October 16, 1995
Dear Shareholder,
We're pleased to present the seventh annual report of the Franklin Universal
Trust which covers the 12 months ended August 31, 1995.
The Trust's fiscal year was one of contrasts.
During the first six months of the Trust's reporting period, the Federal Reserve
Board continued its aggressive campaign to control inflation, raising the
federal funds target rate twice, to 6.00% from 4.75%.
By March of 1995, the effects of these tightenings were realized. U.S. Gross
Domestic Product (GDP) fell from an annualized rate of 5.1% in the fourth
quarter of 1994 to just 2.7% in the first quarter of 1995.* It fell further to
1.1% in the second quarter. This led many to believe that the Federal Reserve
Board had been overzealous in its bid to increase interest rates, and prompted
fears that another recession was nearing. In response to this slowed growth, the
Fed lowered the federal funds target rate on July 6, 1995, to 5.75% from 6.00%.
Since then, the economy appears to have stabilized somewhat, although further
rate cuts could be forthcoming.
Interest rate changes affect investments of all types, including the high yield
corporate bonds and utility stocks in which the Trust invests. We're pleased to
report that the Trust performed very favorably in the economic environment that
prevailed. The Manager's Discussion on page 2 provides specific details
regarding how this performance was achieved.
As always, we appreciate your support of the Franklin Universal Trust. If you
have questions or concerns, please feel free to contact us. We look forward to
serving your investment needs in the future.
Sincerely,
Charles B. Johnson
President
Franklin Universal Trust
*U.S. Commerce Department.
MANAGER'S DISCUSSION
Trust's Objective:
The Franklin Universal Trust seeks to provide high current income consistent
with preservation of capital.
We are pleased to report that during the 12-month period ended August 31, 1995,
the Franklin Universal Trust reported an outstanding cumulative total return of
+20.42%, based on the change in its market price on the New York Stock Exchange.
This performance exceeded returns in nearly every sector, including the Treasury
market (+10.89%), the high yield corporate bond market (+13.9%) and Standard &
Poor's Utilities Index (+17.07%).*
The Trust's exceptional performance was due to a number of factors. First,
general economic trends, most notably declining interest rates, created an ideal
environment for high yield corporate bonds and utility stocks. The Trust has
traditionally concentrated its investments in these two sectors. Falling
interest rates led to
* Source: Micropal, as measured by total return.
higher corporate profits in many cases and fueled a long-awaited price rally in
utility stocks.
Second, the Trust's assets were strategically positioned in industries that
outperformed the overall bond market. For instance, the fund's holdings in the
cable television and media/ broadcasting industries (11% of the Trust's total
net assets), benefited from some high-profile mergers involving well-known
companies such as ABC, Disney, Viacom and Time-Warner. Many of the Trust's cable
and media holdings, including Cablevision Systems, Continental Cablevision and
PanAmSat Capital Corp., benefited from the speculation of potential buy-outs
that surrounded such companies in recent months.
A trend toward consolidation also sparked strong performance in the health care
sector (5% of the Trust's total net assets). During the year, many health care
companies merged for greater economies of scale in hopes of competing with
larger HMOs. OrNda Health Care, an operator of acute care hospitals and one of
the Trust's largest positions in the health care industry, recently acquired a
number of other hospital facilities. Another consolidation involved Abbey Health
Care Group, a home health care provider, which merged with Homedco. Such
activity boosted the performance of the health care industry during the Trust's
fiscal year.
The gaming sector (6% of the Trust's total net assets) also contributed to the
Trust's strong performance. Aztar Corp. and Showboat, both large casino
operators, performed well for the Trust.
Our utility holdings also played a large part in the Trust's strong performance.
As the utility market began to recover in 1994, we increased the Trust's
holdings significantly. Furthermore, we concentrated on companies we expected
would benefit from the increased competition that the certainty of deregulation
will bring.
Utility stocks nearly doubled to 30% of the portfolio's net assets as of August
31, 1995, from 13% a year earlier. By the end of the fiscal year, utility stocks
represented eight of the Trust's top 10 holdings, as the table to the right
shows.
Franklin Universal Trust
Top 10 Company Holdings
As a percentage of total net assets
August 31, 1995
Company % of total
Industry net assets
Southern Company 3.14%
Utility (stock)
Thermadyne Industries, Inc. 2.68%
Industrial (bond)
Scana Corp. 2.27%
Utility (stock)
Texas Utilities 2.19%
Utility (stock)
DPL, Inc. 2.09%
Utility (stock)
Wisconsin Energy 1.94%
Utility (stock)
Comcast Cellular Corp. 1.73%
Cellular Telephone (bond)
Dominion Resources 1.71%
Utility (stock)
Cinergy Corp. 1.66%
Utility (stock)
Pacific Gas & Electric 1.64%
Utility (stock)
For a complete list of the Trust's portfolio, please see page 8 of this report.
The Trust's assets are invested in 154 positions spanning more than 20
industries. Corporate bonds represented 64% of the portfolio's total net assets
at year-end, slightly below the 66% this sector represented a year earlier.
Convertible bonds also fell as a percentage of the total portfolio, to 1% on
August 31, 1995 from 5% a year earlier.
The Trust may invest between 5% and 15% of its total assets in debt obligations
not only of foreign governments and supranational organizations, but also of
foreign corporations. Such investments may be denominated in U.S. dollars,
foreign currencies or European Currency Units. It is currently anticipated that
the investments will be made principally within Australia, Canada, Japan,
Indonesia, New Zealand, Scandinavia, the United Kingdom and Western Europe.
Investments would also be permitted in securities denominated in the currencies
of these countries.
We believe that this change in investment policy will increase the Trust's
income potential as global investment opportunities unfold.
