MESSAGE
FROM THE PRESIDENT
Trust's Objective
The Franklin Universal Trust seeks to provide high current income consistent
with preservation of capital.
To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most Fund reports, such as the Fund's annual and semi-annual
reports, may be mailed to a household. Additional reports may be obtained,
without charge, by calling Fund Information at 1-800/DIAL BEN (1-800/342-5236).
April 15, 1996
Dear Shareholder:
It's a pleasure to bring you the semi-annual report for the Franklin Universal
Trust covering the six-month period ended February 29, 1996.
During this period, equity and bond markets exhibited continued strength. By
year-end, in fact, the Dow Jones Industrial Average(R) had broken the 5000-point
mark for the first time in history. For the 12 months ended February 29, 1996,
the Dow Jones recorded a total return of +40.13%, and its average price
increased to 5485.62 on February 29, 1996, from 4011.05 on February 28, 1995.*
Fixed-income markets followed suit, with the unmanaged Lehman Brothers High
Yield Corporate Bond Index gaining +14.32% over the same period. This index's
average price rose to 94.98 on February 29, 1996, from 89.20 one year earlier.
A number of positive economic factors influenced this strong performance.
Inflation remained subdued at a mere 2.5%, unemployment was low at 5.4% in 1995,
and annualized Gross Domestic Product slowed to 2.7% in the fourth quarter of
1995, down from 5.8% in the third quarter. A slow economy prompted the Federal
Reserve Board to lower short-term interest rates twice in 1995, from 6.00% to
5.50%, and further, to 5.25%, in February of this year.
*Source: Wilshire Associates
As described in more depth in the Performance Summary on page 5, we are proud to
report that the Franklin Universal Trust recorded a six-month cumulative total
return of +9.43%, based on its change in market price on the New York Stock
Exchange. For the 12 months ended February 29, 1996, the Trust's total return
was +19.69%. This performance can be largely attributed to its strategic
investments in utility stocks (28.5% of total net assets) and high yield
corporate bonds (65.97%) -- two investment sectors that performed well
throughout the 12-month period.
Declining interest rates usually result in higher utility stock prices, and
during the reporting period, they helped sustain the rally that began in late
1994. In fact, the Standard & Poor's Utility Index recorded a total return of
+28.06% for the 12 months ended February 29, 1996, and the Index's average price
rose to 195.58 on February 29, 1996, from 160.09 one year earlier. Moreover,
greater competition within the industry has resulted in increased earnings, as
utility companies have focused their attention on becoming the low-cost
providers of power. Competitive pressures have also forced some utilities
companies to consolidate, furthering efforts to lower operating costs.
In managing the Trust's utility stock holdings, which comprised eight of the
Trust's top 10 holdings as of February 29, 1996, we continued to keep a watchful
eye on the industry's regulatory environment. We tended to focus specifically on
those utilities we believed were in the best position to handle increased
competition. Such companies tend to have low production costs, strong
entrepreneurial management teams, and service territories located in growth
regions of the country. We anticipate these utility companies should produce
higher total returns than their peers as they capture a larger part of a more
competitive marketplace.
Positive trends in the high yield corporate bond market also had a significant
impact on the Trust's performance. The portfolio's corporate bond holdings
represented 24 industries at the close of the reporting period, several of which
recorded strong returns.
For example, the Trust's high yield bond holdings in the cable television and
media/broadcasting sector (11.3% of total net assets) continued to rally after
Congress passed the Telecommunications Act of 1996 in February. The bill
proposes to increase competition and integration in the communications and media
markets. Management's selection of potential merger candidates had a significant
impact on the Trust and helped improve its price per share. Mergers often lead
to increased value for the purchased company's bonds; as an example, the value
of the Trust's Continental Cable bonds appreciated sharply following
announcement of the company's scheduled merger with U.S. West.
Franklin Universal Trust
Top 10 Company Holdings
As a percentage of total net assets
February 29, 1996
Company % of total
Industry net assets
Thermadyne Industries 3.38%
Industrial (bond and stock)
Scana Corp. 3.23%
Utility (stock)
Texas Utilities 3.07%
Utility (stock)
DPL Inc. 2.70%
Utility (stock)
Southern Company 2.63%
Utility (stock)
Wisconsin Energy 2.52%
Utility (stock)
Cablevision Systems 2.40%
Cable Television (bond and stock)
CINergy 2.33%
Utility (stock)
American Electric Power 2.26%
Utility (stock)
Dominion Resources 2.25%
Utility (stock)
For a complete list of the Trust's portfolio, please see page 9 of this report.
