptcy/reorganization pending distribution) 1,933,338
------------
3,983,584
------------
METALS 2.3%
600,000 Driefontein Consolidated Mines, Ltd., ADR ........................................... 8,400,000
2,354,720 Free State Consolidated Gold Mines, Ltd., ADR ....................................... 30,317,020
1,400,000 Hartebeestfontein Gold Mining Co., Ltd., ADR ........................................ 5,186,580
1,089,200 Impala Platinum Holdings, Ltd., ADR ................................................. 24,667,984
460,000 Kinross Mines, Ltd., ADR ............................................................ 5,787,766
796,200 Rustenburg Platinum Holdings, Ltd., ADR ............................................. 17,976,524
187,500 St. Helena Gold Mines, Ltd., ADR .................................................... 1,851,563
350,000 Samancor, Ltd., ADR ................................................................. 4,844,105
1,040,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR ...................................... 7,735,000
292,000 Western Deep Levels, Ltd., ADR ...................................................... 9,782,000
------------
116,548,542
------------
PHARMACEUTICALS 4.2%
850,000 American Home Products Corp. ........................................................ 60,562,500
1,125,400 Bristol-Myers Squibb Co. ............................................................ 70,900,200
1,213,400 Merck & Co., Inc. ................................................................... 51,721,175
775,000 Upjohn Co. .......................................................................... 27,706,250
------------
210,890,125
------------
REAL ESTATE INVESTMENT TRUST .3%
726,100 Merry Land & Investment Company, Inc. ............................................... 14,158,950
------------
RETAIL .1%
350,633 aFederated Department Stores, Inc. ................................................... 7,757,755
-----------
UTILITIES 14.9%
1,710,500 American Electric Power Co., Inc. ................................................... 54,308,375
1,675,000 Central & South West Corp. .......................................................... 40,618,750
1,450,000 CINergy Corp. ....................................................................... 36,068,750
1,600,000 Delmarva Power & Light Co. .......................................................... 31,600,000
1,081,200 Dominion Resources, Inc. ............................................................ 38,923,200
1,579,900 Florida Progress Corp. .............................................................. 47,594,488
1,358,300 FPL Group, Inc. ..................................................................... 49,408,163
606,100 Hawaiian Electric Industries, Inc. .................................................. 20,304,350
850,000 Houston Industries, Inc. ............................................................ 32,406,250
1,300,000 iIberdrola, SA (Spain) ............................................................... 7,704,465
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/ VALUE
WARRANTS INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
UTILITIES (CONT.)
1,800,000 Long Island Lighting Co. ............................................................ $ 26,325,000
825,000 Nevada Power Co. .................................................................... 16,603,125
1,500,000 New York State Electric & Gas Corp. ................................................. 32,062,500
1,625,000 Ohio Edison Co. ..................................................................... 32,500,000
2,700,000 Pacific Gas & Electric Co. .......................................................... 67,162,500
50,000 PacifiCorp .......................................................................... 968,750
1,025,400 Public Services Enterprise Group, Inc. .............................................. 28,070,325
1,213,900 San Diego Gas & Electric Co. ........................................................ 25,188,425
2,850,000 SCEcorp ............................................................................. 44,531,250
2,325,000 Southern Co. ........................................................................ 47,371,875
711,800 Soutwestern Public Service Co. ...................................................... 19,841,425
1,600,000 Texas Utilities Co. ................................................................. 50,800,000
--------------
750,361,966
--------------
TOTAL COMMON STOCKS (COST $1,103,576,695) ..................................... 1,199,830,212
--------------
PREFERRED STOCKS 10.8%
AIRLINES .8%
431,100 Delta Airlines, Inc., $3.50 cvt. pfd. ............................................... 22,956,075
620,000 USAir Group, Inc., $4.375 cvt. pfd., Series B ....................................... 16,585,000
--------------
39,541,075
--------------
APPAREL/TEXTILES .2%
150,000 Fieldcrest Cannon, Inc., $3.00 cvt. pfd., Series A .................................. 7,125,000
49,211 JPS Textile Group, Inc., senior exch. adj. rate pfd., Series A ...................... 1,156,459
--------------
8,281,459
--------------
AUTOMOTIVE .2%
408,303 Harvard Industries, Inc., 14.25% pfd., PIK .......................................... 11,177,295
--------------
COMMUNICATIONS .2%
460,000 Nortel, Inc., pfd., Series B ........................................................ 8,970,000
--------------
CONSUMER PRODUCTS .5%
75,000 Pantry Pride, Inc., $14.875 pfd., Series B .......................................... 7,621,875
3,000,000 RJR Nabisco Holding Corp., $0.835 cvt. pfd., Series A ............................... 19,125,000
--------------
26,746,875
--------------
ENERGY 4.7%
550,000 Gerrity Oil & Gas Corp., $1.50 cvt. pfd. ............................................ 6,531,250
650,000 Maxus Energy Corp., $4.00 cum. cvt. pfd. ............................................ 21,043,750
1,020,300 cMcDermott International, Inc., $2.875 cvt. pfd., Series C ........................... 46,678,725
750,000 Noble Drilling Corp., $1.50 cvt. pfd. ............................................... 15,281,250
550,000 cOccidental Petroleum Corp., $3.875 cvt. pfd. ........................................ 29,562,500
494,100 Occidental Petroleum Corp., $3.00 cvt. pfd., Series A ............................... 25,693,200
600,000 cParker & Parsley Capital, 6.25% cvt. pfd. ........................................... 28,500,000
320,000 Reading & Bates, $1.625 cum. cvt. pfd. .............................................. 8,240,000
400,000 Santa Fe Energy Resources, Inc., 7.00% cvt. pfd. .................................... 7,550,000
2,457,900 Santa Fe Energy Resources, Inc., 8.25% cvt. pfd. .................................... 23,657,288
163,900 Snyder Oil Corp., $1.50 cvt. exch. pfd. ............................................. 3,523,850
350,000 cTransco Energy Co., $3.50 cvt. pfd., Series E ....................................... 19,118,750
--------------
235,380,563
--------------
FINANCIAL SERVICES .4%
495,000 Ahmanson (H. F.) & Co., $3.00 cvt. pfd., Series D ................................... 22,151,250
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/ VALUE
WARRANTS INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (CONT.)
METALS 2.9%
535,000 Amax Gold, Inc., $3.75 cvt. pfd., Series B .......................................... $ 26,215,000
283,000 Armco, Inc., $3.625 cum. cvt. pfd., Series A ........................................ 15,352,750
114,200 Armco, Inc., $4.50 cvt. pfd., Series B .............................................. 5,296,025
200,000 Battle Mountain Gold Co., $3.25 cvt. pfd. ........................................... 12,325,000
120,000 Cyprus Minerals, $4.00 cvt. pfd., Series A .......................................... 7,185,000
435,400 Echo Bay Finance Corp., $1.75 cum. cvt. pfd., Series A .............................. 14,041,650
400,000 Freeport-McMoRan Copper & Gold, Inc., $1.75 cvt. pfd. ............................... 10,050,000
336,900 cFreeport-McMoRan, Inc., 4.375% cvt. exch. pfd. ...................................... 12,086,287
500,000 Freeport-McMoRan, Inc., 8.75% cvt. pfd. ............................................. 25,437,500
375,000 Hecla Mining Co., $3.50 cvt. pfd., Series B ......................................... 18,890,625
--------------
146,879,837
--------------
REAL ESTATE INVESTMENT TRUST .5%
1,040,000 Property Trust of America, $1.75 cvt. pfd., Series A ................................ 23,530,000
--------------
RESTAURANTS .4%
1,200,000 Flagstar Cos., $2.25 cvt. pfd., Series A ............................................ 21,600,000
--------------
TOTAL PREFERRED STOCKS (COST $573,414,451) .................................... 544,258,354
--------------
PARTNERSHIP UNITS .2%
500,000 BP Prudhoe Bay Royalty Trust ........................................................ 8,500,000
300,000 Freeport-McMoRan Resource, Ltd., depository units ................................... 4,462,500
59,259 a,b,eZale Corp., Ltd. .................................................................... 42,074
--------------
TOTAL PARTNERSHIP UNITS (COST $20,557,667) .................................... 13,004,574
--------------
WARRANTS
1,215 a,b,eGrand Union Capital Corp. ........................................................... 304
29,143 aNVR, Inc. ........................................................................... 21,857
--------------
TOTAL WARRANTS (COST $1,260,685) .............................................. 22,161
--------------
TOTAL COMMON STOCKS, PREFERRED STOCKS, PARTNERSHIP UNITS AND
WARRANTS (COST $1,698,809,498) ............................................... 1,757,115,301
--------------
<CAPTION>
FACE
AMOUNT
- -------------
<S> <C> <C>
CORPORATE BONDS 28.8%
AEROSPACE
$ 1,772,600 Fairchild Industries, Inc., sub. deb., 9.75%, 04/01/98 .............................. 1,710,559
556,000 Pneumo Corp., S.F., sub. deb., 9.625%, 08/01/98 ..................................... 536,540
--------------
2,247,099
--------------
APPAREL/TEXTILES 2.3%
35,000,000 Bibb Co., senior sub. notes, 14.00%, 10/01/99 ....................................... 13,125,000
30,000,000 Consoltex Group, Inc., senior sub. notes, Series B, 11.00%, 10/01/03 ................ 26,550,000
6,000,000 Forstmann Textiles, Inc., S.F., senior sub. deb., 14.75%, 04/15/99 .................. 6,330,000
25,141,000 JPS Textile Group, Inc., S.F., sub. notes, 10.25%, 06/01/99 ......................... 20,238,505
8,390,000 JPS Textile Group, Inc., S.F., sub. notes, 10.85%, 06/01/99 ......................... 6,879,800
30,000,000 JPS Textile Group, Inc., S.F., sub. notes, 7.00%, 05/15/00 .......................... 15,450,000
5,000,000 Hartmarx Corp., senior sub. notes, 10.875%, 01/15/02 ................................ 4,775,000
25,000,000 Westpoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 ......................... 23,031,250
--------------
116,379,555
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
AUTOMOTIVE .6%
$ 4,000,000 Exide Corp., senior notes, 10.75%, 12/15/02 ......................................... $ 4,000,000
32,000,000 Motor Wheels Corp., senior notes, Series B, 11.50%, 03/01/00 ........................ 23,720,000
1,971,000 Pacific International Services Corp., cvt. sub. deb., 10.00%, 09/01/07 .............. 1,192,455
------------
28,912,455
------------
BIOTECHNOLOGY .8%
16,500,000 Centocor, Inc., Eurobond, cvt. sub. deb., 6.75%, 10/16/01 ........................... 12,705,000
5,600,000 Cetus Corp., cvt. sub. deb., 5.25%, 05/21/02 ........................................ 4,732,000
26,000,000 cGenzyme Corp., cvt. sub. deb., 6.75%, 10/01/01 ...................................... 24,927,500
------------
42,364,500
------------
BUILDING PRODUCTS .2%
5,000,000 American Standard, Inc., S.F., senior sub. deb., 9.25%, 12/01/16 .................... 4,787,500
3,421,700 Walter Industries, Inc., sub. notes, 12.20%, 03/15/00 (in bankruptcy/reorganization
pending distribution)............................................................... 3,473,026
------------
8,260,526
------------
CABLE SYSTEMS 1.9%
2,000,000 Cablevision Industries Corp., senior notes, 10.75%, 01/30/02 ........................ 2,115,000
25,000,000 Cablevision System Corp., senior sub. deb., 9.875%, 04/01/23 ........................ 23,656,250
