o FCF *PA3
SUPPLEMENT DATED JANUARY 1, 1999
TO THE PROSPECTUS OF
FRANKLIN CUSTODIAN FUNDS, INC. - ADVISOR CLASS
DATED FEBRUARY 1, 1998
The prospectus is amended as follows:
I. As of January 1, 1999, each Fund offers four classes of shares: Class A,
Class B, Class C and Advisor Class. Before January 1, 1999, Class A shares
were designated Class I and Class C shares were designated Class II. All
references in the prospectus to Class I shares are replaced with Class A.
II. The following paragraphs are added under "What Are the Risks of Investing
in the Fund?" (the section "Euro Risk" does not apply to U.S. Government
Securities Series):
YEAR 2000. When evaluating current and potential portfolio positions, Year
2000 is one of the factors the investment manager considers.
The investment manager will rely upon public filings and other statements
made by companies about their Year 2000 readiness. Issuers in countries
outside the U.S., particularly in emerging markets, may not be required to
make the same level of disclosure about Year 2000 readiness as is required
in the U.S. The investment manager, of course, cannot audit each company
and its major suppliers to verify their Year 2000 readiness.
If a company in which the Fund is invested is adversely affected by Year
2000 problems, it is likely that the price of its security will also be
adversely affected. A decrease in the value of one or more of the Fund's
portfolio holdings will have a similar impact on the price of the Fund's
shares. Please see "Year 2000 Problem" under "Who Manages the Fund?" for
more information.
EURO RISK. On January 1, 1999, the European Monetary Union (EMU) plans to
introduce a new single currency, the euro, which will replace the national
currency for participating member countries. If the Fund holds investments
in countries with currencies replaced by the euro, the investment process,
including trading, foreign exchange, payments, settlements, cash accounts,
custody and accounting will be impacted.
The process to establish the euro may result in market volatility. It is
not possible to predict the impact of the euro on the business or financial
condition of European issuers or on the Fund. The transition and the
elimination of currency risk among EMU countries may change the economic
environment and behavior of investors, particularly in European markets. To
the extent the Fund holds non-U.S. dollar (euro or other) denominated
securities, it will still be exposed to currency risk due to fluctuations
in those currencies versus the U.S. dollar.
Resources has created an interdepartmental team to handle all euro-related
changes to enable the Franklin Templeton Funds to process transactions
accurately and completely with minimal disruption to business activities.
While there can be no assurance that the Fund will not be adversely
affected, the investment manager and its affiliated service providers are
taking steps that they believe are reasonably designed to address the euro
issue.
III. Under the section "Who Manages the Fund?",
(a) the section "Management Team - Income Series" is revised to add
Frederick G. Fromm to the management team, effective January 1998, and to
add the following:
Frederick G. Fromm
Portfolio Manager of Advisers
Mr. Fromm holds a Bachelor of Arts degree in Business Economics from the
University of California, Santa Barbara. He has been with the Franklin
Templeton Group since 1992.
(b) and the following is added after the "Administrative Services" section:
YEAR 2000 PROBLEM. The Fund's business operations depend on a worldwide
network of computer systems that contain date fields, including securities
trading systems, securities transfer agent operations and stock market
links. Many of the systems currently use a two digit date field to
represent the date, and unless these systems are changed or modified, they
may not be able to distinguish the Year 1900 from the Year 2000 (commonly
referred to as the Year 2000 problem). In addition, the fact that the Year
2000 is a non-standard leap year may create difficulties for some systems.
When the Year 2000 arrives, the Fund's operations could be adversely
affected if the computer systems used by the investment manager, its
service providers and other third parties it does business with are not
Year 2000 ready. For example, the Fund's portfolio and operational areas
could be impacted, including securities trade processing, interest and
dividend payments, securities pricing, shareholder account services,
reporting, custody functions and others. The Fund could experience
difficulties in effecting transactions if any of its foreign subcustodians,
or if foreign broker-dealers or foreign markets are not ready for Year
2000.