Health care securities (5.6% of total net assets) also experienced strong
performance during the reporting period, as ongoing consolidation continued to
drive this sector in general. Two of the Trust's major holdings, OrNda
Healthcorp (1.7% of total net assets) and Tenet Healthcare (1.5% of total net
assets), performed well, and we anticipate they should provide the fund with
solid upside potential through the remainder of the year.
This discussion reflects the strategies we employed for the Trust during the
past six months, and includes our opinions for that period. Since economic and
market conditions are constantly changing, our strategies, and our evaluations,
conclusions and decisions regarding portfolio holdings will change as new
circumstances arise. Although past performance of a specific investment or
sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase for the Trust. As you may know, 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.
Looking forward, we anticipate low levels of inflation, low interest rates and
slow to moderate economic growth for the rest of 1996. Although interest rates
rose temporarily following a stronger-than-expected employment report released
in March, rates and bond yields may remain low in response to other economic
indicators. As a result, we maintain a positive outlook for high yield corporate
bonds and utility stocks.
As always, we appreciate your continued support, welcome your comments, and look
forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
President
Franklin Universal Trust
Performance Summary
The Franklin Universal Trust's closing price on the New York Stock Exchange
(NYSE) rose to $9.250 per share on February 29, 1996, from $8.875 per share on
August 31, 1995. The Trust's net asset value price per share (as opposed to
market price) increased to $9.82 on February 29, 1996, from $9.36 on August 31,
1995. During the reporting period, shareholders received income distributions
totaling 44.4 cents ($0.444) per share. Based on an annualization of the current
monthly dividend of 6.7 cents ($0.067) per share and the NYSE closing price of
$9.250 on February 29, 1996, the Trust's distribution rate was 8.69%. Dividends
will vary based on the Trust's earnings, and past distributions are not
indicative of future trends.
The Trust reported a cumulative total return of +9.43% for the six-month period
ended February 29, 1996. Total return reflects the change in the Trust's market
price on the NYSE. Based on the change in net asset value, total return for the
same period was +9.82%. All total return calculations assume reinvestment of
dividends according to the terms specified in the Trust's dividend reinvestment
plan.
While the Franklin Universal Trust may occasionally experience short-term
volatility, we are confident that its performance should be rewarding for
long-term investors. For example, the Trust reported a total return of +114.67%
in market-price terms for the five years ended February 29, 1996. The NYSE share
price increased to $9.250 on February 29, 1996, from $6.125 on February 28,
1991.
Franklin Universal Trust
Cumulative Total Returns1
Periods ended February 29, 1996
Since
One- Five- Inception
Year Year (9/23/88)
Based on
market value 19.69% 149.62% 114.67%
Based on net
asset value 21.30% 152.83% 145.25%
Distribution Rate2 8.69%
1. Cumulative 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.
2. Distribution rate is based on an annualization of the Trust's current 6.7
cents per share monthly dividend and its NYSE closing price of $9.250 on
February 29, 1996.
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.