Our outlook for the economy and the Franklin Universal Trust is positive. The
Federal Reserve appears to be adopting a monetary policy which should foster
moderate growth, maintain the current low level of inflation and reduce the
chances of recession. This combination of mild growth and inflation will likely
benefit the financial markets in general and the high yield corporate bond and
utility equity sectors in particular. High yield bond issuers will most likely
continue to experience higher earnings and stronger balance sheets, which should
positively affect the high yield market. As for utility stocks, this year's
rally appears to have been sustained, and this sector should benefit from the
consolidation and increased competition that will follow deregulation.
Performance Summary
The Franklin Universal Trust reported a cumulative total return of +20.42% for
the one-year period ended August 31, 1995. Total return reflects the change in
the Trust's market price on the New York Stock Exchange (NYSE). Based on the
change in net asset value (as opposed to market price), the one-year total
return for the same period was +17.66%. All total return calculations assume
reinvestment of dividends and capital gains according to the terms specified in
the Trust's Dividend Reinvestment Plan.
The Trust's closing price on the NYSE increased to $8.875 per share on August
31, 1995, from $8.125 on August 31, 1994, due to factors mentioned in the
Manager's Discussion. The Trust's net asset value price per share increased to
$9.36 on August 31, 1995, from $8.71 on August 31, 1994. Based on an
annualization of the current monthly dividend of 6.7 cents ($0.067) per share
and the NYSE closing price of $8.875 on August 31, 1995, the Trust's
distribution rate was 9.06%.*
During the reporting period, shareholders received income distributions totaling
81 cents ($0.81) per share, including 80.4 cents ($0.804) per share in dividend
income and a special year-end distribution of .6 cents ($0.006) per share,
distributed in December 1994. Dividends will vary based on the Trust's earnings,
and past distributions are not indicative of future trends.
While the Franklin Universal Trust may occasionally experience short-term
volatility, we are confident that its performance will be rewarding for
long-term investors. For example, the Trust reported a total return of +131.48%
in market-price terms during the five years ended August 31, 1995.
Franklin Universal Trust
Cumulative Total Returns1
Periods ended August 31, 1995
Since
One- Five- Inception
year year (9/23/88)
Cumulative
Total Return 20.42% 131.48% 96.17%
(based on
market value)
Cumulative
Total Return 17.66% 131.05% 122.65%
(based on net
asset value)
Distribution Rate2 9.06%
1Cumulative total returns show the change in value of an investment over the
periods indicated. These figures assume reinvestment of dividends and capital
gains according to the terms specified in the Trust's Dividend Reinvestment
Plan.
2Distribution rate is based on an annualization of the Trust's current 6.7
cents per share monthly dividend and the Trust's NYSE closing price of $8.875 on
August 31, 1995.
*High yields reflect the higher credit risks associated with certain lower-rated
securities in the Trust's portfolio and, in some cases, the lower market prices
for these securities.
DIVIDEND REINVESTMENT PLAN
The Fund's Dividend Reinvestment Plan (the "Plan") offers you a prompt and
simple way to reinvest income dividends and capital gain distributions in shares
of the Fund. PNC Bank, National Association (the "Plan Agent"), c/o PFPC Inc.,
P.O. Box 8950, Wilmington, Delaware 19899, acts as your Plan Agent in
administering the Plan. All reinvestments are in full and fractional shares,
carried to two decimal places. The complete Terms and Conditions of the Dividend
Reinvestment Plan are contained in the Fund's prospectus, dated September 23,
1988, used in connection with its initial public offering. A copy of that
prospectus may be obtained from the Fund at the address on the cover of this
report.
You are automatically enrolled in the Plan unless you elect to receive dividends
or distributions in cash. If you own shares in your own name, you should notify
the Plan Agent, in writing, if you wish to receive dividends or distributions in
cash.
If the Fund declares an income dividend or a capital gains distribution payable
in either the Fund's shares or in cash, you, as a participant in the Plan, will
automatically receive an equivalent amount of shares of the Fund. If the market
price per share on the valuation date equals or exceeds the net asset value per
share on that date, the Fund will issue new shares to you at the higher of the
net asset value or 95% of the market price on the valuation date. The valuation
date is generally the payment date or, if that date is not a trading day on the
New York Stock Exchange, the next preceding trading day. If the net asset value
per share exceeds the market price per share at such time, or if the Fund
declares a dividend or distribution payable only in cash, you will be deemed to
have elected to receive shares of the Fund valued at the market price on the
valuation date, purchased on your behalf by the Plan Agent in the open market.
If, before the Plan Agent has completed its purchases, the market price exceeds
the net asset value per share, the average per share purchase price paid by the
Plan Agent may exceed the net asset value per share of the Fund, resulting in
the acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund.
There is no direct charge to participants for reinvesting dividends and
distributions, since the Plan Agent's fees are paid by the Fund. However, when
shares are purchased in the open market, each participant will pay a pro rata
portion of any brokerage commissions incurred.
The automatic reinvestment of dividends and distributions does not relieve
shareholders of liability for any taxes which may be payable on such dividends
or distributions. Generally, income and capital gains resulting from dividends
and distributions received in the form of shares of the Fund are realized
notwithstanding the fact that cash is not received by shareholders.
You will receive an annual account statement from the Plan Agent, showing total
dividends and distributions, date of investment, shares acquired and price per
share, and total shares of record held by you and by the Plan Agent for you. You
are entitled to vote all shares of record, including shares purchased for you by
the Plan Agent, and, if you vote by proxy, your proxy will include all such
shares.
As long as you participate in the Plan, the Plan Agent will hold the shares it
has acquired for you in safekeeping, in non-certificated form. This convenience
provides added protection against loss, theft or inadvertent destruction of
certificates.