The investment manager and its affiliated service providers are making a
concerted effort to take steps they believe are reasonably designed to
address their Year 2000 problems. Of course, the Fund's ability to reduce
the effects of the Year 2000 problem is also very much dependent upon the
efforts of third parties over which the Fund and the investment manager may
have no control.
IV. Under "How Is the Fund Organized?", the first paragraph is replaced with
the following:
Each Fund is a diversified series of Custodian Funds, an open-end
management investment company, commonly called a mutual fund. Custodian
Funds was incorporated under the laws of Delaware in 1947, reincorporated
under the laws of Maryland in 1979, and is registered with the SEC. Each
Fund offers four classes of shares: Growth Series - Class A, Growth Series
- Class B, Growth Series - Class C and Growth Series - Advisor Class;
Income Series - Class A, Income Series - Class B, Income Series - Class C
and Income Series - Advisor Class; U.S. Government Securities Series -
Class A, U.S. Government Securities Series - Class B, U.S. Government
Securities Series - Class C and U.S. Government Securities Series - Advisor
Class; and Utilities Series - Class A, Utilities Series - Class B,
Utilities Series - Class C and Utilities Series - Advisor Class. Additional
series and classes of shares may be offered in the future.
V. In step 2 under "How Do I Buy Shares? - Opening Your Account," the minimum
investment to add to your account is changed from $25 to $50.
VI. In the chart under "How Do I Buy Shares? - Opening Your Account," the
section "By Phone" is deleted.
VII. The section "How Do I Buy Shares in Connection with Retirement Plans?",
found under "How Do I Buy Shares?", is replaced with the following:
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the
Fund. Plan documents are required for all retirement plans. Trust Company
can provide the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important
information about its plans. These plans require separate applications and
their policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure
or application, please call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before
choosing a retirement plan. Your investment representative or advisor can
help you make investment decisions within your plan.
VIII.In the section "Exchange Restrictions," found under "May I Exchange Shares
for Shares of Another Fund?",
(a) the second item is replaced with the following:
o Generally exchanges may only be made between identically registered
accounts, unless you send written instructions with a signature
guarantee. You may, however, exchange shares from a Fund account
requiring two or more signatures into an identically registered money
fund account requiring only one signature for all transactions. PLEASE
NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON
YOUR ACCOUNT. Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
(b) and the following new item is added:
o You must meet the applicable minimum investment amount of the fund you
are exchanging into, or exchange 100% of your Fund shares.
IX. In the "By Phone" section of the chart under "How Do I Sell Shares?",
(a) the first bulleted item is replaced with the following:
o If the request is $100,000 or less. Institutional accounts may exceed
$100,000 by completing a separate agreement. Call Institutional
Services to receive a copy.
(b) and the third bulleted item is deleted.
X. Distribution option 3 in the section "What Distributions Might I Receive
From the Fund? - Distribution Options" is replaced with the following:
3. RECEIVE DISTRIBUTIONS IN CASH - You may receive dividends, or both
dividend and capital gain distributions in cash. If you have the money sent
to another person or to a checking or savings account, you may need a
signature guarantee. If you send the money to a checking or savings
account, please see "Electronic Fund Transfers" under "Services to Help You
Manage Your Account."
XI. Under "Transaction Procedures and Special Requirements,"
(a) the section "Joint Accounts" is replaced with the following:
JOINT ACCOUNTS. For accounts with more than one registered owner, the fund
accepts written instructions signed by only one owner for transactions and
account changes that could otherwise be made by phone. For all other
transactions and changes, all registered owners must sign the instructions.
Please keep in mind that if you have previously told us that you do not
want telephone exchange or redemption privileges on your account, then we
can only accept written instructions to exchange or redeem shares if they
are signed by all registered owners on the account.
(b) the reference to $50,000 in the section "Signature Guarantees" is
replaced with $100,000.
(c) the section "Trust Company Retirement Plan Accounts," found under
"Telephone Transactions", is deleted.