<TABLE>
<CAPTION>
FRANKLIN UNIVERSAL TRUST
Annual Meeting of Shareholders
February 15, 1996
1. Regarding the election of trustees who constitute the current Board of
Trustees
% of Broker
For (%) Voted Against (%) Abstain (%) Non-Vote
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank H. Abbot 22,200,312.118 82.900 97.850 -0- -0- 487,621.990 2.150 -0-
Harris J. Ashton 22,386,115.745 83.590 98.670 -0- -0- 301,818.363 1.330 -0-
S. Joseph Fortunato 22,384,676.838 83.590 98.660 -0- -0- 303,257.270 1.340 -0-
David W. Garbellano 22,203,131.391 82.910 97.860 -0- -0- 484,802.717 2.140 -0-
Edward B. Jamieson 22,344,342.735 83.440 98.490 -0- -0- 343,591.373 1.510 -0-
Charles B. Johnson 22,398,703.673 83.640 98.730 -0- -0- 289,230.435 1.270 -0-
Rupert H. Johnson, Jr. 22,398,198.467 83.640 98.720 -0- -0- 289,735.641 1.280 -0-
Frank W. T. LaHaye 22,389,547.120 83.610 98.680 -0- -0- 298,386.988 1.320 -0-
Gordon S. Macklin 22,247,229.729 83.080 98.060 -0- -0- 440,704.379 1.940 -0-
2. Regarding the ratification of the selection of Coopers & Lybrand L.L.P.,
Certified Public Accountants, as the independent auditors for the Fund for the
fiscal year ending August 31, 1996
Broker
For (%) % of Voted Against (%) Abstain (%) Non-Vote
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
22,254,197.541 83.100 98.090 79,949.585 .350 353,786.982 1.560 -0-
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN UNIVERSAL TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
(unaudited)
Shares,
Warrants Value
& Rights (Note 2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks, Warrants & Rights 35.3%
Automotive .6%
60,800 a Harvard Industries, Inc., Class B.............................................. $ 1,535,200
------------
Containers & Packaging .3%
92,274 a Gaylord Container Corp., warrants.............................................. 899,672
------------
Energy .8%
9,000 a McMoRan Oil & Gas Co. ......................................................... 27,000
14,935 a Santa Fe Energy Resources, Inc. ............................................... 138,149
66,600 Ultramar Corp. ................................................................ 1,906,425
------------
2,071,574
------------
Financial
15,180 a,b Westfed Holdings, Inc., Series B............................................... --
------------
Health Care .3%
4,066 a Kendall International, Inc., Class A, warrants................................. 319,396
4,348 a Kendall International, Inc., Class B, warrants................................. 319,808
2,456 a Kendall International, Inc., rights............................................ 192,926
------------
Home Building .3%
67,247 a NVR, Inc. ..................................................................... 672,470
35,607 a NVR, Inc., warrants............................................................ 53,411
------------
725,881
------------
Industrial .1%
7,254 a Thermadyne Industries, Inc. ................................................... 134,199
------------
Lodging
752 a Host Marriott Corp. ........................................................... 9,776
752 Marriott International, Inc. .................................................. 36,942
------------
46,718
------------
Metals & Mining 2.9%
228,000 Driefontein Consolidated Mines, Ltd., ADR...................................... 3,477,000
26,059 East Daggafontein Mines, Ltd., ADR............................................. 68,974
131,350 Free State Consolidated Gold Mines, Ltd., ADR.................................. 1,264,244
4,500 Freeport-McMoRan Copper & Gold, Inc. .......................................... 144,000
63,156 Freeport-McMoRan Copper & Gold Inc., Class B................................... 2,060,465
15,000 Freeport-McMoRan, Inc. ........................................................ 639,375
4,000 a Gulf States Steel, warrants.................................................... 40,000
------------
7,694,058
------------
Technology/Information Systems
84,885 a Memorex Telex N.V., ADR........................................................ $ 82,237
------------
Telecommunications 1.3%
40,600 BellSouth Corp. ............................................................... 1,618,924
130 Nippon Telegraph & Telephone Corp. ............................................ 989,628
15,300 SBC Communications, Inc. ...................................................... 839,588
------------
3,448,140
------------
Transportation .2%
2,723 a Continental Airlines, Inc., Class A............................................ 123,896