You may withdraw from the Plan at any time, without penalty, by notifying the
Plan Agent in writing at the address above. If you withdraw from the Plan, you
will receive a certificate issued in your name for all full shares and the Plan
Agent will convert any fractional shares you hold at the time of withdrawal to
cash at the then current market price and send you a check for the proceeds.
If you hold shares in your own name, please address all notices, correspondence,
questions, or other communications regarding the Plan to the Plan Agent at the
address noted above. If shares are not held in your name, you should contact
your brokerage firm, bank, or other nominee for more information.
FRANKLIN UNIVERSAL TRUST
Statement of Investments in Securities and Net Assets, August 31, 1995
<TABLE>
<CAPTION>
Shares,
Warrants Value
& Rights (Note 2)
Common Stocks, Warrants & Rights 38.0%
Automotive .6%
<S> <C> <C>
60,800 aHarvard Industries, Inc., Class B.............................................. $ 1,489,600
-----------
Containers & Packaging .7%
92,275 aGaylord Container Corp., warrants.............................................. 899,681
71,842 aGaylord Container Corp. Class A................................................ 844,144
-----------
1,743,825
-----------
Energy .7%
9,000 aMcMoRan Oil & Gas Co. ......................................................... 29,250
14,935 aSanta Fe Energy Resources, Inc................................................. 141,883
66,600 Ultramar Corp.................................................................. 1,573,425
-----------
1,744,558
-----------
Financials
15,180 a,dWestfed Holdings, Inc., Series B............................................... --
-----------
Gaming & Leisure
752 aHost Marriott Corp............................................................. 8,648
752 Marriott International, Inc.................................................... 26,696
-----------
35,344
-----------
Health Care .3%
4,066 aKendall International, Inc., Class A, warrants................................. 250,295
4,348 aKendall International, Inc., Class B, warrants................................. 245,914
2,456 aKendall International, Inc., rights............................................ 151,186
-----------
647,395
-----------
Home Building .3%
67,247 aNVR, Inc....................................................................... 659,861
35,607 aNVR, Inc., warrants............................................................ 84,567
-----------
744,428
-----------
Industrial .1%
7,254 aThermadyne Industries, Inc. ................................................... 131,932
-----------
Metals & Mining 2.8%
228,000 Driefontein Consolidated Mines, Ltd., ADR...................................... 3,363,000
24,571 East Daggafontein Mines, Ltd., ADR............................................. 73,251
131,350 Free State Consolidated Gold Mines, Ltd., ADR.................................. 1,526,944
4,500 Freeport-McMoRan Copper & Gold, Inc............................................ 105,188
63,156 Freeport-McMoRan Copper & Gold, Inc., Class B.................................. 1,476,272
Metals & Mining (cont.)
90,000 Freeport-McMoRan, Inc. ........................................................ $ 506,250
4,000 aGulf States Steel, warrants ................................................... 36,000
-----------
7,086,905
-----------
Technology/Information Systems
84,885 aMemorex Telex N.V., ADR ....................................................... 116,717
-----------
Telecommunications 1.5%
20,300 BellSouth Corp. ............................................................... 1,395,625
46,900 SBC Communications, Inc. ...................................................... 2,374,313
-----------
3,769,938
-----------
Transportation .1%
2,723 aContinental Airlines, Inc., Class A ........................................... 81,009
7,580 aContinental Airlines, Inc., Class B ........................................... 224,558
-----------
305,567
-----------
Utilities 30.9%
138,600 American Electric Power Co., Inc. ............................................. 4,729,725
205,600 CINergy Corp. ................................................................. 5,268,500
79,700 Delmarva Power & Light Co. .................................................... 1,733,475
150,000 Dominion Resources, Inc. ...................................................... 5,418,750
298,000 DPL, Inc. ..................................................................... 6,630,500
100,000 Duke Power Co. ................................................................ 4,062,500
130,000 Long Island Lighting Co. ...................................................... 2,210,000
35,300 New England Electric System ................................................... 1,235,500
175,000 New York State Electric & Gas Corp. ........................................... 4,221,875
180,600 Pacific Gas & Electric Co. .................................................... 5,192,250
77,000 Pinnacle West Capital Corp. ................................................... 1,915,375
100,000 Public Service Co. of Colorado ................................................ 3,237,500
309,200 Scana Corp. ................................................................... 7,188,900
74,600 SCEcorp. ...................................................................... 1,240,225
472,000 Southern Co. .................................................................. 9,971,000
200,200 Texas Utilities Co. ........................................................... 6,956,950
229,400 Wisconsin Energy Corp. ........................................................ 6,165,125
-----------
77,378,150
-----------
Total Common Stocks, Warrants & Rights (Cost $85,631,847) ............... 95,194,359
-----------
Partnership Units .3%
Financials
5 b,dPG Partners, L.P., Preference Units (Cost $147,892) ........................... 791,700
-----------
Automotive .6%
60,409 Harvard Industries, Inc., 14.25%, pfd., PIK ................................... $ 1,517,765
-----------
Consumer Goods 1.0%
420,000 RJR Nabisco Holdings, $0.6012 cvt. pfd., Series C ............................. 2,520,000
-----------
Energy .7%
12,200 Ashland Oil, Inc., $3.125 cum. cvt. pfd. ...................................... 649,650
20,000 cOccidental Petroleum Corp., $3.875 cvt. exch. pfd. ............................ 1,110,000
-----------
1,759,650
-----------
Financials 2.3%
40,000 First Nationwide Bank, 11.50%, pfd. ........................................... 4,300,000
60,000 Security Capital Pacific, 1.75%, cvt. pfd., Series A .......................... 1,425,000
49,806 a,dWestfed Holdings, Inc., 15.50%, cum. senior pfd., Series A .................... 498
-----------
5,725,498
-----------
Media and Broadcasting .9%
2,060 PanAmSat Corp.,12.75%, pfd., PIK .............................................. 2,296,343
-----------
Restaurants .3%
40,000 Flagstar Cos., Inc., $2.25 cvt. pfd., Series A ................................ 750,000
-----------
Total Preferred Stocks (Cost $19,626,114) ............................... 14,569,256
-----------
Face
Amount
------
Non-Convertible Bonds 79.7%
Automotive 1.6%
$3,800,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02 ................................ 3,999,500
-----------
Cable Television 7.1%
5,000,000 eBell Cablemedia, Plc., senior disc. notes, zero coupon to 07/15/99, (original
accretion rate 11.95%), 11.95% thereafter, 07/15/04 .......................... 3,256,250
3,000,000 Cablevision Systems Corp., senior sub. deb., 9.875%, 04/01/23 ................. 3,255,000
1,000,000 Comcast Corp., senior sub. deb., 9.50%, 01/15/08 .............................. 1,015,000
2,000,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07 ............. 2,210,000
1,400,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08 .............. 1,415,750
2,400,000 fRogers Cablesystems, Inc., senior secured deb. (Canada), 9.65%, 01/15/14....... 1,510,333
3,000,000 Tele-Communications, Inc., senior deb., 9.80%, 02/01/12 ....................... 3,420,510
2,000,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24 ............... 1,810,000
-----------
17,892,843
-----------
Cellular Telephone 3.6%
6,000,000 eComcast Cellular Corp., senior sub. deb., Series B, (original accretion rate
11.37%), 0.00%, 03/05/00 ..................................................... 4,470,000
Cellular Telephone (cont.)