30,000,000 Continental Cablevision, Inc., senior sub. deb., 9.50%, 08/01/13 .................... 28,950,000
27,000,000 Helicon Group LP Corp., senior secured notes, 9.00%, 11/01/03 ....................... 23,760,000
16,000,000 Storer Communication, Inc., sub. deb., 10.00%, 05/15/03 ............................. 15,600,000
------------
94,081,250
------------
CHEMICALS 1.6%
29,000,000 Applied Extrusion Technology, senior unsecured notes, 11.50%, 04/01/02 .............. 29,580,000
7,000,000 IMC Fertilizer Group, Inc., senior notes, 6.25%, 12/01/01 ........................... 6,755,000
16,000,000 IMC Fertilizer Group, Inc., senior notes, Series B, 10.75%, 06/15/03 ................ 17,160,000
8,900,000 Uniroyal Chemical Co., Inc., senior notes, 10.50%, 05/01/02 ......................... 8,989,000
20,000,000 Uniroyal Chemical Co., Inc., senior notes, 11.00%, 05/01/03 ......................... 20,250,000
------------
82,734,000
------------
COMMUNICATIONS .2%
8,440,000 Cellular, Inc., cvt. sub. deb., 6.75%, 07/15/09 ..................................... 8,429,450
------------
COMPUTER/TECHNOLOGY 1.0%
30,000,000 Anacomp, Inc., senior sub. notes, 15.00%, 11/01/00 .................................. 28,950,000
18,000,000 Conner Peripheral, Inc., cvt. sub. deb., 6.75%, 03/01/01 ............................ 13,770,000
11,750,000 Maxtor Corp., cvt. sub. deb., 5.75%, 03/01/12 ....................................... 6,227,500
------------
48,947,500
------------
CONGLOMERATES .2%
5,059,000 Coltec Industries, Inc., S.F., senior sub. deb., 11.25%, 12/01/15 ................... 5,330,921
4,000,000 Emhart Corp., S.F., senior sub. deb., 9.25%, 08/15/16 ............................... 4,080,000
------------
9,410,921
------------
CONSUMER PRODUCTS 2.5%
15,000,000 Calmar, Inc., S.F., senior secured notes, 12.00%, 12/15/97 .......................... 15,225,000
16,000,000 Mafco, Inc., senior sub. deb., 11.875%, 11/15/02 .................................... 15,440,000
26,000,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03 ................... 24,050,000
30,000,000 Revlon Consumer Products Corp., senior sub. notes, Series B, 10.50%, 02/15/03 ....... 28,350,000
35,000,000 RJR Nabisco, Inc., senior sub. notes, 9.25%, 08/15/13 ............................... 33,775,000
8,650,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ..................................... 8,693,250
------------
125,533,250
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
ENERGY 3.1%
$ 10,000,000 Energy Ventures, senior notes, 10.25%, 03/15/04 ..................................... $ 9,825,000
15,000,000 cFalcon Drilling, senior sub. notes, 12.50%, 03/15/05 ................................ 15,037,500
25,000,000 Gerrity Oil & Gas Corp., senior sub. notes, 11.75%, 07/15/04 ........................ 22,500,000
19,000,000 Global Marine, Inc., senior secured notes, 12.75%, 12/15/99 ......................... 20,472,500
600,000 Moran Energy, Inc., sub. deb., 11.50%, 05/01/98 ..................................... 513,000
40,000,000 Oryx Energy Co., cvt. sub. deb., 7.50%, 05/15/14 .................................... 31,500,000
6,835,000 Pogo Producing Co., cvt. sub. deb., 8.00%, 12/31/05 ................................. 6,800,825
8,000,000 cSeacor Holdings, Inc., cvt. sub. deb., 6.00%, 07/01/03 .............................. 7,360,000
30,000,000 Snyder Oil Corp., cvt. sub. notes, 7.00%, 05/15/01 .................................. 27,000,000
15,000,000 Tesoro Petroleum Corp., S.F., sub. deb., 12.75%, 03/15/01 ........................... 15,093,750
------------
156,102,575
------------
FOOD & BEVERAGES 1.8%
2,980,000 Chock Full O'Nuts Corp., S.F., cvt. sub. deb., 8.00%, 09/15/06 ...................... 2,831,000
46,932,000 cDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 .................................. 40,126,860
6,600,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00 ................ 6,699,000
13,000,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03 ............... 12,707,500
16,000,000 Speciality Foods Corp., senior sub. notes, Series B, 11.25%, 08/15/03 ............... 15,600,000
16,000,000 Speciality Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01 .......... 15,680,000
------------
93,644,360
------------
FOOD CHAINS .9%
30,000,000 Americold Corp., senior sub. notes, Series B, 11.50%, 03/01/05 ...................... 27,750,000
15,000,000 cGrand Union Capital Corp., senior notes, 11.375%, 02/15/99 .......................... 15,675,000
------------
43,425,000
------------
GAMING & HOTELS .9%
30,000,000 Aztar Corp., senior sub. notes, 11.00%, 10/01/02 .................................... 29,250,000
10,000,000 Harrah's Jazz, first mortgage, 14.25%, 11/15/01 ..................................... 10,775,000
3,910,000 Host Marriott Hospitality, senior sub. notes, Series L, 11.00%, 05/01/07 ............ 3,983,313
------------
44,008,313
------------
HEALTH CARE 1.0%
8,100,000 Grancare, Inc., cvt. sub. deb., 6.50%, 01/15/03 ..................................... 7,097,625
16,300,000 OrNda Healthcorp, Inc., senior sub. notes, 12.25%, 05/15/02 ......................... 17,848,500
19,200,000 cMedical Care International, Inc., cvt. sub. deb., 6.75%, 10/01/06 ................... 17,184,000
10,000,000 Sola Group, Ltd., senior sub. notes, 6.00%, 12/15/03 ................................ 8,550,000
------------
50,680,125
------------
INDUSTRIAL PRODUCTS 1.4%
15,000,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04 ................................... 13,725,000
8,300,000 Pace Industries, Inc., senior notes, Series B, 10.625%, 12/01/02 .................... 7,677,500
30,000,000 RHI Holdings, Inc., senior sub. deb., 11.875%, 03/01/99 ............................. 28,650,000
14,500,000 Thermadyne Industries, Inc., notes, 10.75%, 11/01/03 ................................ 13,702,500
7,393,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 ......................... 7,060,315
------------
70,815,315
------------
MEDIA & BROADCASTING .4%
$ 12,250,000 cBenedek Broadcast, senior notes, 11.875%, 03/01/05 .................................. $ 12,387,813
7,359,600 Time Warner, Inc., cvt. sub. deb., 8.75%, 01/10/15 .................................. 7,396,398
2,300,000 Time Warner, Inc., S.F., sub. deb., 8.75%, 04/01/17 ................................. 2,139,000
------------
21,923,211
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
METALS 1.6%
7,000,000 Armco Steel, Inc., senior notes, 11.375%, 10/15/99 .................................. 7,000,000
5,000,000 Armco Steel, Inc., senior notes, 9.375%, 11/01/00 ................................... 4,600,000
900,000 Coeur D' Alene Mines Corp., cvt. senior sub. deb., 6.00%, 06/10/02 .................. 814,500
20,000,000 Coeur D' Alene Mines Corp., cvt. sub. deb., 6.375%, 01/31/04 ........................ 18,000,000
13,420,000 FMC Corp., Eurobonds, cvt. senior sub. deb., 6.75%, 01/16/05 ........................ 11,843,150
4,500,000 Freeport-McMoRan, Inc., cvt. disc. deb., 6.55%, 01/15/01 ............................ 4,106,250
14,000,000 Jorgensen Earle M. Co., senior notes, 10.75%, 03/01/00 .............................. 13,440,000
12,000,000 Republic Engineered Steel Co., first mortgage, 9.875%, 12/15/01 ..................... 11,010,000
9,000,000 cUCAR Global Enterprises, senior sub. notes, 12.00%, 01/15/05 ........................ 9,483,750
-------------
80,297,650
-------------
POLLUTION CONTROL .6%
21,000,000 Air & Water Technology Corp., cvt. sub. deb., 8.00%, 05/15/15 ....................... 13,965,000
14,800,000 Sanifill, Inc., cvt. sub. deb., 7.50%, 06/01/06 ..................................... 14,985,000
-------------
28,950,000
-------------
PUBLISHING .6%
12,500,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 .............................. 12,875,000
15,100,000 Sullivan Graphics, Inc., senior sub. notes, 15.00%, 02/01/00 ........................ 16,043,750
-------------
28,918,750
-------------
RAILROADS .8%
500,000 Missouri Pacific Railroad Co., gen. mortgage, Series A, 4.75%, 01/01/20 ............. 283,607
500,000 Missouri Pacific Railroad Co., gen. mortgage, Series B, 4.75%, 01/01/30 ............. 284,042
1,200,000 Missouri Pacific Railroad Co., income deb., 5.00%, 01/01/45 ......................... 630,000
37,500,000 Southern Pacific Rail Corp., senior notes, 9.375%, 08/15/05 ......................... 37,875,000
-------------
39,072,649
-------------
REAL ESTATE DEVELOPMENT .3%
20,000,000 Rouse Co., cvt. sub. deb., 5.75%, 07/23/02 .......................................... 17,762,500
-------------
RESTAURANTS .6%
35,000,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 ............................ 29,312,500
-------------
RETAIL .8%
15,000,000 Carter Hawley Hale Stores, cvt. senior sub. notes, 6.25%, 12/31/00 .................. 10,650,000
9,000,000 Drug Emporium, Inc., cvt. sub. deb., 7.75%, 10/01/14 ................................ 6,671,250
22,000,000 Levitz Furniture Co., senior sub. notes, 12.375%, 04/15/97 .......................... 21,670,000
-------------
38,991,250
-------------
SEMICONDUCTORS .2%
9,000,000 VLSI Technology, Inc., cvt. sub. deb., 7.00%, 05/01/12 .............................. 8,921,250
-------------
TRANSPORTATION .3%
16,000,000 AMR Corp., cvt. sub. deb., 6.125%, 11/01/24 ......................................... 15,160,000
-------------
UTILITIES 2.2%
435,837,500 iESCOM, E168, utility deb. (South Africa), 11.00%, 06/01/08 .......................... 85,311,904
8,508,853 Midland CoGeneration Venture, deb. notes, Series C-91, 10.33%, 07/23/02 ............. 8,420,965
16,491,940 Midland CoGeneration Venture, S.F., sub. deb., Series C-94, 10.33%, 07/23/02 ........ 16,321,594
6,000,000 Texas-New Mexico Power Co., secured deb., 10.75%, 09/15/03 .......................... 6,024,870
-------------
116,079,333
-------------
TOTAL CORPORATE BONDS (COST $1,595,822,786) ................................... 1,451,365,287
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES 16.3%
$275,000,000 U.S. Treasury Bonds, 7.25%-8.125%, 05/15/16 - 08/15/22 .............................. $ 277,506,214
556,000,000 U.S. Treasury Notes, 6.00%-7.50%, 12/31/97 - 02/15/03 ............................... 544,824,786
--------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $819,575,723) .......................... 822,331,000
--------------
iFOREIGN GOVERNMENT AGENCIES 7.7%
188,000,000 Government of Canada, first coupon deb., 8.00%, 06/01/23 ............................ 123,828,298
400,000,000 Republic of Argentina, floating rate notes, 5.00%, 03/31/23 . ....................... 164,000,000
130,000,000 Republic of South Africa, 12.00%, 02/28/05 .......................................... 28,348,635
35,000,000 United Mexican States, Series A, 6.25%, 12/31/19 .................................... 16,537,500
117,000,000 United Mexican States, Series B, 6.25%, 12/31/19 .................................... 55,282,500
--------------
TOTAL FOREIGN GOVERNMENT AGENCIES (COST $421,512,308) ......................... 387,996,933
--------------
hZERO COUPON /STEP-UP BONDS 2.5%
65,000,000 Bell & Howell Co., senior deb., zero coupon to 03/01/00, (original accretion rate
11.50%), 11.50% thereafter, 03/01/05 ............................................... 35,262,500
11,000,000 Dr Pepper Bottling Holdings Co., S.F., senior sub. disc. notes, zero coupon to
02/15/98, (original accretion rate 11.625%), 11.625% thereafter, 02/15/03 .......... 7,755,000
25,552,000 Dr Pepper/Seven-Up Cos., Inc., senior sub. notes, zero coupon to 11/01/97,
(original accretion rate 11.50% ), 11.50% thereafter, 11/01/02 ..................... 22,070,540
9,000,000 Exide Corp., senior sub. deb., zero coupon to 12/15/97, (original accretion rate
12.25%), 12.25% thereafter, 12/15/04 ............................................... 6,502,500
25,000,000 a,dGrand Union Capital Corp., senior notes, Series B, zero coupon to 07/15/99, (original
accretion rate 15.00%), 15.00% thereafter, 07/15/04 ................................ 375,000
47,700,000 a,dGrand Union Capital Corp., senior sub. notes, Series B, (original accretion rate
16.50%), 0.00%, 01/15/07 477,000
7,000,000 L.F.C. Holding, senior deb., zero coupon to 06/15/97, (original accretion rate
15.00%), 15.00% thereafter, 06/15/02 ............................................... 5,171,530
40,000,000 Revlon Worldwide Corp., senior secured disc. notes, Series B, (original accretion