7,580 a Continental Airlines, Inc., Class B............................................ 363,840
------------
487,736
------------
Utilities 28.5%
138,600 American Electric Power Co., Inc. ............................................. 5,942,475
205,600 CINergy Corp. ................................................................. 6,142,300
79,700 Delmarva Power & Light Co. .................................................... 1,763,362
150,000 Dominion Resources, Inc. ...................................................... 5,925,000
298,000 DPL, Inc. ..................................................................... 7,114,750
80,000 Duke Power Co. ................................................................ 3,910,000
74,600 Edison International........................................................... 1,305,500
35,300 New England Electric System.................................................... 1,363,463
23,500 New Jersey Resources Corp. .................................................... 684,438
175,000 New York State Electric & Gas Corp. ........................................... 4,134,375
26,400 Peco Energy Co. ............................................................... 745,800
77,000 Pinnacle West Capital Corp. ................................................... 2,184,875
100,000 Public Service Co. of Colorado................................................. 3,525,000
309,200 Scana Corp. ................................................................... 8,503,000
289,300 Southern Co. .................................................................. 6,907,038
200,200 Texas Utilities Co. ........................................................... 8,083,075
229,400 Wisconsin Energy Corp. ........................................................ 6,623,925
------------
74,858,376
------------
Total Common Stocks, Warrants & Rights (Cost $80,464,754)...................... 92,815,921
------------
Partnership Units .2%
Financial
5 b PG Partners, L.P., Preference Units (Cost $237,612)............................ 452,400
------------
Preferred Stocks 7.2%
Automotive .6%
60,409 Harvard Industries, Inc., 14.25% pfd., PIK..................................... $ 1,638,594
------------
Cable Television 1.2%
30,000 c Cablevision Systems Corp., 11.125% pfd., PIK, Series L......................... 3,093,750
------------
Consumer Goods 1.1%
420,000 RJR Nabisco Holdings, $0.6012 cvt. pfd., Series C.............................. 2,887,500
------------
Energy .7%
12,200 Ashland Oil, Inc., $3.125 cum. cvt. pfd. ...................................... 754,875
20,000 c Occidental Petroleum Corp., $3.875 cvt. exch. pfd. ............................ 1,195,000
------------
1,949,875
------------
Financial 2.4%
40,000 First Nationwide Bank, 11.50% pfd. ............................................ 4,540,000
60,000 Security Capital Pacific, 1.75% cvt. pfd., Series A............................ 1,605,000
49,806 b Westfed Holdings, Inc., 15.50% cum. senior pfd., Series A...................... 498
-------------
6,145,498
-------------
Media and Broadcasting 1.0%
2,191 PanAmSat Corp.,12.75%, pfd., PIK............................................... 2,585,380
-------------
Restaurants .2%
40,000 Flagstar Cos., Inc., $2.25 cvt. pfd., Series A................................. 560,000
-------------
Total Preferred Stocks (Cost $19,772,687)...................................... 18,860,597
-------------
Face
Amount
--------
Non-Convertible Bonds 80.5%
Automotive 1.6%
$ 3,800,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02................................. 4,047,000
-------------
Cable Television 6.4%
5,000,000 d Bell Cablemedia, Plc., senior disc. notes, zero coupon to 07/15/99, (original
accretion rate 11.95%), 11.95% thereafter, 07/15/04........................... 3,700,000
3,000,000 Cablevision Systems Corp., senior sub. deb., 9.875%, 04/01/23.................. 3,225,000
1,000,000 Comcast Corp., senior sub. deb., 9.50%, 01/15/08............................... 1,055,000
2,000,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07.............. 2,310,000
1,400,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08............... 1,575,000
2,400,000 e Rogers Cablesystems, Inc., senior secured deb. (Canada), 9.65%, 01/15/14....... 1,583,263
3,000,000 Tele-Communications, Inc., senior deb., 9.80%, 02/01/12........................ 3,464,424
-------------
16,912,687
-------------
Cellular Telephones 3.6%
$ 6,000,000 d Comcast Cellular Corp., senior sub. deb., Series B, (original accretion rate 11.37%),