(d) and the section "Keeping Your Account Open" is replaced with the
following:
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may
close your account if the value of your shares is less than $250, or less
than $50 for employee accounts. We will only do this if the value of your
account fell below this amount because you voluntarily sold your shares and
your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we
will notify you and give you 30 days to increase the value of your account
to $1,000, or $100 for employee accounts. These minimums do not apply to
IRAs, accounts managed by the Franklin Templeton Group, the Franklin
Templeton Profit Sharing 401(k) Plan, the series of Franklin Templeton Fund
Allocator Series, or certain defined contribution plans that qualify to buy
shares with no minimum initial investment requirement.
XII. In the section "Services to Help You Manage Your Account":
(a) the second sentence under "Automatic Investment Plan" is replaced with
the following:
Under the plan, you can have money transferred automatically from your
checking or savings account to the Fund each month to buy additional
shares.
(b) the second paragraph under "Systematic Withdrawal Plan" is replaced
with the following:
If you would like to establish a systematic withdrawal plan, please
complete the systematic withdrawal plan section of the account application
included with this prospectus and indicate how you would like to receive
your payments. You may choose to direct your payments to buy the same class
of shares of another Franklin Templeton Fund or have the money sent
directly to you, to another person, or to a checking or savings account. If
you choose to have the money sent to a checking or savings account, please
see "Electronic Fund Transfers" below. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your
account.
(c) and the following new section is added after the section "Systematic
Withdrawal Plan":
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions or payments
under a systematic withdrawal plan sent directly to a checking or savings
account. If the account is with a bank that is a member of the Automated
Clearing House, the payments may be made automatically by electronic funds
transfer. If you choose this option, please allow at least fifteen days for
initial processing. We will send any payments made during that time to the
address of record on your account.
XIII.In the "Useful Terms and Definitions" section, the definition of "Class I,
Class II and Advisor Class" is replaced with the following:
CLASS A, CLASS B, CLASS C AND ADVISOR CLASS - Each Fund offers four classes
of shares, designated "Class A," "Class B," "Class C" and "Advisor Class."
The four classes have proportionate interests in the Fund's portfolio. They
differ, however, primarily in their sales charge and expense structures.
Please keep this supplement for future reference.
o FCF *SAA
SUPPLEMENT DATED JANUARY 1, 1999
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN CUSTODIAN FUNDS, INC. - ADVISOR CLASS
DATED FEBRUARY 1, 1998
The Statement of Additional Information is amended as follows:
I. As of January 1, 1999, each Fund offers four classes of shares: Class A,
Class B, Class C and Advisor Class. Before January 1, 1999, Class A shares
were designated Class I and Class C shares were designated Class II. All
references in the Statement of Additional Information to Class I shares are
replaced with Class A.
II. The first sentence in the section "Additional Information on Exchanging
Shares," found under "How Do I Buy, Sell and Exchange Shares?", is replaced
with the following:
If you request the exchange of the total value of your account, declared
but unpaid income dividends and capital gain distributions will be
reinvested in the Fund and exchanged into the new fund at Net Asset Value
when paid.
III. Under "Miscellaneous Information," the following is added:
The Information Services & Technology division of Resources established a
Year 2000 Project Team in 1996. This team has already begun making
necessary software changes to help the computer systems that service the
Fund and its shareholders to be Year 2000 compliant. After completing these
modifications, comprehensive tests are conducted in one of Resources' U.S.
test labs to verify their effectiveness. Resources continues to seek
reasonable assurances from all major hardware, software or data-services
suppliers that they will be Year 2000 compliant on a timely basis.
Resources is also beginning to develop a contingency plan, including
identification of those mission critical systems for which it is practical
to develop a contingency plan. However, in an operation as complex and
geographically distributed as Resources' business, the alternatives to use
of normal systems, especially mission critical systems, or supplies of
electricity or long distance voice and data lines are limited.
IV. In the "Useful Terms and Definitions" section, the definition of "Class I,
Class II and Advisor Class" is replaced with the following:
CLASS A, CLASS B, CLASS C AND ADVISOR CLASS - Each Fund offers four classes
of shares, designated "Class A," "Class B," "Class C" and "Advisor Class."
The four classes have proportionate interests in the Fund's portfolio. They
differ, however, primarily in their sales charge and expense structures.
Please keep this supplement for future reference.