rate 12.00%), 0.00%, 03/15/98 ...................................................... 23,900,000
33,250,000 Speciality Foods Corp., senior secured disc. deb., Series B, zero coupon to 08/15/99,
(original accretion rate 13.00%), 13.00% thereafter, 08/15/05 ...................... 16,957,500
12,000,000 Uniroyal Chemical Co., Inc., senior notes, zero coupon to 05/01/98, (original
accretion rate 12.00%), 12.00% thereafter, 05/01/05 ................................ 8,700,000
--------------
TOTAL ZERO COUPON /STEP-UP BONDS (COST $146,868,226) .......................... 127,171,570
--------------
TOTAL LONG TERM INVESTMENTS (COST $4,682,588,541) ............................. 4,545,980,091
--------------
jSHORT TERM INVESTMENTS
CERTIFICATES OF DEPOSIT .8%
25,000,000 Paribas Finance, Inc., New York Branch, 6.07%, 05/03/95 ............................. 24,999,000
15,000,000 Banque Paribas, New York Branch, 6.18%, 05/08/95 .................................... 15,000,300
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $39,999,300) .............................. 39,999,300
--------------
COMMERCIAL PAPER 2.7%
40,000,000 American Express Credit Corp., 6.03%, 04/17/95 ...................................... 39,886,000
40,000,000 Associate Corp. of North America, 6.02%, 04/28/95 - 05/01/95 ........................ 39,802,800
40,000,000 Svenska Handelsbanken, Inc., 6.05%, - 6.06%, 05/08/95 - 05/09/95 .................... 39,741,000
20,000,000 Westpac Banking Corp., 6.03%, 05/15/95 .............................................. 19,849,200
--------------
TOTAL COMMERCIAL PAPER (COST $139,279,000) .................................... 139,279,000
--------------
CORPORATE BONDS
8,000,000 a,dContinental Airlines, Inc., 2nd priority equipment certificates, 11.00%, 12/31/95
(COST $7,631,271) ................................................................. 4,000
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
jSHORT TERM INVESTMENTS (CONT.)
h,iZERO COUPON /STEP-UP BONDS 2.5%
Mexican Federal Treasury Certificates (CETES),
$ 72,100,000 41.50%, 04/12/95 .................................................................. $ 10,339,806
53,600,000 14.19%, 04/20/95 .................................................................. 7,563,074
133,723,980 15.24%, 04/27/95 .................................................................. 18,605,417
51,416,000 16.25%, 05/11/95 .................................................................. 6,956,460
25,000,000 16.55%, 05/18/95 .................................................................. 3,335,783
57,729,950 15.298%, 06/08/95 ................................................................. 7,393,336
98,576,600 16.55%, 07/06/95 .................................................................. 11,985,640
70,150,000 16.74%, 07/13/95 .................................................................. 8,438,616
80,000,000 34.50%, 07/20/95 .................................................................. 9,523,585
106,098,000 35.38%, 07/27/95 .................................................................. 12,504,129
29,169,000 32.98%, 08/10/95 .................................................................. 3,372,116
75,000,000 34.25%, 09/07/95 .................................................................. 8,372,888
57,000,000 13.86%, 10/19/95 .................................................................. 6,046,774
51,850,000 14.75%, 10/26/95 .................................................................. 5,450,155
57,245,000 14.33%, 11/16/95 .................................................................. 5,859,094
--------------
TOTAL ZERO COUPON /STEP-UP BONDS (COST $153,473,658) .......................... 125,746,873
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $5,022,971,770) .......... 4,851,009,264
--------------
k,lRECEIVABLES FROM REPURCHASE AGREEMENTS 2.3%
117,019,978 Joint Repurchase Agreement, 6.27%, 04/03/95 (Maturity Value $117,930,431)
(COST $117,868,845)
Collateral: U.S. Treasury Notes, 5.00% - 9.25%, 08/31/96 - 12/31/99 ............... 117,868,845
--------------
TOTAL INVESTMENTS (COST $5,140,840,615) 98.4% ............................ 4,968,878,109
OTHER ASSETS AND LIABILITIES, NET 1.6% ................................... 78,905,886
--------------
NET ASSETS 100.0% ........................................................ $5,047,783,995
==============
At March 31, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $5,140,840,615 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 200,329,286
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (372,291,792)
--------------
Net unrealized depreciation ....................................................... $ (171,962,506)
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
PIK - Payment-in-Kind
S.F. - Sinking Fund
a Non-income producing.
b See Note 6 regarding restricted securities.
c See Note 7 regarding Rule 144A securities.
d See Note 9 regarding defaulted securities.
e See Note 1 regarding securities valued by the Board of Directors.
h Zero coupon/step-up bonds. The current effective yield may vary. The original
accretion rate will remain constant.
i Face amount stated in foreign currencies, value in U.S. dollars.
j Certain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
k Face amount for repurchase agreements is for the underlying collateral.
l See Note 1(g) regarding Joint Repurchase Agreements
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT U.S. GOVERNMENT SECURITIES FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) 96.8%..............................
$ 24,337,568 GNMA I, SF, 6.00%, 09/15/23 - 11/15/23 ............................................. $ 21,196,634
1,297,439,039 GNMA I, SF, 6.50%, 03/15/03 - 03/15/24 ............................................. 1,172,567,019
32,516,936 GNMA PL, 6.50%, 05/15/24 ........................................................... 28,655,713
36,663,028 GNMA PL, 6.75%, 01/15/34 ........................................................... 32,899,531
2,259,515,123 GNMA I, SF, 7.00%, 04/15/16 - 03/15/24 ............................................. 2,114,777,363
11,639,261 GNMA PL, 7.25%, 04/15/22 ........................................................... 10,804,563
35,804,695 GNMA PL, 7.375%, 04/15/29 .......................................................... 33,502,740
21,412,791 GNMA PL, 7.425%, 07/15/29 .......................................................... 20,099,694
1,779,765,942 GNMA I, SF, 7.50%, 06/15/05 - 03/15/24 ............................................. 1,718,595,387
219,637,615 GNMA II, 7.50%, 10/20/22 - 07/20/23 ................................................ 210,853,208
5,995,097 GNMA PL, 7.75%, 10/15/12 ........................................................... 5,730,971
1,584,307,576 GNMA I, SF, 8.00%, 10/15/07 - 08/15/24 ............................................. 1,570,452,806
30,653,900 GNMA II, 8.00%, 08/20/16 - 03/20/19 ................................................ 30,270,880
56,474,554 GNMA PL, 8.00%, 04/15/22 - 05/15/32 ................................................ 54,710,007
10,575,245 GNMA I, GPM, 8.25%, 03/15/17 - 11/15/17 ............................................ 10,504,243
25,062,446 GNMA PL, 8.25%, 12/15/20 - 02/15/28 ................................................ 24,565,232
450,042,056 GNMA I, SF, 8.50%, 05/15/16 - 06/15/24 ............................................. 456,373,247
74,115,515 GNMA II, 8.50%, 04/20/16 - 03/20/22 ................................................ 74,694,951
1,886,010 GNMA I, GPM, 8.75%, 03/20/17 - 07/20/17 ............................................ 1,891,028
613,579,316 GNMA I, SF, 9.00%, 10/15/04 - 07/15/23 ............................................. 633,523,712
20,677,782 GNMA II, 9.00%, 02/20/20 - 11/20/21 ................................................ 21,181,906
8,466,629 GNMA I, GPM, 9.25%, 05/15/16 - 01/15/17 ............................................ 8,699,504
18,235,092 GNMA PL, 9.25%, 10/15/23 ........................................................... 18,565,694
340,361,269 GNMA I, SF, 9.50%, 05/15/09 - 02/15/23 ............................................. 356,955,583
17,158,411 GNMA II, 9.50%, 09/20/15 - 10/20/21 ................................................ 17,801,937
313,428,051 GNMA I, SF, 10.00%, 04/15/12 - 09/15/21 ............................................ 336,151,584
57,562,424 GNMA II, 10.00%, 08/20/13 - 03/20/21 ............................................... 60,944,217
9,853,006 GNMA I, GPM, 10.25%, 02/15/16 - 02/15/21 ........................................... 10,381,068
1,898,886 GNMA I, MD, 10.50%, 08/15/00 - 12/15/02 ............................................ 1,983,149
306,254,148 GNMA I, SF, 10.50%, 12/15/09 - 12/15/21 ............................................ 333,338,652
86,290,171 GNMA II, 10.50%, 09/20/13 - 03/20/21 ............................................... 92,519,286
21,059,506 GNMA I, GPM, 11.00%, 12/15/09 - 03/15/11 ........................................... 22,757,428
256,346,320 GNMA I, SF, 11.00%, 01/15/01 - 05/15/21 ............................................ 282,782,034
26,025,225 GNMA II, 11.00%, 07/20/13 - 01/20/21 ............................................... 28,253,635
10,489,407 GNMA I, GPM, 11.25%, 06/15/13 - 11/15/16 ........................................... 11,381,006
3,649,394 GNMA I, GPM, 11.50%, 03/15/10 - 06/15/13 ........................................... 3,948,188
54,055,364 GNMA I, SF, 11.50%, 02/15/13 - 12/15/17 ............................................ 60,102,807
3,593,697 GNMA II, 11.50%, 08/20/13 - 04/20/18 ............................................... 3,923,868
501,892 GNMA II, GPM, 11.50%, 07/20/13 - 01/20/14 .......................................... 542,985
2,468,285 GNMA I, GPM, 11.75%, 07/15/13 -12/15/15 ............................................ 2,682,717
1,216,922 GNMA I, GPM, 12.00%, 10/15/10 - 04/15/13 ........................................... 1,328,727
249,299,571 GNMA I, SF, 12.00%, 05/15/11 - 08/15/19 ............................................ 279,682,957
11,194,408 GNMA II, 12.00%, 09/20/13 - 02/20/16 ............................................... 12,334,838
1,832,903 GNMA I, GPM, 12.50%, 04/15/10 - 10/15/12 ........................................... 2,018,485
216,021,238 GNMA I, SF, 12.50%, 01/15/10 - 08/15/18 ............................................ 244,374,026
9,646,725 GNMA II, 12.50%, 09/20/13 - 11/20/15 ............................................... 10,719,924
226,753 GNMA I, GPM, 12.75%, 11/15/13 - 06/15/15 ........................................... 250,279
193,272,479 GNMA I, SF, 13.00%, 07/15/10 - 01/15/16 ............................................ 219,605,855
5,909,302 GNMA II, 13.00%, 09/20/13 - 09/20/15 ............................................... 6,596,258
---------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
(COST $11,022,886,128) ...................................................... 10,678,477,526
---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MARCH 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT U.S. GOVERNMENT SECURITIES FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
jSHORT TERM INVESTMENTS 2.7%
$ 307,995,000 U.S. Treasury Bills, 5.615% - 6.16%, 04/20/95 - 08/31/95 (COST $302,489,874) ....... $ 302,645,598
---------------
TOTAL INVESTMENTS (COST $11,325,376,002) 99.5% .......................... 10,981,123,124
OTHER ASSETS AND LIABILITIES, NET .5% .................................... 53,844,640
---------------
NET ASSETS 100.0% ....................................................... $11,034,967,764
===============
At March 31, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $11,325,376,002 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................... $ 86,436,160
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................... (430,689,038)
---------------
Net unrealized depreciation ...................................................... $ (344,252,878)
===============
</TABLE>
PORTFOLIO ABBREVIATIONS:
GPM - Graduate Payment Mortgage
MD - Midget
PL - Project Loan
SF - Single Family
jCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of the purchase by the Fund. Other
securities bear interest at the rates shown, payable at fixed dates or upon
maturity.