0.00%, 03/05/00 .............................................................. $4,560,000
3,000,000 d Nextel Communications, senior disc. notes, (original accretion rate 9.75%),
0.00%, 08/15/04 .............................................................. 1,792,500
3,000,000 Rogers Cantel Mobile Communications, Inc., senior sub. notes, 10.75%, 11/01/01. 3,172,500
-------------
9,525,000
-------------
Chemicals 4.6%
3,000,000 Arcadian Partners, S.F., senior sub. notes, Series B, 10.75%, 05/01/05......... 3,322,500
4,000,000 Harris Chemical North America, Inc., senior secured disc. notes, 10.25%, 07/15/01 4,040,000
500,000 IMC Global, Inc., senior deb., 9.45%, 12/15/11................................. 542,500
1,000,000 IMC Global, Inc., senior notes, 9.25%, 10/01/00................................ 1,065,000
1,500,000 IMC Global, Inc., senior notes, Series B, 10.125%, 06/15/01.................... 1,661,250
1,350,000 IMC Global, Inc., senior notes, Series B, 10.75%, 06/15/03..................... 1,512,000
-------------
12,143,250
-------------
Consumer Goods 4.5%
2,750,000 d Coleman Holdings, Inc., senior secured disc. notes, (original accretion rate
10.875%), 0.00%, 05/27/98..................................................... 2,261,874
1,700,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03.............. 1,589,500
3,000,000 Revlon Consumer Products Corp., senior sub. notes, Series B, 10.50%, 02/15/03.. 3,135,000
1,500,000 d Revlon Worldwide Corp., senior secured disc. notes, Series B, (original accretion
rate 12.00%), 0.00%, 03/15/98................................................. 1,207,500
1,500,000 RJR Nabisco, Inc., senior notes, 9.25%, 08/15/13............................... 1,490,625
2,000,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03................................ 2,020,000
-------------
11,704,499
-------------
Containers & Packaging 2.7%
1,000,000 Container Corp. of America, guaranteed senior notes, Series A, 11.25%, 05/01/04 1,040,000
3,000,000 Container Corp. of America, senior notes, 9.75%, 04/01/03...................... 2,977,500
3,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04....................... 3,138,750
-------------
7,156,250
-------------
Energy 1.4%
3,500,000 Gulf Canada Resources, Ltd., senior sub. deb., 9.25%, 01/15/04................. 3,683,750
-------------
Food & Beverages 4.1%
1,600,000 f Beatrice Foods, Inc., S.F., senior sub. notes, 12.00%, 12/01/01................ 472,000
600,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05................. 594,000
5,714,000 c Del Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ............................ 4,114,080
1,000,000 Dominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05................... 1,085,000
$ 300,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00........... $ 316,500
1,500,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03.......... 1,582,500
1,000,000 Specialty Foods Corp., senior sub. notes, Series B, 11.25%, 08/15/03........... 835,000
2,000,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01...... 1,775,000
-------------
10,774,080
-------------
Food Retailing 6.9%
4,000,000 Brunos, Inc., senior sub. notes, 10.50%, 08/01/05.............................. 3,900,000
850,000 Doane Products Co., senior notes, 10.625%, 03/01/06............................ 850,000
2,000,000 Grand Union Co., senior notes, 12.00%, 09/01/04................................ 1,655,000
1,100,000 P & C Food Markets, Inc., senior sub. notes, 11.50%, 10/15/01.................. 1,119,250
4,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03..................... 3,890,000
1,000,000 Penn Traffic Co., senior notes, 8.625%, 12/15/03............................... 932,500
2,000,000 Penn Traffic Co., senior notes, 10.375%, 10/01/04.............................. 1,997,500
2,000,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03....................... 1,850,000
1,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05........................ 950,000
1,000,000 Ralphs Grocery Co., sub. notes, 10.45%, 06/15/04............................... 995,000
-------------
18,139,250
-------------
Forest & Paper Products 8.2%
3,000,000 Fort Howard Corp., senior sub. notes, 9.00%, 02/01/06.......................... 2,958,750
1,817,495 Fort Howard Corp., sub. deb., 11.00%, 01/02/02................................. 1,940,175
4,000,000 Rapp International Finance, company guaranteed secured notes, 13.25%, 12/15/05. 3,980,000
1,000,000 REPAP New Brunswick, senior notes, 9.875%, 07/15/00............................ 1,015,000