$3,000,000 eNextel Communications, senior disc. notes, (original accretion rate 9.75%)
0.00%, 08/15/04 .............................................................. $ 1,455,000
3,000,000 Rogers Cantel Mobile Communications, Inc., senior sub. notes, 10.75%, 11/01/01 3,112,500
-----------
9,037,500
-----------
Chemicals 4.5%
3,000,000 Arcadian Partners, S.F., senior sub. notes, Series B, 10.75%, 05/01/05 ........ 3,150,000
4,000,000 eHarris Chemical North America, Inc., senior secured disc. notes, zero coupon
to 01/15/96, (original accretion rate 10.25%), 10.25% thereafter, 07/15/01 ... 3,580,000
500,000 IMC Global, Inc., senior deb., 9.45%, 12/15/11 ................................ 505,000
1,000,000 IMC Global, Inc., senior notes, 9.25%, 10/01/00 ............................... 1,020,000
1,500,000 IMC Global, Inc., senior notes, Series B, 10.125%, 06/15/01 ................... 1,590,000
1,350,000 IMC Global, Inc., senior notes, Series B, 10.75%, 06/15/03 .................... 1,451,250
-----------
11,296,250
-----------
Consumer Goods 4.5%
2,750,000 eColeman Holdings, Inc., senior secured disc. notes, (original accretion rate
10.875%), 0.00%, 05/27/98 .................................................... 2,131,250
1,700,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03 ............. 1,593,750
3,000,000 Revlon Consumer Products Corp., senior sub. notes, Series B, 10.50%, 02/15/03 . 3,000,000
1,500,000 eRevlon Worldwide Corp., senior secured disc. notes, Series B, (original accretion
rate 12.00%), 0.00%, 03/15/98 ................................................ 1,068,750
1,500,000 RJR Nabisco, Inc., senior notes, 9.25%, 08/15/13 .............................. 1,522,500
2,000,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ............................... 1,980,000
-----------
11,296,250
-----------
Containers & Packaging 4.1%
1,000,000 Container Corp. of America, guaranteed senior notes, Series A, 11.25%, 05/01/04
1,075,000
3,000,000 Container Corp. of America, senior notes, 9.75%, 04/01/03 ..................... 3,045,000
3,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04 ...................... 3,060,000
2,000,000 Stone Container Corp., senior notes, 9.875%, 02/01/01 ......................... 1,982,500
1,000,000 Stone Container Corp., senior notes, 11.50%, 10/01/04 ......................... 1,063,750
-----------
10,226,250
-----------
Energy 1.6%
4,000,000 Gulf Canada Resources, Ltd., senior sub. deb., 9.25%, 01/15/04 ................ 4,057,640
-----------
Food & Beverages 4.7%
1,600,000 Beatrice Foods, Inc., S.F., senior sub. notes, 12.00%, 12/01/01 ............... 1,408,000
600,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ................ 642,000
5,384,000 cDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ............................ 3,849,560
1,000,000 cDominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05................... 1,010,000
Food & Beverages (cont.)