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
DYNATECH U.S. GOVERNMENT
GROWTH FUND FUND UTILITIES FUND INCOME FUND SECURITIES FUND
------------ ----------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities
At identified cost ......................... $391,179,688 $22,222,636 $2,662,725,313 $5,022,971,770 $11,325,376,002
============ =========== ============== ============== ===============
At value ................................... 571,973,690 52,781,925 2,575,424,094 4,851,009,264 10,981,123,124
Receivables from repurchase
agreements, at value
and cost .................................... 12,128,101 21,407,504 47,145,406 117,868,845 --
Cash ........................................ 13,834 32,182 12,914 2,634,636 8,998
Receivables:
Dividends and interest ..................... 704,960 55,760 20,808,519 87,892,088 71,334,840
Investment securities sold ................. 4,473,989 -- -- -- --
Capital shares sold ........................ 276,644 29,162 2,622,953 11,844,278 5,169,331
Prepaid expenses............................. 60,868 -- -- -- 3,146,641
------------ ----------- -------------- -------------- ---------------
Total assets ........................... 589,632,086 74,306,533 2,646,013,886 5,071,249,111 11,060,782,934
------------ ----------- -------------- -------------- ---------------
Liabilities:
Payables:
Investment securities
purchased ................................... -- -- -- 17,877,618 --
Capital shares repurchased ................. 633,063 46,018 5,850,020 2,659,651 15,557,920
Payable upon return of
securities loaned (Note 8)................... -- -- 25,446,567 -- --
Management fees ............................ 241,484 38,645 1,001,751 1,913,169 8,345,777
Distribution fees .......................... 214,633 23,725 610,069 501,216 1,911,473
Shareholder servicing costs ................ 36,297 7,915 106,748 90,005 --
Accrued expenses and
other liabilities............................ -- 29,196 235,811 423,457 --
------------ ----------- -------------- -------------- ---------------
Total liabilities ...................... 1,125,477 145,499 33,250,966 23,465,116 25,815,170
------------ ----------- -------------- -------------- ---------------
Net assets, at value ......................... $588,506,609 $74,161,034 $2,612,762,920 $5,047,783,995 $11,034,967,764
============ =========== ============== ============== ===============
Net assets consist of:
Undistributed net investment income ......... $ 3,061,957 $ 393,049 $ 6,695,136 $ 33,424,775 $ 19,951,013
Unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities denominated in
foreign currencies .......................... 180,794,002 30,559,289 (87,301,219) (172,256,165) (344,252,878)
Net realized gain (loss) from investments
and foreign currency transactions ........... 2,602,920 341,846 (20,488,802) (2,180,373) (715,605,893)
Capital shares .............................. 358,542 70,622 3,003,936 23,638,978 16,662,152
Additional paid-in capital .................. 401,689,188 42,796,228 2,710,853,869 5,165,156,780 12,058,213,370
------------ ----------- -------------- -------------- ---------------
Net assets, at value.......................... $588,506,609 $74,161,034 $2,612,762,920 $5,047,783,995 $11,034,967,764
============ =========== ============== ============== ===============
Shares outstanding ........................... 35,854,181 7,062,162 300,393,576 2,363,897,752 1,666,215,166
============ =========== ============== ============== ===============
Net asset value per share .................... $16.41 $10.50 $8.70 $2.14 $6.62
============ =========== ============== ============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
DYNATECH U.S. GOVERNMENT
GROWTH FUND FUND UTILITIES FUND INCOME FUND SECURITIES FUND
----------- ---------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends.................................... $ 5,165,268 $ 169,935 $ 72,105,157 $ 71,833,759 $ --
Interest (Note 1) ........................... 291,695 608,459 16,183,974 158,753,121 462,921,809
----------- ---------- ------------ ------------- ------------
Total income ........................... 5,456,963 778,394 88,289,131 230,586,880 462,921,809
----------- ---------- ------------ ------------- ------------
Expenses:
Management fees, net (Note 5) ............... 1,357,854 222,704 6,021,102 11,171,666 25,087,873
Distribution fees (Note 5) .................. 534,363 62,912 1,591,870 2,935,919 4,097,777
Shareholder servicing costs (Note 5) ........ 236,367 37,635 757,632 887,400 1,628,181
Reports to shareholders .................... 164,160 35,572 827,434 854,586 2,194,639
Custodian fees .............................. 33,295 3,427 144,423 759,620 601,321
Registration fees ........................... 14,572 5,811 244,388 305,397 180,845
Professional fees (Note 5) .................. 13,630 3,644 27,025 40,726 88,333
Directors' fees and expenses................. 1,850 175 7,518 12,037 31,433
Other ....................................... 20,170 2,310 70,290 91,648 115,526
----------- ---------- ------------ ------------- ------------
Total expenses ......................... 2,376,261 374,190 9,691,682 17,058,999 34,025,928
----------- ---------- ------------ ------------- ------------
Net investment income .............. 3,080,702 404,204 78,597,449 213,527,881 428,895,881
----------- ---------- ------------ ------------- ------------
Realized and unrealized gain (loss) from investments:
Net realized gain (loss) from:
Investments................................ 2,602,908 341,760 (20,307,696) (3,244,603) (41,540,472)
Foreign currency transactions.............. -- -- -- 1,618,127 --
Net unrealized appreciation (depreciation) on:
Investments ............................... 52,272,798 5,114,431 132,873,667 (130,439,871) 214,072,618
Translation of assets and liabilities
denominated in foreign currencies ........... -- -- -- (666,716) --
----------- ---------- ------------ ------------- ------------
Net realized and unrealized gain (loss)
on investments .............................. 54,875,706 5,456,191 112,565,971 (132,733,063) 172,532,146
----------- ---------- ------------ ------------- ------------
Net increase in net assets resulting
from operations ............................. $57,956,408 $5,860,395 $191,163,420 $ 80,794,818 $601,428,027
=========== ========== ============ ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
AND THE YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
GROWTH FUND DYNATECH FUND UTILITIES FUND
--------------------------- ------------------------- ------------------------------
1995 1994 1995 1994 1995 1994
------------ ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .............. $ 3,080,702 $ 6,640,300 $ 404,204 $ 469,253 $ 78,597,449 $ 177,611,864
Net realized gain (loss) from
investments and foreign
currency transactions............... 2,602,908 1,478,440 341,760 896,402 (20,307,696) 1,912,217
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated
in foreign currencies............... 52,272,798 32,965,685 5,114,431 522,124 132,873,667 (812,037,414)
------------ ----------- ----------- ----------- -------------- -------------
Net increase (decrease) in
net assets resulting
from operations...................... 57,956,408 41,084,425 5,860,395 1,887,779 191,163,420 (632,513,333)
Distributions to shareholders from:
Undistributed net investment income (4,752,087) (11,372,383) (337,944) (858,495) (78,652,106) (170,878,877)
Net realized capital gains ......... (1,478,428) (3,114,515) (896,316) (4,124,934) (2,095,631) (13,407,885)
Increase (decrease) in net assets
from capital share transactions
(Note 2) ........................... 20,161,195 (70,801,740) 2,122,315 (960,790) (70,161,047) (237,465,899)
------------ ----------- ----------- ----------- -------------- -------------
Net increase (decrease) in
net assets .................... 71,887,088 (44,204,213) 6,748,450 (4,056,440) 40,254,636 (1,054,265,994)
Net assets:
Beginning of period ................ 516,619,521 560,823,734 67,412,584 71,469,024 2,572,508,284 3,626,774,278
------------ ----------- ----------- ----------- -------------- -------------
End of period ...................... $588,506,609 $516,619,521 $ 74,161,034 $67,412,584 $2,612,762,920 $2,572,508,284
============ ============ ============ =========== ============== ==============
Undistributed net investment income
included in net assets:
Beginning of period ............... $ 4,733,342 $ 9,465,425 $ 326,789 $ 716,031 $ 6,749,793 $ 16,806
============ ============ ============ =========== ============== ==============
End of period ..................... $ 3,061,957 $ 4,733,342 $ 393,049 $ 326,789 $ 6,695,136 $ 6,749,793
============ ============ ============ =========== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
AND THE YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
INCOME FUND U.S. GOVERNMENT SECURITIES FUND
------------------------------------ ------------------------------------
1995 1994 1995 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 213,527,881 $ 330,686,148 $ 428,895,881 $ 966,419,067
Net realized gain (loss) from investments and
foreign currency transactions .................. (1,626,476) 55,974,567 (41,540,472) (111,364,839)
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities denominated in foreign currencies (131,106,587) (449,635,348) 214,072,618 (1,196,683,846)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets
resulting from operations .................. 80,794,818 (62,974,633) 601,428,027 (341,629,618)
Distributions to shareholders from:
Undistributed net investment income ............. (203,914,685) (343,424,035) (415,117,253) (983,276,666)
Net realized capital gains ...................... (62,863,177) (48,228,616) -- --
Increase (decrease) in net assets from capital
share transactions (Note 2) ..................... 342,262,495 1,410,687,943 (820,090,449) (1,274,862,037)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets ...... 156,279,451 956,060,659 (633,779,675) (2,599,768,321)
Net assets:
Beginning of period ............................. 4,891,504,544 3,935,443,885 11,668,747,439 14,268,515,760
---------------- ---------------- ---------------- ----------------
End of period ................................... $ 5,047,783,995 $ 4,891,504,544 $ 11,034,967,764 $ 11,668,747,439
================ ================ ================ ================
Undistributed net investment income included
in net assets:
Beginning of period ............................ $ 8,679,566 $ 42,309,475 $ 6,172,385 $ 22,809,371
================ ================ ================ ================
End of period .................................. $ 33,424,775 $ 8,679,566 $ 19,951,013 $ 6,172,385
================ ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Custodian Funds, Inc. (the Corporation) is an open-end, diversified
management investment company (mutual fund) registered under the Investment
Company Act of 1940 as amended. The Corporation's shares are offered in five
different Series (the Funds) with each Fund, in effect, representing a separate
fund and each of the Funds maintaining a totally separate investment portfolio.