2,000,000 REPAP New Brunswick, senior notes, 10.625%, 04/15/05........................... 1,950,000
1,000,000 REPAP New Brunswick, senior notes, FRN, 8.859%, 07/15/00....................... 1,005,000
1,500,000 REPAP Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02................... 1,458,750
500,000 REPAP Wisconsin, Inc., senior secured notes, 9.875%, 05/01/06.................. 481,250
2,200,000 S.D. Warren Co., senior sub notes, 12.00%, 12/15/04............................ 2,365,000
4,000,000 Tjiwi Kimia International, guaranteed senior notes, 13.25%, 08/01/01........... 4,420,000
-------------
21,573,925
-------------
Gaming & Leisure 3.8%
4,000,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04............................... 4,440,000
1,000,000 Players International, Inc., senior notes, 10.875%, 04/15/05................... 972,500
4,000,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09............................ 4,660,000
-------------
10,072,500
-------------
Health Care 5.2%
4,000,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02............... 4,270,000
698,924 Amerisource Distribution Corp., senior deb., PIK, 11.25%, 07/15/05............. 772,311
$ 4,000,000 OrNda Healthcorp., guaranteed senior sub. notes, 11.375%, 08/15/04............. $ 4,540,000
600,000 Tenet Healthcare Corp., senior notes, 8.625%, 12/01/03......................... 633,000
500,000 Tenet Healthcare Corp., senior sub. notes, 9.625%, 09/01/02.................... 555,000
2,500,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05................... 2,781,250
-------------
13,551,561
-------------
Industrial 6.8%
3,400,000 AAF-McQuay, Inc., senior notes, 8.875%, 02/15/03............................... 3,408,500
3,000,000 American Standard, Inc., S.F., deb., 9.25%, 12/01/16........................... 3,082,500
1,000,000 d American Standard, Inc., S.F., senior sub. deb., zero coupon to 06/01/98, (original
acretion rate 10.50%), 10.50% thereafter, 06/01/05............................ 876,250
2,400,000 Inter-City Products Corp., senior secured notes, 9.75%, 03/01/00............... 1,860,000
3,631,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02.................... 3,685,465
5,035,000 Thermadyne Industries, Inc., sub. notes, 10.75%, 11/01/03...................... 5,060,175
-------------
17,972,890
Lodging 2.3%
4,000,000 John Q. Hammons Hotels, first mortgage, 8.875%, 02/15/04....................... 4,040,000
2,000,000 Red Roof Inns, senior notes, 9.625%, 12/15/03.................................. 2,020,000
-------------
6,060,000
-------------
Media & Broadcasting 4.5%
2,000,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04................. 2,100,000
1,000,000 American Radio Systems, senior sub. notes, 9.00%, 02/01/06..................... 992,500
3,000,000 New World Communications Group, Inc., senior notes, 11.00%, 06/30/05........... 3,195,000
4,000,000 d PanAmSat 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............... 3,420,000
2,000,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24................ 2,030,000
-------------
11,737,500
-------------
Metals & Mining 4.4%
5,000,000 d Acme Metals, Inc., guaranteed senior secured disc. notes, zero coupon to 08/01/97,
(original accretion rate 13.50%), 13.50% thereafter, 08/01/04................. 4,400,000
3,000,000 Envirosource, Inc., senior notes, 9.75%, 06/15/03.............................. 2,760,000
4,000,000 Gulf States Steel, units, 13.50%, 04/15/03..................................... 3,680,000
615,000 UCAR Global Enterprises, senior sub. notes, 12.00%, 01/15/05................... 719,550
-------------
11,559,550
-------------
Publishing-Newspaper .4%
1,000,000 Hollinger International Publishing, senior sub. notes, 9.25%, 02/01/06......... 1,005,000
-------------
Restaurants 3.0%
$ 2,199,275 b Atherton Franchise Capital, L.P., 11.00%, 05/01/06............................. $ 1,847,391
2,000,000 Family Restaurants, Inc., senior notes, 9.75%, 02/01/02........................ 1,240,000
1,500,000 Flagstar Corp., senior notes, 10.875%, 12/01/02................................ 1,357,500
1,510,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04....................... 1,026,800
2,500,000 Foodmaker, Inc., S.F., senior sub. notes, 9.25%, 03/01/99...................... 2,456,250
-------------
7,927,941
-------------
Technology/Information Systems .8%
2,000,000 ADT Operations, Ltd., guaranteed senior sub. notes, 9.25%, 08/01/03............ 2,140,000
-------------
Textiles & Apparel1 .6%