$ 300,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00........... $ 313,500
1,500,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03 ......... 1,533,750
1,000,000 Specialty Foods Corp., senior sub. notes, Series B, 11.25%, 08/15/03 .......... 975,000
2,000,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01 ..... 1,945,000
-----------
11,676,810
-----------
Food Retailing 6.6%
3,000,000 Brunos, Inc., senior sub. notes, 10.50%, 08/01/05 ............................. 2,955,000
1,100,000 P & C Food Markets, Inc., senior sub. notes, 11.50%, 10/15/01 ................. 1,105,500
4,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03 .................... 4,000,000
1,000,000 Penn Traffic Co., senior notes, 8.625%, 12/15/03 .............................. 860,000
2,000,000 Penn Traffic Co., senior notes, 10.375%, 10/01/04 ............................. 1,895,000
2,000,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03 ...................... 1,880,000
3,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05 ....................... 2,835,000
1,000,000 Ralphs Grocery Co., sub. notes, 10.45%, 06/15/04 .............................. 983,750
-----------
16,514,250
-----------
Forest & Paper Products 6.9%
3,000,000 Fort Howard Corp., senior sub. notes, 9.00%, 02/01/06 ......................... 2,775,000
1,873,237 Fort Howard Corp., sub. deb., 11.00%, 01/02/02 ................................ 1,915,385
1,000,000 REPAP New Brunswick, senior notes, 9.094%, 07/15/00 ........................... 1,002,500
1,000,000 REPAP New Brunswick, senior notes, 9.875%, 07/15/00 ........................... 1,007,500
2,000,000 REPAP New Brunswick, senior notes, 10.625%, 04/15/05 .......................... 2,030,000
1,500,000 REPAP Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02 .................. 1,455,000
500,000 REPAP Wisconsin, Inc., senior secured notes, 9.875%, 05/01/06 ................. 482,500
2,200,000 S.D. Warren Co., senior sub notes, 12.00%, 12/15/04 ........................... 2,442,000
4,000,000 Tjiwi Kimia International, guaranteed senior notes, 13.25%, 08/01/01 .......... 4,260,000
-----------
17,369,885
-----------
Gaming & Leisure 6.2%
4,000,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04 .............................. 4,500,000
4,000,000 John Q. Hammons Hotels, first mortgage, 8.875%, 02/15/04 ...................... 3,780,000
1,000,000 cPlayers International, Inc., senior notes, 10.875%, 04/15/05 .................. 990,000
2,000,000 Red Roof Inns, senior notes, 9.625%, 12/15/03 ................................. 1,940,000
4,000,000 Showboat, Inc, senior sub. notes, 13.00%, 08/01/09 ............................ 4,320,000
-----------
15,530,000
-----------
Healthcare 5.0%
4,000,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 .............. 4,190,000
698,924 Amerisource Distribution Corp., senior deb., PIK, 11.25%, 07/15/05 ............ 751,343
4,000,000 OrNda Healthcorp., guaranteed senior sub. notes, 11.375%, 08/15/04 ............ 4,400,000
Healthcare (cont.)
$ 500,000 Tenet Healthcare Corp., senior sub. notes, 9.625%, 09/01/02 ................... $ 527,500
2,500,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05 .................. 2,637,500
-----------
12,506,343
-----------
Industrial 5.7%
3,000,000 American Standard, Inc., S.F., deb., 9.25%, 12/01/16 .......................... 3,018,750
1,000,000 eAmerican Standard, Inc., S.F., senior sub. deb., zero coupon to 06/01/98,
(original accretion rate 10.50%), 10.50% thereafter, 06/01/05 ................ 782,500
2,400,000 Inter-City Products Corp., senior secured notes, 9.75%, 03/01/00 .............. 2,022,000
3,631,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 ................... 3,594,690
5,035,000 Thermadyne Industries, Inc., sub. notes, 10.75%, 11/01/03 ..................... 4,909,125
-----------
14,327,065
-----------
Media & Broadcasting 3.3%
2,000,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04 ................ 2,090,000
3,000,000 New World Communications Group, Inc., senior sub. notes, 11.00%, 06/30/05 ..... 3,165,000
4,000,000 ePanAmSat Capital Corp., L.P., senior sub. disc. notes, zero coupon to 08/01/98,
(original accretion rate 11.375%), 11.375% thereafter, 08/01/03 .............. 3,070,000
-----------
8,325,000
-----------
Metals & Mining 4.8%
5,000,000 eAcme Metals, Inc., guaranteed senior secured disc. notes, zero coupon to
08/01/97, (original accretion rate 13.50%), 13.50% thereafter, 08/01/04 ...... 3,975,000
3,000,000 Envirosource, Inc., senior notes, 9.75%, 06/15/03 ............................. 2,730,000
4,000,000 cGulf States Steel, units, 13.50%, 04/15/03 .................................... 3,860,000
1,200,000 UCAR Global Enterprises, senior sub. notes, 12.00%, 01/15/05 .................. 1,348,500
-----------
11,913,500
-----------
Restaurants 3.1%
2,254,038 b,dAtherton Franchise Capital, L.P., 11.00%, 05/01/06 ............................ 1,893,391
2,000,000 Family Restaurant, Inc., senior notes, 9.75%, 02/01/02 ........................ 1,030,000
1,500,000 Flagstar Corp., senior notes, 10.875%, 12/01/02 ............................... 1,380,000
1,510,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 ...................... 1,155,150
2,500,000 Foodmaker, Inc., S.F., senior sub. notes, 9.25%, 03/01/99 ..................... 2,318,750
-----------
7,777,291
-----------
Technology/Information Systems 1.3%
3,000,000 ADT Operations, Ltd., guaranteed senior sub. notes, 9.25%, 08/01/03 ........... 3,105,000
-----------
Textiles & Apparel 2.1%
1,550,000 Forstmann Textile & Co., Inc., S.F., senior sub. notes, 14.75%, 04/15/99 ...... 860,250
2,567,000 JPS Textile Group, Inc., S.F., disc. notes, 10.85%, 06/01/99 .................. 2,502,825
Textiles & Apparel (cont.)