All of the funds (except for the DynaTech Fund) will be offering an additional
class of shares effective May 1, 1995.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITIES VALUATIONS
Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and ask prices. Other securities
for which market quotations are readily available are valued at current market
values, obtained from pricing services, which are based on a variety of factors,
including recent trades, institutional size trading in similar types of
securities (considering yield, risk and maturity) and/or developments related to
specific securities. Portfolio securities which are traded both in the
over-the-counter market and on a securities exchange are valued according to the
broadest and most representative market as determined by the Manager. Other
securities for which market quotations are not available, if any, are valued in
accordance with procedures established by the Board of Directors.
Securities denominated in foreign currencies and traded on foreign exchanges or
in foreign markets are valued in a similar manner, and these values are
translated into U.S. dollars at current market quotations of their respective
currency against U.S. dollars last quoted by a major bank or, if no such
quotation is available, at the rate of exchange determined in accordance with
procedures established by the Board of Directors.
The fair values of securities restricted as to resale, if any, are determined
following procedures established by the Board of Directors -- see Note 6.
B. INCOME TAXES
The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
Each Fund is treated as a separate entity in the determination of compliance
with the Internal Revenue Code.
C. SECURITY TRANSACTIONS
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.
D. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Bond
discount is amortized as required by the Internal Revenue Code.
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities -- see Note 9.
E. EXPENSE ALLOCATION
Common expenses incurred by the Corporation are allocated among the Funds based
on the ratio of net assets of each Fund to the combined net assets. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.
F. FOREIGN CURRENCY TRANSLATION
The accounting records of the Funds are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange of such currencies against U.S. dollars on the
date of the valuation. Purchases and sales of securities, income and expenses
are translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are recognized when reported by the custodian
bank.
38
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
F. FOREIGN CURRENCY TRANSLATION (CONT.)
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade date and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Funds' books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in exchange rates.
G. REPURCHASE AGREEMENTS
All Funds except the U.S. Government Securities Fund may enter into a Joint
Repurchase Agreement whereby their uninvested cash balances are deposited into a
joint cash account to be used to invest in one or more repurchase agreements
with government securities dealers recognized by the Federal Reserve Board
and/or member banks of the Federal Reserve System. The value and face amount of
the Joint Repurchase Agreement has been allocated to the Funds based on their
pro-rata interest.
In a repurchase agreement, the Funds purchase a U.S. government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Funds to
the seller, collateralized by the underlying security. The transaction requires
the initial collateralization of the seller's obligation by U.S. government
securities with market value, including accrued interest of at least 102% of the
dollar amount invested by the Funds, with the value of the underlying security
marked to market daily to maintain coverage of at least 100%. The collateral is
delivered to the Funds' custodian and held until resold to the dealer or bank.
At March 31, 1995, all outstanding repurchase agreements and joint Repurchase
Agreements held by the Funds had been entered into on that date.
2. CAPITAL STOCK
At March 31, 1995, there were 10 billion shares of capital stock authorized,
which were allocated to the Funds as follows:
<TABLE>
<CAPTION>
DYNATECH U.S. GOVERNMENT
GROWTH FUND FUND UTILITIES FUND INCOME FUND SECURITIES FUND
------------ ------------ -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Allocated shares of $.01 par value capital
stock......................................... 500,000,000 500,000,000 800,000,000 3,200,000,000 5,000,000,000
============ ============ ============== ============== ===============
Paid-in capital............................... $402,047,730 $ 42,866,850 $2,713,857,805 $5,188,795,758 $12,074,875,522
============ ============ ============== ============== ===============
</TABLE>
Transactions in each of the Fund's shares for the six months ended March 31,
1995 and the year ended September 30, 1994 were as follows:
<TABLE>
<CAPTION>
GROWTH FUND DYNATECH FUND UTILITIES FUND
------------------------- ---------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ -------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended March 31, 1995
Shares sold............................ 1,330,633 $ 20,374,637 203,568 $ 2,059,563 12,789,408 $ 110,205,995
Shares issued in reinvestment of
distributions......................... 376,355 5,532,422 109,287 1,078,649 6,889,629 59,074,665
Shares redeemed........................ (1,142,195) (17,798,344) (314,044) (3,170,940) (26,534,342) (227,063,438)
Changes from exercise of exchange
privilege:
Shares sold.......................... 2,583,097 39,795,346 984,072 9,924,187 16,585,018 142,672,633
Shares redeemed...................... (1,821,434) (27,742,866) (767,449) (7,769,144) (18,206,357) (155,050,902)
---------- ------------ -------- ----------- ----------- -------------
Net increase (decrease).............. 1,326,456 $ 20,161,195 215,434 $ 2,122,315 (8,476,644) $ (70,161,047)
========== ============ ======== =========== =========== =============
</TABLE>
39
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
2. CAPITAL STOCK (CONT.)
<TABLE>
<CAPTION>
GROWTH FUND DYNATECH FUND UTILITIES FUND
-------------------------- ------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Year ended September 30, 1994
Shares sold............................ 3,594,801 $ 52,149,133 505,692 $ 4,903,527 55,310,086 $ 531,158,254
Shares issued in connection with merger
(Note 11).............................. -- -- -- -- 1,469,352 12,798,053
Shares issued in reinvestment of
distributions......................... 812,022 11,831,146 449,890 4,296,451 13,733,791 125,487,908
Shares redeemed........................ (6,292,343) (91,797,133) (812,226) (7,855,743) (61,566,757) (568,855,177)
Changes from exercise of exchange
privilege:
Shares sold.......................... 4,202,629 61,629,923 1,746,294 17,042,460 25,554,670 239,950,636
Shares redeemed...................... (7,154,900) (104,614,809) (1,985,867) (19,347,485) (62,057,114) (578,005,573)
---------- ------------- ---------- ------------ ----------- -------------
Net decrease......................... (4,837,791) $ (70,801,740) (96,217) $ (960,790) (27,555,972) $(237,465,899)
========== ============= ========== ============ =========== =============
<CAPTION>
INCOME FUND U.S. GOVERNMENT SECURITIES FUND
----------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Six months ended March 31, 1995
Shares sold................................................. 198,345,154 $ 423,195,538 23,029,534 $ 149,018,875
Shares issued in reinvestment of distributions.............. 77,436,466 164,929,881 28,051,897 180,653,445
Shares redeemed............................................. (148,605,411) (317,007,916) (156,336,467) (1,008,987,830)
Changes from exercise of exchange privilege:
Shares sold................................................ 84,039,226 179,467,455 15,128,020 97,701,193
Shares redeemed............................................ (50,633,987) (108,322,463) (36,986,290) (238,476,132)
------------ -------------- ------------ ---------------
Net increase (decrease) ................................... 160,581,448 $ 342,262,495 (127,113,306) $ (820,090,449)
============ ============== ============ ===============
Year ended September 30, 1994
Shares sold................................................. 583,148,319 $1,363,903,591 126,955,076 $878,791,189
Shares issued in reinvestment of distributions.............. 91,810,668 213,563,591 57,290,275 391,863,450
Shares redeemed............................................. (221,776,333) (514,046,627) (293,226,524) (1,997,900,628)
Changes from exercise of exchange privilege:
Shares sold................................................ 266,632,325 624,897,928 30,365,255 208,267,481
Shares redeemed............................................ (119,137,856) (277,630,540) (110,425,365) (755,883,529)
------------ -------------- ------------ ---------------
Net increase (decrease).................................... 600,677,123 $1,410,687,943 (189,041,283) $(1,274,862,037)
============ ============== ============ ===============
</TABLE>
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At September 30, 1994, for tax purposes, the Funds had accumulated net realized
gains or capital loss carryovers as follows:
<TABLE>
<CAPTION>
DYNATECH
GROWTH FUND FUND UTILITIES FUND INCOME FUND
----------- -------- -------------- -----------
<S> <C> <C> <C> <C>
Accumulated net realized gains........................................ $1,478,440 $896,402 $1,912,217 $77,441,293
========== ======== ========== ===========
<CAPTION>
U.S. GOVERNMENT
SECURITIES FUND
---------------
<S> <C>
Capital loss carryovers
Expiring in: 1995...................................................................................... $ 61,421,160
1996........................................................................................ 266,310,966
1997........................................................................................ 92,974,800
1998........................................................................................ 74,910,973
1999........................................................................................ 67,082,683
2002........................................................................................ 111,364,839
------------
$674,065,421
============
</TABLE>
40
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the period ended March 31, 1995 were as follows:
<TABLE>
<CAPTION>
DYNATECH U.S. GOVERNMENT
GROWTH FUND FUND UTILITIES FUND INCOME FUND SECURITIES FUND
----------- ---------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Purchases.... $12,156,958 $2,774,550 $ 89,312,618 $1,790,376,360 $ 212,375,645
=========== ========== ============ ============== ==============
Sales........ $ 5,136,084 $1,826,728 $232,835,059 $1,014,642,309 $1,009,447,765
=========== ========== ============ ============== ==============
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to each
Fund, and receives fees computed monthly on the net assets of each Fund on the
last day of the month at an annualized rate of 5/8 of 1% of the first $100
million of net assets, 1/2 of 1% of net assets in excess of $100 million up to
$250 million, 45/100 of 1% of net assets in excess of $250 million up to $10
billion, 44/100 of 1% of net assets in excess of $10 billion up to $12.5
billion, 42/100 of 1% of net assets in excess of $12.5 billion up to $15
billion, 40/100 of 1% of net assets in excess of $15 billion up to $17.5
billion, 38/100 of 1% of net assets in excess of $17.5 billion to $20 billion,
and 36/100 of 1% of net assets in excess of $20 billion. Fees incurred by the
Funds aggregated $43,861,199 for the period ended March 31, 1995. The terms of
the agreement provide that aggregate annual expenses of each Fund be limited to
the extent necessary to comply with the limitations set forth in the laws,
regulations and administrative interpretations of the states in which the Funds'
shares are registered. There were no reimbursements to the Funds under this
provision during the period ended March 31, 1995.
In its capacity as underwriter for the capital stock of the Corporation,
Franklin/Templeton Distributors, Inc. receives commissions on sales of the
Corporation's capital stock. Commissions received by Franklin/Templeton
Distributors, Inc. and the amounts which were subsequently paid to other dealers
for the period ended March 31, 1995 were as follows:
<TABLE>
<CAPTION>
DYNATECH U.S. GOVERNMENT
GROWTH FUND FUND UTILITIES FUND INCOME FUND SECURITIES FUND
----------- -------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Total commissions received.... $787,243 $79,495 $3,495,314 $15,848,356 $4,647,474
======== ======= ========== =========== ==========
Paid to other dealers......... $698,711 $70,420 $3,276,064 $14,976,984 $4,368,045
======== ======= ========== =========== ==========
</TABLE>
Commissions are deducted from the gross proceeds received from the sale of the
capital stock of the Corporation, and as such are not expenses of the Funds.