1,550,000 f Forstmann Textile & Co., Inc., S.F., senior sub. notes, 14.75%, 04/15/99....... 426,250
2,567,000 JPS Textile Group, Inc., S.F., disc. notes, 10.85%, 06/01/99................... 1,681,385
1,000,000 WestPoint Stevens, Inc., senior notes, 8.75%, 12/15/01......................... 1,017,500
1,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05.................... 1,005,000
-------------
4,130,135
-------------
Transportation 1.8%
1,000,000 Delta Airlines, Inc., S.F., pass-through equipment trust, 10.06%, 01/02/16..... 1,173,010
3,000,000 Delta Airlines, Inc., S.F., pass-through equipment trust, 10.50%, 04/30/16..... 3,644,597
-------------
4,817,607
-------------
Utilities 1.9%
2,000,000 El Paso Electric Co., first mortgage, Series E, 9.40%, 05/01/11................ 2,070,000
830,748 Midland CoGeneration Venture, S.F., deb., Series C, 10.33%, 07/23/02........... 875,586
2,000,000 Midland CoGeneration Venture, S.F., secured lease obligation, Series A,
11.75%, 07/23/05.............................................................. 2,143,694
-------------
5,089,280
-------------
Total Non-Convertible Bonds (Cost $207,821,511).......................... 211,723,655
-------------
Convertible Bonds 1.7%
Electronics .6%
1,500,000 c Dovatron International, Inc., cvt. sub. notes, 6.00%, 10/15/02................. 1,601,250
-------------
Financial .3%
1,000,000 c Peregrine Investment Finance, cvt. guaranteed, 4.50%, 12/01/00................. 862,500
-------------
Health Care .1%
200,000 Sun Healthcare Group, Inc., cvt. sub. notes, 6.00%, 03/01/04................... 172,000
-------------
Media & Broadcasting .3%
1,000,000 c All American Communications, Inc., cvt. sub. notes, 6.50%, 10/01/03............ 885,000
-------------
Technology/Information Systems .4%
$ 700,000 c Altera Corp., cvt. sub. notes, 5.75%, 06/15/02................................. $ 1,001,000
-------------
Total Convertible Bonds (Cost $4,318,916).............................. 4,521,750
-------------
Total Bonds (Cost $212,140,427)........................................ 216,245,405
-------------
Foreign Government Agencies .3%
4,350,000 e ESCOM, E168, utility deb. (South Africa), 11.00%, 06/01/08 (Cost $1,026,906)... 888,872
-------------
Total Investments before Repurchase Agreements (Cost $313,642,386)..... 329,263,195
-------------
g Receivables from Repurchase Agreements2.6%
6,892,321 Joint Repurchase Agreement, 5.418%, 03/01/96, (Maturity Value $6,858,967)
(Cost $6,857,935)
BA Securities, Inc., (Maturity Value $1,095,598)
Collateral: U.S. Treasury Notes, 5.625% - 8.50%, 11/15/96 - 07/31/00
BT Securities Corp., (Maturity Value $1,095,598)
Collateral: U.S. Treasury Notes, 5.00%, 02/15/99
Chase Securities, Inc., (Maturity Value $285,379)
Collateral: U.S. Treasury Notes, 6.875% - 7.75%, 10/31/96 - 11/30/99
Daiwa Securities America, Inc., (Maturity Value $1,095,598)
Collateral: U.S. Treasury Bills, 04/18/96 - 05/30/96
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,095,598)
Collateral: U.S. Treasury Bills, 05/02/96 - 09/19/96
U.S. Treasury Notes, 6.125% - 7.50%, 05/31/97 - 10/31/99
Fuji Securities, Inc., (Maturity Value $1,095,598)
Collateral: U.S. Treasury Notes, 5.875% - 7.75%, 12/31/96 - 11/30/99
SBC Capital Markets, Inc., (Maturity Value $1,095,598)
Collateral: U.S. Treasury Notes, 5.625% - 6.50%, 06/30/97 - 08/15/97......... 6,857,935
-------------
Total Investments (Cost $320,500,321)127.8%......................... 336,121,130
Liabilities in Excess of Other Assets(27.8)%........................ (73,044,908)
-------------
Net Assets 100.0%.................................................. $263,076,222
=============
At February 29,1996 the net unrealized appreciation based on the cost of
investments for income tax purposes of $320,531,260 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost .......................................... $ 35,802,893
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value........................................... (20,213,023)
-------------
Net unrealized appreciation.................................................... $ 15,589,870
=============
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.
dZero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant.
eFace amount is stated in foreign currency and value is stated in U.S. dollars.
fSee Note 10 regarding defaulted securities.
gFace amount for repurchase agreements is for the underlying collateral. See
Note 2(f) regarding joint repurchase agreement.
The accompanying notes are an integral part of these financial statements.