$1,000,000 WestPoint Stevens, Inc., senior notes, 8.75%, 12/15/01......................... $ 987,500
1,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05.................... 970,000
-----------
5,320,575
-----------
Transportation 1.8%
1,000,000 Delta Airlines, Inc., S.F., pass through equipment trust, 10.06%, 01/02/16..... 1,121,286
3,000,000 Delta Airlines, Inc., S.F., pass through equipment trust, 10.50%, 04/30/16..... 3,484,920
-----------
4,606,206
-----------
Utilities 1.2%
876,958 Midland CoGeneration Venture, S.F., deb., Series C, 10.33%, 07/23/02........... 907,582
2,000,000 Midland CoGeneration Venture, S.F., secured lease obligation, Series A,
11.75%, 07/23/05.............................................................. 2,121,876
-----------
3,029,458
-----------
Total Non-Convertible Bonds (Cost $197,818,415).......................... 199,807,616
-----------
Convertible Bonds 1.7%
Energy .4%
1,000,000 Noble Affiliates, cvt. sub. notes, 4.25%, 11/01/03............................. 976,250
-----------
Financials .3%
1,000,000 cPeregrine Investment Finance, cvt. guaranteed, 4.50%, 12/01/00................. 815,000
-----------
Metals & Mining .2%
500,000 cHomestake Mining Co., cvt., sub. deb., 5.50%, 06/23/00......................... 502,500
-----------
Technology/Information Systems .8%
1,100,000 cAltera Corp., cvt. sub. notes, 5.75%, 06/15/02................................. 1,504,250
480,000 cDanka Business Systems, Plc., cvt. sub. notes, 6.75%, 04/01/02................. 574,800
-----------
2,079,050
-----------
Total Convertible Bonds (Cost $4,027,500) ............................... 4,372,800
-----------
Total Bonds (Cost $201,845,915) ......................................... 204,180,416
-----------
Foreign Government and Agencies .9%
4,350,000 fESCOM, E168, utility deb. (South Africa), 11.00%, 06/01/08..................... 882,968
3,000,000 Republic of Venezuela, FRN, 6.8125%, 12/18/07.................................. 1,479,375
-----------
Total Foreign Government and Agencies (Cost $3,397,810) ................. 2,362,343
-----------
Total Investments before Repurchase Agreements (Cost $310,649,578)....... 317,098,074
-----------
Statement of Investments in Securities and Net Assets, August 31, 1995 (cont.)
Face Value
Amount (Note 2)
g,hReceivables from Repurchase Agreements 2.2%
$5,591,283 Joint Repurchase Agreement, 5.859%, 09/01/95 (Maturity Value $5,435,418)
(Cost $5,434,533)
Collateral: U.S. Treasury Bills, 02/29/96 - 07/25/96
U.S. Treasury Notes, 4.75% - 9.125%, 08/31/97 - 12/31/99 ........ $ 5,434,533
-----------
Total Investments (Cost $316,084,111) 128.6% ....................... 322,532,607
Liabilities in Excess of Other Assets, Net (28.6)% ................. (71,799,087)
-----------
Net Assets 100.0% .................................................. $250,733,520
===========
At August 31, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $316,115,050
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there was an excess of value over tax cost ............................ $ 27,794,569
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value ............................................ (21,377,012)
-----------
Net unrealized appreciation ................................................. $ 6,417,557
===========
</TABLE>
PORTFOLIO ABBREVIATIONS:
FRN - Floating Rate Note
L.P. - Limited Partnership
PIK - Payment-in-Kind
S.F. - Sinking Fund
aNon-income producing.
bSee Note 8 regarding restricted securities.
cSee Note 9 regarding Rule 144A securities.
dSee Note 2(a) regarding securities valued by the Board of Trustees.
eZero coupon/step-up bonds. The current effective yield may vary. The original
accretion rate will remain constant.
fFace amount stated in foreign currencies, value in U.S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 2(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
FRANKLIN UNIVERSAL TRUST
Financial Statements
Statement of Assets and Liabilities
August 31, 1995
Assets:
Investment in securities, at value
(identified cost $310,649,578) $317,098,074
Receivables from repurchase
agreements, at value and cost 5,434,533
Receivables:
Dividends and interest 5,202,761
Unamortized note issuance costs
(Note 3) 371,824
------------
Total assets 328,107,192
------------
Liabilities:
Payables:
Notes (Note 3) 74,960,886
Accrued interest (Note 3) 2,109,375
Management fees 203,514
Accrued expenses and other liabilities 99,897
------------
Total liabilities 77,373,672
------------
Net assets, at value $250,733,520
============
Net assets consist of:
Undistributed net investment income $ 1,948,330
Unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 6,448,654
Net realized loss from investments and
foreign currency transactions (4,534,603)
Capital shares 267,793
Additional paid-in capital 246,603,346
------------
Net assets, at value $250,733,520
============
Net asset value per share
($250,733,520 O 26,779,333 shares
of beneficial interest outstanding) $9.36
============
Statement of Operations
for the year ended August 31, 1995
Investment income:
Dividends, net of foreign
taxes withheld of $39,366 $ 6,305,389
Interest 23,569,568
------------
Total income $29,874,957
Expenses:
Management fees (Note 5) 2,343,213
Shareholder servicing costs 128,608
Reports to shareholders 77,706
Professional fees 51,112
Custodian fees 31,896
Trustees' fees and expenses 22,085
Amortization of note
issuance costs 124,056
Other 57,919
------------
Operating expenses 2,836,595
Interest expense (Note 3) 4,231,800
------------
Total expenses 7,068,395
------------
Net investment income 22,806,562
------------
Realized and unrealized gain
from investments and
foreign currency:
Net realized gain from:
Investments 5,228,811
Foreign currency
transactions 15,112
Net unrealized appreciation
(depreciation) on:
Investments 11,073,453
------------
Translation of assets and
liabilities denominated in
foreign currencies (854)
------------
Net realized and
unrealized gain from
investments and foreign
currency 16,316,522
------------
Net increase in net assets
resulting from operations $39,123,084
============
The accompanying notes are an integral part of these financial statements.