Pursuant to a shareholder service agreement with Franklin/Templeton Investor
Services, Inc., the Funds pay costs on a per shareholder account basis. Such
costs incurred for the period ended March 31, 1995 aggregated $3,547,215 of
which $3,357,787 was paid to Franklin/Templeton Investor Services, Inc.
Effective May 1, 1994, the Funds implemented a plan of distribution under Rule
12b-1 of the Investment Company Act of 1940, pursuant to which the Funds will
reimburse Franklin/Templeton Distributors, Inc. in an amount up to a maximum of
0.15% per annum of the average daily net assets of the Income, Utilities and
U.S. Government Securities Series and 0.25% per annum of the average daily net
assets of the Growth and DynaTech Series for costs incurred in the promotion,
offering and marketing of the Funds shares. Costs incurred by the Funds under
the agreement aggregated $9,222,841 for the period ended March 31, 1995.
During the period ended March 31, 1995, legal fees of $36,383 were incurred to a
law firm in which Brian E. Lorenz, Secretary of the Corporation, is a partner.
Such fees were allocated to each Fund as described in Note 1.
Certain officers and directors of the Corporation are also officers and/or
directors of Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc., and
Franklin/Templeton Investor Services, Inc., all wholly owned subsidiaries of
Franklin Resources, Inc.
6. RESTRICTED SECURITIES
A restricted security is a security which has not been registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933. The
Funds, except the U.S. Government Securities Series, may purchase restricted
securities through a private offering and they cannot be sold without prior
registration under the Securities Act of 1933 unless such sale is pursuant to an
exemption therefrom. Subsequent costs of registration of such securities are
borne by the issuer. A secondary market exists for certain privately placed
securities. The Funds value these restricted securities as disclosed in Note 1.
At March 31, 1995, the Income Fund held restricted securities with a value
aggregating $42,378 representing .0008% of the Fund's net assets. Such
securities are:
41
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
ACQUISITION
SHARES SECURITY DATE COST VALUE
- --------- -------------------------------------------------------------------- ----------- --------- ------
<S> <C> <C> <C> <C>
1,215 Grand Union Capital Corp., warrants................................. 07/22/92 1,136,827 304
59,255 Zale Corp., Ltd Partnership......................................... 07/30/93 42,074 42,074
</TABLE>
7. RULE 144A SECURITIES
Rule 144A provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act of 1933 for specified resales of restricted
securities to qualified institutional investors. The Funds value these
securities as disclosed in Note 1. At March 31, 1995, the Utilities Fund and the
Income Fund held 144A securities with a value aggregating $7,975,000 and
$304,813,060 respectively, representing .3% and 6.0% of the respective Funds'
net assets. See the accompanying statement of investments in securities and net
assets for specific information of such securities.
8. LOANS OF PORTFOLIO SECURITIES
During the period ended March 31, 1995, the Utilities Fund loaned 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 cash collateral received is invested by the Fund in short-term
instruments and any interest income in excess of a predetermined rebate to the
brokers is kept by the Fund as interest income. Interest income from this source
amounted to $74,202 in the Utilities Fund for the period ended March 31, 1995.
At March 31, 1995, the value of the loaned securities amounted to $25,446,567 in
the Utilities Fund. The Fund has received sufficient cash collateral to meet
these commitments.
9. CREDIT RISK AND DEFAULTED SECURITIES
Although the Income Fund has a diversified portfolio, 32.41% of its portfolio is
invested in lower rated and comparable quality unrated high yield securities.
Investments in higher yield securities are accompanied by a greater degree of
credit risk and such lower quality securities 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. At March 31, 1995, the Fund
held 3 defaulted securities issued by 2 separate companies with a value
aggregating $856,000, representing .02% of the Fund's net assets. For more
information as to specific securities, see the accompanying statement of
investments in securities and net assets.
For financial reporting purposes, it is the Funds' accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
10. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities held by
any of the Funds are defined in the Investment Company Act of 1940 as an
affiliated company. The Growth Fund had investments in affiliated companies at
March 31, 1995, which amounted to $6,906.
11. ACQUISITION OF HAMPTON UTILITIES TRUST
On August 5, 1994, the Franklin Utilities Fund acquired all of the net assets of
Hampton Utilities Trust pursuant to a plan of reorganization approved by the
shareholders of the Hampton Utilities Trust on August 5, 1994.
The acquistion was accomplished by a tax-free exchange of the Franklin Utilities
Fund shares for all the net assets of the Hampton Utilities Trust, which is
accounted for as a pooling-of-interest without restatement for financial
reporting purposes.
The selected financial information and shares outstanding for the funds,
immediately before and after the acquisition were as follows:
<TABLE>
<CAPTION>
NET ASSET UNDISTRIBUTED ACCUMULATED UNREALIZED
VALUE SHARES EXCHANGE NET INVESTMENT NET REALIZED APPRECIATION
NET ASSETS PER SHARE OUTSTANDING RATIO INCOME GAIN (LOSS) ON INVESTMENTS
-------------- --------- ----------- ---------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Hampton Utilities Trust......... $ 12,798,053 $12.39 1,032,684 1.42284730 $ -- $ 2,308 $ 3,694,964
Franklin Utilities Fund......... 2,746,347,100 8.71 315,260,781 22,351,674 (3,580,742) (112,655,303)
Combined........................ 2,759,145,153 8.71 316,730,133 22,351,674 (3,578,434) (108,960,339)
</TABLE>
42
<PAGE>
FRANKLIN CUSTODIAN FUNDS, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
12. FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each year
by Fund are as follows:
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------
NET DISTRI-
REALIZED & DISTRI- BUTIONS NET
NET ASSET NET UNREALIZED TOTAL BUTIONS FROM ASSET
VALUE AT INVEST- GAIN FROM FROM NET REALIZED TOTAL VALUE
YEAR BEGINNING MENT (LOSS) ON INVESTMENT INVESTMENT CAPITAL DISTRI- AT END TOTAL
ENDED OF YEAR INCOME INVESTMENTS OPERATIONS INCOME GAINS BUTIONS OF YEAR RETURN++
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND:+
1990 $11.97 $.314 $(1.188) $ (.874) $(.206) $(.200) $(.406) $10.69 $ (7.55)
1991 10.69 .325 2.703 3.028 (.268) -- (.268) 13.45 28.65
1992 13.45 .229 .524 .753 (.353) (.150) (.503) 13.70 5.73
1993 13.70 .232 .575 .807 (.189) (.068) (.257) 14.25 5.87
1994 14.25 .190 .899 1.089 (.297) (.082) (.379) 14.96 7.63
1995+++ 14.96 .080 1.57 1.627 (.135) (.042) (.177) 16.41 11.01
DYNATECH FUND:+
1990 7.63 .156 (.352) (.196) (.059) (.605) (.664) 6.77 (2.71)
1991 6.77 .126 1.952 2.078 (.168) -- (.168) 8.68 31.21
1992 8.68 .120 .522 .642 (.112) -- (.112) 9.21 7.29
1993 9.21 .102 1.207 1.309 (.117) (.112) (.229) 10.29 14.36
1994 10.29 .070 .210 .280 (.124) (.596) (.720) 9.85 2.89
1995+++ 9.85 .060 .769 .829 (.049) (.130) (.179) 10.50 8.53
UTILITIES FUND:
1990 8.10 .529 (.555) (.026) (.580) (.014) (.594) 7.48 (.93)
1991 7.48 .535 1.385 1.920 (.590) -- (.590) 8.81 26.15
1992 8.81 .530 .849 1.379 (.559) -- (.559) 9.63 15.89
1993 9.63 .534 1.161 1.695 (.545) -- (.545) 10.78 17.83
1994 10.78 .550 (2.436) (1.886) (.524) (.040) (.564) 8.33 (17.94)
1995+++ 8.33 .262 .639 .639 (.262) (.007) (.269) 8.70 7.69
INCOME FUND:
1990 2.11 .212 (.324) (.112) (.220) (.018) (.238) 1.76 (6.37)
1991 1.76 .190 .350 .540 (.220) -- (.220) 2.08 32.60
1992 2.08 .190 .194 .384 (.205) (.009) (.214) 2.25 18.80
1993 2.25 .180 .227 .407 (.185) (.012) (.197) 2.46 18.76
1994 2.46 .170 (.201) (.031) (.180) (.029) (.209) 2.22 (1.52)
1995+++ 2.22 .090 (.052) .038 (.090) (.028) (.118) 2.14 1.85
U.S. GOVERNMENT SECURITIES FUND:**
1990 6.90 .668 (.020) .648 (.688) -- (.688) 6.86 9.47
1991 6.86 .653 .287 .940 (.660) -- (.660) 7.14 13.97
1992 7.14 .609 .106 .715 (.595) -- (.595) 7.26 10.14
1993 7.26 .557 (.056) .501 (.561) -- (.561) 7.20 6.86
1994 7.20 .500 (.678) (.178) (.512) -- (.512) 6.51 (2.75)
1995+++ 6.51 .250 .100 .350 (.240) -- (.240) 6.62 5.54
</TABLE>
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------
RATIO
OF NET
NET ASSETS RATIO OF INVESTMENT
AT END EXPENSES INCOME TO PORTFOLIO
YEAR OF YEAR TO AVERAGE AVERAGE TURNOVER
ENDED (IN 000'S) NET ASSETS NET ASSETS RATE
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GROWTH FUND:+
1990 $ 169,939 .73% 2.74% --%
1991 331,392 .70 2.58 7.98
1992 532,971 .66 2.06 .81
1993 560,824 .64 1.64 1.70
1994 516,620 .77 1.23 6.52
1995+++ 588,507 .87* 1.13* .96
DYNATECH FUND:+
1990 36,538 .79 2.09 11.34
1991 48,867 .93 1.57 7.12
1992 64,595 .81 1.42 10.70
1993 71,469 .81 1.03 26.56
1994 67,413 1.00 .69 9.73
1995+++ 74,161 1.06* 1.14* 3.73
UTILITIES FUND:
1990 749,386 .60 6.50 2.07
1991 1,226,118 .59 6.44 .89
1992 2,191,095 .57 5.90 1.39
1993 3,626,774 .55 5.30 7.81
1994 2,572,508 .64 5.76 6.34
1995+++ 2,612,763 .74* 6.01* 3.53
INCOME FUND:
1990 1,299,130 .55 10.73 12.14
1991 1,673,187 .56 10.17 33.92
1992 2,483,501 .55 9.11 23.30
1993 3,935,444 .54 7.84 25.41
1994 4,891,505 .64 7.37 23.37
1995+++ 5,047,784 .70* 6.09* 23.81
U.S. GOVERNMENT SECURITIES FUND;**
1990 11,143,333 .52 9.72 18.23
1991 12,426,910 .52 9.26 22.14
1992 13,617,157 .53 8.46 38.75
1993 14,268,516 .52 7.71 43.10
1994 11,668,747 .55 7.37 18.28
1995+++ 11,034,968 .61* 7.66* 1.95
</TABLE>
*Annualized
**Maturity of U.S. government issues and the reinvestment of the proceeds
thereof are considered as purchases and sales of securities in computing the
portfolio turnover rate.
+Data prior to 1992 has been adjusted to reflect a two-for-one stock split in
the form of a 100% stock dividend to shareholders of record effective on the
beginning of business on June 1, 1992.
++Total return measures the changes in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge and assumes reinvestment of dividends at the offering price and capital
gains, if any, at net asset value. Effective May 1, 1994, with the
implementation of the Rule 12b-1 distribution plan, as disclosed in Note 5, the
existing sales charge on reinvested dividends were eliminated.
+++For the six months ended March 31, 1995
43
<PAGE>
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)
GRAPHIC MATERIAL(1)
This bar chart shows the Standard & Poor's 500 Stock Index monthly total
returns from 4/1/55 to 3/31/95.
<TABLE>
<CAPTION>
DATE AMOUNT 1-MONTH RETURN
<S> <C> <C>
4/1/55 $10,000
4/30/55 10,377 3.77%
5/31/55 10,364 -0.13%
6/30/55 11,331 9.33%
7/31/55 12,019 6.07%
8/31/55 11,925 -0.78%
9/30/55 12,165 2.01%
10/31/55 11,795 -3.04%
11/30/55 12,678 7.49%
12/31/55 12,820 1.12%
1/31/56 12,352 -3.65%
2/29/56 12,781 3.47%
3/31/56 13,776 7.78%
4/30/56 13,747 -0.21%
5/31/56 12,844 -6.57%
6/30/56 13,486 5.00%
7/31/56 14,181 5.15%
8/31/56 13,641 -3.81%
9/30/56 13,141 -3.67%
10/31/56 13,208 0.51%
11/30/56 13,063 -1.10%
12/31/56 13,651 4.50%
1/31/57 13,081 -4.18%
2/28/57 12,654 -3.26%
3/31/57 13,014 2.84%
4/30/57 13,494 3.69%
5/31/57 13,993 3.70%
6/30/57 14,120 0.91%
7/31/57 14,281 1.14%
8/31/57 13,479 -5.62%
9/30/57 12,779 -5.19%
10/31/57 12,369 -3.21%
11/30/57 12,568 1.61%
12/31/57 12,188 -3.02%
1/31/58 12,709 4.27%
2/28/58 12,447 -2.06%
3/31/58 12,941 3.97%
4/30/58 13,353 3.18%
5/31/58 13,553 1.50%
6/30/58 14,044 3.62%
7/31/58 14,650 4.32%
8/31/58 14,824 1.19%
9/30/58 15,680 5.77%
10/31/58 16,078 2.54%
11/30/58 16,438 2.24%
12/31/58 17,447 6.14%
1/31/59 17,513 0.38%
2/28/59 17,510 -0.02%
3/31/59 17,640 0.74%
4/30/59 18,324 3.88%
5/31/59 18,671 1.89%
6/30/59 18,753 0.44%
7/31/59 19,408 3.49%
8/31/59 19,116 -1.50%
9/30/59 18,394 -3.78%
10/31/59 18,601 1.13%
11/30/59 18,847 1.32%
12/31/59 19,533 3.64%
1/31/60 18,137 -7.15%
2/29/60 18,303 0.92%
3/31/60 18,208 -0.52%
4/30/60 17,889 -1.75%
5/31/60 18,370 2.69%
6/30/60 18,886 2.81%
7/31/60 18,418 -2.48%
8/31/60 18,900 2.62%
9/30/60 17,914 -5.22%
10/31/60 17,871 -0.24%
11/30/60 18,590 4.02%
12/31/60 19,621 5.55%
1/31/61 20,860 6.31%
2/28/61 21,421 2.69%
3/31/61 22,130 3.31%
4/30/61 22,215 0.38%
5/31/61 22,640 1.91%
6/30/61 22,150 -2.16%
7/31/61 22,877 3.28%
8/31/61 23,326 1.96%
9/30/61 23,034 -1.25%
10/31/61 23,687 2.83%
11/30/61 24,619 3.93%
12/31/61 24,895 1.12%
1/31/62 23,952 -3.79%
2/28/62 24,342 1.63%
3/31/62 24,373 0.13%
4/30/62 22,863 -6.20%
5/31/62 20,897 -8.60%
6/30/62 19,362 -7.35%
7/31/62 20,592 6.35%
8/31/62 20,907 1.53%
9/30/62 20,080 -3.96%
10/31/62 20,169 0.44%
11/30/62 22,217 10.15%
12/31/62 22,738 2.35%
1/31/63 23,855 4.91%
2/28/63 23,167 -2.88%
3/31/63 24,176 4.36%
4/30/63 25,349 4.85%
5/31/63 25,712 1.43%
6/30/63 25,393 -1.24%
7/31/63 25,305 -0.35%
8/31/63 26,538 4.87%
9/30/63 26,436 -0.38%
10/31/63 27,287 3.22%
11/30/63 27,000 -1.05%
12/31/63 27,914 3.39%
1/31/64 28,666 2.69%
2/29/64 28,949 0.99%
3/31/64 29,600 2.25%
4/30/64 29,780 0.61%
5/31/64 30,121 1.15%
6/30/64 30,840 2.39%
7/31/64 31,403 1.83%
8/31/64 30,893 -1.62%
9/30/64 31,999 3.58%
10/31/64 32,258 0.81%
11/30/64 32,091 -0.52%
12/31/64 32,501 1.28%
1/31/65 33,579 3.32%
2/28/65 33,529 -0.15%
3/31/65 33,280 -0.74%
4/30/65 34,419 3.42%
5/31/65 34,153 -0.77%
6/30/65 32,747 -4.12%
7/31/65 33,187 1.34%
8/31/65 33,934 2.25%
9/30/65 35,265 3.92%
10/31/65 36,230 2.74%
11/30/65 35,912 -0.88%
12/31/65 36,551 1.78%
1/31/66 36,729 0.49%
2/28/66 36,073 -1.79%
3/31/66 35,555 -1.44%
4/30/66 36,284 2.05%
5/31/66 34,319 -5.42%
6/30/66 34,048 -0.79%
7/31/66 33,590 -1.35%
8/31/66 30,979 -7.77%
9/30/66 31,039 0.19%
10/31/66 32,515 4.76%
11/30/66 32,616 0.31%
12/31/66 32,888 0.83%
1/31/67 35,459 7.82%
2/28/67 35,528 0.19%
3/31/67 37,219 4.76%
4/30/67 38,791 4.22%
5/31/67 36,757 -5.24%
6/30/67 37,694 2.55%
7/31/67 39,403 4.53%
8/31/67 38,941 -1.17%
9/30/67 40,513 4.04%
10/31/67 39,336 -2.91%
11/30/67 39,378 0.11%
12/31/67 40,744 3.47%
1/31/68 38,957 -4.39%
2/29/68 37,741 -3.12%
3/31/68 38,408 1.77%
4/30/68 41,555 8.19%
5/31/68 42,019 1.12%
6/30/68 42,722 1.67%
7/31/68 41,932 -1.85%
8/31/68 42,413 1.15%
9/30/68 44,369 4.61%
10/31/68 44,689 0.72%
11/30/68 46,832 4.80%
12/31/68 45,242 -3.40%
1/31/69 44,872 -0.82%
2/28/69 42,746 -4.74%
3/31/69 44,554 4.23%
4/30/69 45,510 2.15%
5/31/69 45,410 -0.22%
6/30/69 43,228 -4.81%
7/31/69 40,627 -6.02%
8/31/69 42,255 4.01%
9/30/69 41,538 -1.70%
10/31/69 43,376 4.42%
11/30/69 41,846 -3.53%
12/31/69 41,440 -0.97%
1/31/70 38,271 -7.65%
2/28/70 40,288 5.27%
3/31/70 40,697 1.02%
4/30/70 37,015 -9.05%
5/31/70 34,758 -6.10%
6/30/70 33,378 -3.97%
7/31/70 35,824 7.33%
8/31/70 37,417 4.45%
9/30/70 39,010 4.26%
10/31/70 38,565 -1.14%
11/30/70 40,395 4.75%
12/31/70 43,054 6.58%
1/31/71 44,796 4.05%
2/28/71 45,203 0.91%
3/31/71 47,217 4.46%
4/30/71 48,930 3.63%
5/31/71 46,896 -4.16%
6/30/71 47,297 0.86%
7/31/71 45,342 -4.13%
8/31/71 46,979 3.61%
9/30/71 47,017 0.08%
10/31/71 45,052 -4.18%
11/30/71 44,937 -0.26%
12/31/71 49,178 9.44%
1/31/72 50,069 1.81%
2/29/72 51,336 2.53%
3/31/72 52,000 1.29%
4/30/72 52,228 0.44%
5/31/72 53,131 1.73%
6/30/72 52,350 -1.47%
7/31/72 52,472 0.23%
8/31/72 54,280 3.45%
9/30/72 54,397 0.22%
10/31/72 54,904 0.93%
11/30/72 57,408 4.56%
12/31/72 58,501 1.90%
1/31/73 57,500 -1.71%
2/28/73 55,344 -3.75%
3/31/73 55,646 0.55%
4/30/73 53,376 -4.08%
5/31/73 52,368 -1.89%
6/30/73 52,438 0.13%
7/31/73 54,429 3.80%
8/31/73 52,433 -3.67%
9/30/73 54,953 4.81%
10/31/73 54,882 -0.13%
11/30/73 48,633 -11.39%
12/31/73 49,920 2.65%
1/31/74 49,419 -1.00%
2/28/74 49,239 -0.36%
3/31/74 48,518 -1.46%
4/30/74 46,623 -3.91%
5/31/74 45,059 -3.35%
6/30/74 44,858 -0.45%
7/31/74 41,368 -7.78%
8/31/74 37,633 -9.03%
9/30/74 33,622 -10.66%
10/31/74 39,104 16.30%
11/30/74 37,025 -5.32%
12/31/74 36,787 -0.64%
1/31/75 41,304 12.28%
2/28/75 43,778 5.99%
3/31/75 45,211 3.27%
4/30/75 47,348 4.73%
5/31/75 49,436 4.41%
6/30/75 52,131 5.45%
7/31/75 48,604 -6.77%
8/31/75 47,580 -2.11%
9/30/75 46,435 -2.41%
10/31/75 49,298 6.17%
11/30/75 50,516 2.47%
12/31/75 50,449 -0.13%
1/31/76 56,418 11.83%
2/29/76 55,775 -1.14%
3/31/76 57,995 3.98%
4/30/76 57,358 -1.10%
5/31/76 56,534 -1.44%
6/30/76 59,412 5.09%
7/31/76 58,933 -0.81%
8/31/76 58,631 -0.51%
9/30/76 60,534 3.25%
10/31/76 59,188 -2.22%
11/30/76 58,728 -0.78%
12/31/76 62,461 6.36%
1/31/77 59,305 -5.05%
2/28/77 58,020 -2.17%
3/31/77 57,817 -0.35%
4/30/77 57,829 0.02%
5/31/77 56,466 -2.36%
6/30/77 59,714 5.75%
7/31/77 58,746 -1.62%
8/31/77 57,510 -2.10%
9/30/77 58,050 0.94%
10/31/77 55,531 -4.34%
11/30/77 57,028 2.70%
12/31/77 57,972 1.66%
1/31/78 54,406 -6.15%
2/28/78 53,059 -2.48%
3/31/78 55,101 3.85%
4/30/78 59,808 8.54%
5/31/78 60,061 0.42%
6/30/78 59,795 -0.44%
7/31/78 63,019 5.39%
8/31/78 64,653 2.59%
9/30/78 64,972 0.49%
10/31/78 59,022 -9.16%
11/30/78 60,004 1.66%
12/31/78 61,753 2.91%
1/31/79 64,207 3.97%
2/28/79 61,862 -3.65%
3/31/79 66,116 6.88%
4/30/79 66,226 0.17%
5/31/79 64,482 -2.63%
6/30/79 67,899 5.30%
7/31/79 68,493 0.87%
8/31/79 72,128 5.31%
9/30/79 73,072 1.31%
10/31/79 68,058 -6.86%
11/30/79 70,959 4.26%
12/31/79 73,145 3.08%