FRANKLIN UNIVERSAL TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended August 31, 1995 and 1994
1995 1994
---------- ----------
Increase (decrease) in net assets:
Operations:
Net investment income $ 22,806,562 $ 22,386,677
Net realized gain from
investments and foreign
currency transactions 5,243,923 11,252,874
Net unrealized appre-
ciation (depreciation)
on investments and
translation of assets
and liabilities denomi-
nated in foreign
currencies 11,072,599 (40,114,480)
---------- ----------
Net increase
(decrease) in net
assets resulting
from operations 39,123,084 (6,474,929)
Distributions to
shareholders from
undistributed net
investment inc (21,691,260) (23,016,837)
---------- ----------
Net increase
(decrease)
in net assets 17,431,824 (29,491,766)
Net assets:
Beginning of year 233,301,696 262,793,462
---------- ----------
End of year (including
undistributed net in-
vestment income of
$1,935,898 at 8/31/95
and $820,596 at
8/31/94) $250,733,520 $233,301,696
========== ==========
Statement of Cash Flows
for the year ended August 31, 1995
Interest and dividends received $ 24,724,045
Operating expenses paid (2,703,229)
Interest expense paid (4,218,750)
------------
Cash provided - operations 17,802,066
------------
Investment purchases (1,094,680,779)
Investment sales 1,098,569,973
------------
Cash provided - investments 3,889,194
------------
Distributions to shareholders (21,691,260)
------------
Cash used - financing activities (21,691,260)
------------
Net change in cash --
Cash at beginning of year --
------------
Cash at end of year $ --
============
The accompanying notes are an integral part of these financial statements.
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements
NOTE 1 - ORGANIZATION
Franklin Universal Trust (the "Fund") was organized as a Massachusetts business
trust on April 26, 1988, and is registered as a diversified, closed-end
management investment company under the Investment Company Act of 1940. The Fund
has two classes of securities: senior fixed-rate notes (the "Notes") and shares
of beneficial interest (the "Shares").
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a. Security Valuation:
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 asked 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
Trustees.
The value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is traded or as of the close of trading on the New
York Stock Exchange, if that is earlier, and that value is then converted into
its U.S. dollar equivalent at the foreign exchange rate in effect at noon, New
York time, on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and asked price
is used. Occasionally, events which affect the values of foreign securities and
foreign exchange rates may occur between the times at which they are determined
and the close of the exchange and will, therefore, not be reflected in the
computation of the Fund's net asset value, unless material. If events which
materially affect the value of these foreign securities occur during such
period, then these securities will be valued in accordance with procedures
established by the Board of Trustees.
The fair values of securities restricted as to resale, if any, are determined
following procedures established by the Board of Trustees.
b. 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.
c. 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, if any, is amortized as required by the Internal Revenue Code.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale and net realized gain
(loss) from foreign currency transactions.
d. Income Taxes:
The Fund intends 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.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
e. Foreign Currency Translation:
The accounting records of the Fund 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.
The Fund does 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 and the difference between the amounts of dividends, interest and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
appreciation/depreciation on translation of assets and liabilities denominated
in foreign currencies 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.
f. Repurchase Agreements:
The Fund may enter into a Joint Repurchase Agreement whereby its uninvested cash
balance is 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 are allocated to the
Fund based on its pro-rata interest.
In a repurchase agreement, the Fund purchases 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 Fund 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 Fund, with the value of the underlying
security marked to market daily to maintain coverage of at least 100%. The
collateral is delivered to the Fund's custodian and held until resold to the
dealer or bank. At August 31, 1995, the outstanding joint repurchase agreements
held by the Fund had been entered into on that date.
NOTE 3 - SENIOR FIXED-RATE NOTES
On August 30, 1993, the Fund issued $75 million aggregate principal amount of a
new class of five-year senior notes (the Notes) and received proceeds of
$74,522,250 after deduction of underwriting commissions and discounts. The Notes
are general unsecured obligations of the Fund and rank senior to all existing or
future unsecured indebtedness of the Fund. The Notes are senior to the Shares
and, in any liquidation of the Fund, the Notes must be paid in full before any
payments would be made with respect to the Shares.
The Notes carry a rating by Standard & Poor's Corporation of "AAA" and bear
interest, payable semi-annually, at the rate of 5.625% per annum, to maturity on
September 1, 1998. The market value of the Notes as of August 31, 1995 is
$73,845,000. Under the Investment Company Act of 1940, the Fund is required to
maintain asset coverage for the Notes of at least 300%. In addition, pursuant to
the agreement with respect to the Notes, the Fund is required to maintain on a
semi-monthly basis a specified discounted asset value for its portfolio that
equals or exceeds an amount determined under guidelines established by Standard
& Poor's Corporation. The Fund has met these requirements during the year ended
August 31, 1995.
NOTE 3 - SENIOR FIXED-RATE NOTES (cont.)
The costs of $620,282 incurred by the Fund in connection with the issuance of
the Notes are deferred and amortized on a straight-line basis over the term of
the notes.
The discount relating to the issuance of these Notes, which amounted to $65,250,
is being amortized to interest expense over a period of five years from August
30, 1993.
NOTE 4 - DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At August 31, 1995, for tax purposes, the Fund had a capital loss carryover of
$4,518,776 expiring in 2000. For tax purposes, the aggregate cost of securities
is higher (and unrealized appreciation is lower) than for financial reporting
purposes at August 31, 1995 by $30,939.
NOTE 5 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of an agreement, provides investment
advice, administrative services, office space and facilities to the Fund, and
receives fees computed weekly and payable monthly at an annualized rate of 0.75%
of the Fund's average weekly net assets (total assets less liabilities other
than the principal amount of the Notes). Fees incurred by the Fund pursuant to
this agreement aggregated $2,343,213 for the year ended August 31, 1995. Certain
officers and Trustees of the Fund are also officers and/or directors of Franklin
Advisers, Inc., a wholly owned subsidiary of Franklin Resources, Inc.
NOTE 6 - TRUST SHARES
At August 31, 1995, there was an unlimited number of shares of $.01 par value
authorized. At August 31, 1995, no shares were issued pursuant to the Fund's
Dividend Reinvestment Plan; all reinvested dividends were satisfied with
previously issued shares purchased in the open market pursuant to such Plan.
NOTE 7 - STATEMENT OF CASH FLOWS
The Fund's financial statements for the year ended August 31, 1995 include a
statement of cash flows in compliance with SFAS 102. Cash provided from
operations differs from net investment income because of amortization of bond
discount, amortization of note issuance costs, commissions and discounts, bonds
paid-in-kind, stock dividends and year-end income and expense accrual changes
amounting to $5,004,496.
NOTE 8 - 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
Fund 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 Fund values these restricted
securities as disclosed in Note 2. At August 31, 1995, the Fund held restricted
securities with a value aggregating $2,685,091, representing 1.07% of the Fund's
net assets. Such securities are:
<TABLE>
<CAPTION>
Face Acquisition
Amount Security Date Cost Value
-------- -------------------------------------------- ------- -------- --------
<S> <C> <C> <C>
$2,254,038 Atherton Franchise Capital, L.P., 11.00%, 05/01/06......... 04/28/94 $2,254,038 $1,893,391
Units
--------
5 PG Partners, Limited Partnership, Preference Units......... 03/31/93 147,892 791,700
</TABLE>
NOTE 9 - 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 Fund values these
securities as disclosed in Note 2. At August 31, 1995, the Fund held 144A
securities with a value aggregating $14,216,110, representing 5.67% of the
Fund's net assets. See the accompanying Statement of Investments in Securities
and Net Assets for specific information on such securities.
NOTE 10 - CREDIT RISK AND DEFAULTED SECURITIES
Although the Fund has a diversified portfolio, 65.11% 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 holders of high yielding
securities, because such securities are generally unsecured and are often
subordinated to other creditors of the issuer.
NOTE 11 - SUBSEQUENT EVENTS
On August 15, 1995 and September 18, 1995, the Board of Trustees declared
dividends as follows:
From Net
Record Date Payment Date Investment Income
------------------ ------------------ -----------------
September 15, 1995 September 29, 1995 $.067
October 13, 1995 October 31, 1995 .067
NOTE 12 - FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for each share of
beneficial interest outstanding, total investment return, ratios to average net
assets and other supplemental data. This information has been derived from the
information provided in the financial statements and market price data for the
Fund's shares.
<TABLE>
<CAPTION>
Year Ended August 31,
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year......................... $8.71 $9.81 $8.94 $7.50 $7.01
------- ------- ------- ------- -------
Net investment income..................................... 0.85 0.84 0.88 0.80 0.84
Net gain (loss) on securities (realized and
unrealized)............................................... 0.61 (1.08) 0.74 1.465 0.654
------- ------- ------- ------- -------
Total from investment operations........................... 1.46 (0.24) 1.62 2.265 1.494
------- ------- ------- ------- -------
Less distributions:
Distributions from net investment income.................. (0.81) (0.86) (0.750) (0.797) (0.934)
Distributions from paid-in capital........................ -- -- -- (0.028) (0.070)
------- ------- ------- ------- -------
Total distributions........................................ (0.81) (0.86) (0.750) (0.825) (1.004)
------- ------- ------- ------- -------
Net asset value, end of year............................... $9.36 $8.71 $9.81 $8.94 $7.50
======= ======= ======= ======= =======
Market value per share, end of year1....................... $8.875 $8.125 $9.50 $8.50 $7.25
======= ======= ======= ======= =======
Total Investment Return:
Based on market value per share2.......................... 20.42% (5.60)% 21.16% 32.39% 26.47%
Ratio to Average Net Assets:
Expenses.................................................. 2.26% 2.30% 3.24% 3.36% 4.01%
Net investment income..................................... 7.30% 7.04% 7.39% 7.28% 9.04%
Supplemental Data:
Net assets at end of year (000's omitted)................. $250,734 $233,302 $262,793 $239,486 $200,891
Portfolio turnover rate................................... 27.41% 36.76% 39.49% 30.44% 38.57%
Total debt outstanding at end of year (000's omitted)..... $ 74,961 $ 74,948 $ 74,523 $ 71,475 $ 71,356
Asset coverage per $1,000 of debt ........................ $ 3,345 $ 3,113 $ 3,526 $ 3,351 $ 2,815
(For Notes outstanding throughout the year)
</TABLE>
<TABLE>
<CAPTION>
Face Amount of Average Monthly Average Monthly Average Amount of
Year Notes Outstanding Face Amount of Number of Shares Notes Per Share
Ended End of Year Notes Outstanding Outstanding During the Year
---- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
1991 $71,600,000 $72,550,000 26,698,150 $2.72
1992 $71,600,000 $71,600,000 26,779,333 $2.67
1993 $75,000,000 $71,883,333 26,779,333 $2.68
1994 $75,000,000 $75,000,000 26,779,333 $2.80
1995 $75,000,000 $75,000,000 26,779,333 $2.80
</TABLE>
1Based on last sale on the New York Stock Exchange.
2Total return measures the change in value of an investment over ther periods
indicated. It reflects the change in market value of the capital shares, and
assumes reinvestment of dividends and capital gains in accordance with the
dividend reinvestment plan as stated in the Prospectus.
Of the income dividends paid by the Fund during the fiscal year ended August 31,
1995, 28.34% qualified for the 70% dividends received deduction for
corporations. The Fund hereby designates these amounts as dividends qualifying
for the dividends received deduction under IRC Section 854(b)(2).
FRANKLIN UNIVERSAL TRUST
Report of Independent Auditors
To the Shareholders and Board of Trustees
of Franklin Universal Trust:
We have audited the accompanying statement of assets and liabilities of Franklin
Universal Trust, including the statement of investments in securities and net
assets, as of August 31, 1995, and the related statements of operations and cash
flows for the year then ended, the statements of changes in net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Franklin Universal Trust as of August 31, 1995, the results of its operations
and cash flows for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
September 29, 1995
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