1/31/80 77,360 5.76%
2/29/80 77,021 -0.44%
3/31/80 70,170 -8.89%
4/30/80 73,057 4.11%
5/31/80 76,459 4.66%
6/30/80 79,594 4.10%
7/31/80 84,770 6.50%
8/31/80 85,265 0.58%
9/30/80 88,498 3.79%
10/31/80 89,916 1.60%
11/30/80 99,121 10.24%
12/31/80 96,878 -2.26%
1/31/81 92,446 -4.57%
2/28/81 93,674 1.33%
3/31/81 98,176 4.81%
4/30/81 95,874 -2.34%
5/31/81 95,715 -0.17%
6/30/81 95,924 0.22%
7/31/81 95,712 -0.22%
8/31/81 89,768 -6.21%
9/30/81 86,172 -4.01%
10/31/81 90,407 4.91%
11/30/81 93,715 3.66%
12/31/81 92,150 -1.67%
1/31/82 90,533 -1.75%
2/28/82 85,051 -6.06%
3/31/82 85,442 0.46%
4/30/82 88,861 4.00%
5/31/82 85,381 -3.92%
6/30/82 84,992 -0.46%
7/31/82 83,038 -2.30%
8/31/82 92,669 11.60%
9/30/82 94,716 2.21%
10/31/82 105,169 11.04%
11/30/82 108,968 3.61%
12/31/82 111,965 2.75%
1/31/83 115,675 3.31%
2/28/83 117,872 1.90%
3/31/83 123,134 4.46%
4/30/83 132,359 7.49%
5/31/83 130,725 -1.23%
6/30/83 136,771 4.62%
7/31/83 132,256 -3.30%
8/31/83 133,753 1.13%
9/30/83 136,567 2.10%
10/31/83 134,495 -1.52%
11/30/83 136,839 1.74%
12/31/83 137,110 0.20%
1/31/84 135,847 -0.92%
2/29/84 130,568 -3.89%
3/31/84 133,827 2.50%
4/30/84 134,558 0.55%
5/31/84 126,571 -5.94%
6/30/84 130,396 3.02%
7/31/84 128,251 -1.64%
8/31/84 141,889 10.63%
9/30/84 142,978 0.77%
10/31/84 142,970 -0.01%
11/30/84 140,809 -1.51%
12/31/84 145,638 3.43%
1/31/85 156,428 7.41%
2/28/85 157,778 0.86%
3/31/85 159,005 0.78%
4/30/85 158,275 -0.46%
5/31/85 166,830 5.41%
6/30/85 170,614 2.27%
7/31/85 169,787 -0.48%
8/31/85 167,751 -1.20%
9/30/85 163,669 -2.43%
10/31/85 170,626 4.25%
11/30/85 181,727 6.51%
12/31/85 191,723 5.50%
1/31/86 192,177 0.24%
2/28/86 205,915 7.15%
3/31/86 218,647 6.18%
4/30/86 215,553 -1.42%
5/31/86 226,380 5.02%
6/30/86 231,478 2.25%
7/31/86 217,894 -5.87%
8/31/86 233,407 7.12%
9/30/86 215,393 -7.72%
10/31/86 227,182 5.47%
11/30/86 232,061 2.15%
12/31/86 227,415 -2.00%
1/31/87 257,380 13.18%
2/28/87 266,884 3.69%
3/31/87 275,908 3.38%
4/30/87 272,749 -1.14%
5/31/87 274,395 0.60%
6/30/87 289,680 5.57%
7/31/87 303,650 4.82%
8/31/87 314,265 3.50%
9/30/87 308,795 -1.74%
10/31/87 241,592 -21.76%
11/30/87 220,972 -8.54%
12/31/87 239,193 8.25%
1/31/88 248,864 4.04%
2/29/88 259,271 4.18%
3/31/88 252,805 -2.49%
4/30/88 255,187 0.94%
5/31/88 255,998 0.32%
6/30/88 269,551 5.29%
7/31/88 268,093 -0.54%
8/31/88 257,744 -3.86%
9/30/88 270,409 4.91%
10/31/88 277,430 2.60%
11/30/88 272,189 -1.89%
12/31/88 278,653 2.37%
1/31/89 298,470 7.11%
2/28/89 289,831 -2.89%
3/31/89 298,369 2.95%
4/30/89 313,315 5.01%
5/31/89 324,324 3.51%
6/30/89 324,647 0.10%
7/31/89 353,337 8.84%
8/31/89 358,819 1.55%
9/30/89 359,360 0.15%
10/31/89 350,313 -2.52%
11/30/89 356,108 1.65%
12/31/89 366,678 2.97%
1/31/90 341,444 -6.88%
2/28/90 344,360 0.85%
3/31/90 355,586 3.26%
4/30/90 346,026 -2.69%
5/31/90 377,856 9.20%
6/30/90 377,856 0.00%
7/31/90 375,883 -0.52%
8/31/90 340,432 -9.43%
9/30/90 326,173 -4.19%
10/31/90 323,988 -0.67%
11/30/90 343,406 5.99%
12/31/90 355,257 3.45%
1/31/91 370,007 4.15%
2/28/91 394,901 6.73%
3/31/91 406,671 2.98%
4/30/91 406,811 0.03%
5/31/91 422,505 3.86%
6/30/91 405,782 -3.96%
7/31/91 423,985 4.49%
8/31/91 432,316 1.96%
9/30/91 427,462 -1.12%
10/31/91 432,531 1.19%
11/30/91 413,531 -4.39%
12/31/91 463,027 11.97%
1/31/92 453,813 -1.99%
2/29/92 458,153 0.96%
3/31/92 451,381 -1.48%
4/30/92 463,971 2.79%
5/31/92 464,419 0.10%
6/30/92 459,980 -0.96%
7/31/92 478,091 3.94%
8/31/92 466,618 -2.40%
9/30/92 474,473 1.68%
10/31/92 475,472 0.21%
11/30/92 489,861 3.03%
12/31/92 498,253 1.71%
1/31/93 501,764 0.70%
2/28/93 507,024 1.05%
3/31/93 519,946 2.55%
4/30/93 506,731 -2.54%
5/31/93 518,243 2.27%
6/30/93 522,410 0.80%
7/31/93 519,627 -0.53%
8/31/93 537,519 3.44%
9/30/93 535,860 -0.31%
10/31/93 546,252 1.94%
11/30/93 539,200 -1.29%
12/31/93 548,249 1.68%
1/31/94 566,068 3.25%
2/28/94 549,060 -3.00%
3/31/94 527,633 -3.90%
4/30/94 533,717 1.15%
5/31/94 540,333 1.24%
6/30/94 529,894 -1.93%
7/31/94 546,580 3.15%
8/31/94 567,131 3.76%
9/30/94 555,788 -2.00%
10/31/94 567,392 2.09%
11/30/94 544,977 -3.95%
12/31/94 555,680 1.96%
1/31/95 569,183 2.43%
2/28/95 589,667 3.60%
3/31/95 609,631 3.39%
</TABLE>
GRAPHIC MATERIAL(2)
This bar chart shows the Standard & Poor's 500 Stock Index
2-year rolling total returns from 4/1/55 to 3/31/95.
<TABLE>
<CAPTION>
Return 2-YR
<S> <C>
30.14% 3/55-3/57
- -6.06% 3/56-3/58
35.55% 3/57-3/59
40.70% 3/58-3/60
25.45% 3/59-3/61
33.86% 3/60-3/62
9.25% 3/61-3/63
21.45% 3/62-3/64
37.66% 3/63-3/65
20.12% 3/64-3/66
11.84% 3/65-3/67
8.02% 3/66-3/68
19.71% 3/67-3/69
5.96% 3/68-3/70
5.98% 3/69-3/71
27.77% 3/70-3/72
17.85% 3/71-3/73
- -6.70% 3/72-3/74
- -18.75% 3/73-3/75
19.53% 3/74-3/76
27.88% 3/75-3/77
- -4.99% 3/76-3/78
14.35% 3/77-3/79
27.35% 3/78-3/80
48.49% 3/79-3/81
21.76% 3/80-3/82
25.42% 3/81-3/83
56.63% 3/82-3/84
29.13% 3/83-3/85
63.38% 3/84-3/86
73.52% 3/85-3/87
15.62% 3/86-3/88
8.14% 3/87-3/89
40.66% 3/88-3/90
36.30% 3/89-3/91
26.94% 3/90-3/92
27.85% 3/91-3/93
16.89% 3/92-3/94
17.25% 3/93-3/95
</TABLE>
GRAPHIC MATERIAL (3)
This chart shows in pie chart format the fund's securities breakdown by
industry as a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 3/31/95
<S> <C>
Aerospace 8.1
Business Services 5.6
Chemicals 4.6
Communications & Entertainment 7.4
Data Processing 9
Diversified Manufacturers 3.7
Electronics & Electrical Equipment 6.9
Energy/Energy Services 5.2
Environmental Protection & Purification 8.1
Health Care - Diversified 10.1
Pharmaceuticals 9.6
Retailers 1.9
Telecommunications 2.1
Transportation 9.2
Other 5.7
Cash & Equivalents 2.8
</TABLE>
GRAPHIC MATERIAL (4)
This chart shows in pie chart format the fund's securities breakdown
by industry as a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 3/31/95
<S> <C>
Cash 28.9
Semiconductor Manufacturers 13.8
Precision Instruments/Test Equipment 4.1
Computer Software 9.2
Computer Hardware 6.6
Specialty Retailers 4.3
Environmental Services 3.9
Pharmaceuticals 4.9
Medical Services 4.1
Networking 3.6
Telecommunications 12.4
Other 4.2
</TABLE>
GRAPHIC MATERIAL (5)
This chart shows in pie chart format the fund's securities breakdown
by security type as a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 3/31/95
<S> <C>
Stocks 83.3
Bonds 12.6
Cash & Equivalents 4.1
</TABLE>
GRAPHIC MATERIAL (6)
This chart shows in pie chart format the fund's securities breakdown
by industry as a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 3/31/95
<S> <C>
Utilities Stocks 14.9
Oil & Gas Stocks 5.3
Gold & Other Metals Stocks 5.2
Pharmaceuticals Stocks 4.2
Consumer Goods Stocks 1.6
Other Stocks 3.6
Cash 7.5
Foreign Bonds 11.9
U.S. T-Bonds 16.3
Corporate Bonds 29.5
</TABLE>
GRAPHIC MATERIAL (7)
This scatter chart compares the relationship between the fund's risk and
return to that of a One-year CD, 10-Year Treasury, and 30-Year Treasury.
<TABLE>
<CAPTION>
<S> <C> <C>
Return Risk
ML10yr 8.34 6.64262
ML30yr 9.13 9.21476
USG 8.05 3.25338
CDs 1 Yr $U 4.96 0.4917
</TABLE>
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between the fund's 30-day yield of 7.12%
and the Average Ginnie Mae Fund yield of 6.63%, and the One-year CD yield
of 6.07%, and the Average Money Fund Yield of 5.52%.