</TABLE>
FRANKLIN UNIVERSAL TRUST
Financial Statements
Statement of Assets and Liabilities
February 29, 1996 (unaudited)
Assets:
Investments in securities, at value
(identified cost $313,642,386) $329,263,195
Receivables from repurchase agreements,
at value and cost 6,857,935
Receivables:
Dividends and interest 5,263,146
Unamortized note issuance costs (Note 3) 310,023
------------
Total assets 341,694,299
------------
Liabilities:
Payables:
Notes (Note 3) 74,967,411
Accrued interest (Note 3) 2,109,375
Investment securities purchased 1,253,555
Management fees 213,854
Accrued expenses and other liabilities 73,882
------------
Total liabilities 78,618,077
------------
Net assets, at value $263,076,222
============
Net assets consist of:
Undistributed net investment income $ 1,028,488
Unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 15,619,209
Net realized loss from investments and
foreign currency transactions (442,614)
Capital shares 267,793
Additional paid-in capital 246,603,346
------------
Net assets, at value $263,076,222
============
Net asset value per share
($263,076,222 / 26,779,333 shares
of beneficial interest outstanding) $9.82
============
Statement of Operations
for the six months ended February 29, 1996 (unaudited)
Investment income:
Dividends, net of foreign taxes
withheld of $657 $ 3,164,460
Interest 11,416,738
-----------
Total income $14,581,198
Expenses:
Management fees (Note 5) 1,252,267
Shareholder servicing costs 58,428
Reports to shareholders 35,617
Professional fees 22,773
Custodian fees 15,225
Trustees' fees and expenses 10,950
Amortization of notes
issuance costs 62,028
Other 37,851
-----------
Operating expenses 1,495,139
Interest expense (Note 3) 2,115,877
-----------
Total expenses 3,611,016
-----------
Net investment income 10,970,182
-----------
Realized and unrealized gain
from investments and
foreign currency:
Net realized gain (loss) from:
Investments 4,093,424
Foreign currency transactions (1,435)
Net unrealized appreciation
(depreciation) on:
Investments 9,172,314
Translation of assets and
liabilities denominated in
foreign currencies (1,759)
-----------
Net realized and unrealized
gain from investments and
foreign currency 13,262,544
-----------
Net increase in net assets
resulting from operations $24,232,726
===========
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 six months ended February 29, 1996
(unaudited) and the year ended August 31, 1995
Six months Year
ended ended
2/29/96 8/31/95
----------- -----------
Increase (decrease)
in net assets:
Operations:
Net investment income $ 10,970,182 $ 22,806,562
Net realized gain from
investments and foreign
currency transactions 4,091,989 5,243,923
Net unrealized appre-
ciation on investments
and translation of
assets and liabilities
denominated in
foreign currencies 9,170,555 11,072,599
----------- -----------
Net increase
in net assets
resulting from
operations 24,232,726 39,123,084
Distributions to
shareholders from
undistributed net
investment income (11,890,024) (21,691,260)
----------- -----------
Net increase
in net assets 12,342,702 17,431,824
Net assets:
Beginning of period 250,733,520 233,301,696
----------- -----------
End of period (including
undistributed net
investment income of
$1,028,488 at 2/29/96
and $1,948,330 at
8/31/95) $263,076,222 $250,733,520
============ ============
Statement of Cash Flows
for the six months ended February 29, 1996 (unaudited)
Interest and dividends received $ 12,146,593
Operating expenses paid (1,448,763)
Interest expense paid (2,109,375)
-------------
Cash provided - operations 8,588,455
-------------
Investment purchases (693,358,877)
Investment sales 696,660,446
-------------
Cash provided - investments 3,301,569
-------------
Distributions to shareholders (11,890,024)
-------------
Cash used - financing activities (11,890,024)
Net change in cash --
Cash at beginning of period --
------------
Cash at end of period $ --
============
The accompanying notes are an integral part of these financial statements.
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (unaudited)
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 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 for which
market quotations are readily available are valued at the last sale price or, if
there is no sale price, within the range of the most recent quoted bid and asked
prices. Other securities are valued based on a variety of factors, including
yield, risk, maturity, trade activity and recent developments related to the
securities. The Fund may utilize a pricing service, bank or broker/dealer
experienced in such matters to perform any of the pricing functions, under
procedures approved by the Board of Trustees (the Board). Securities for which
market quotations are not available are valued in accordance with procedures
established by the Board.
The value of a foreign security is determined as of the earlier of the close of
trading on the foreign exchange on which it is traded or the close of trading on
the New York Stock Exchange. 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 prices 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, these securities
will be valued in accordance with procedures established by the Board.
The fair values of securities restricted as to resale are determined following
procedures established by the Board.
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.
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 and premium are 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 and foreign currency
transactions - see Note 10.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sales and 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 shareholders which will be sufficient to relieve the
Fund from income and excise taxes.
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 the currencies against U.S. dollars on the
valuation date. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the day
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
e. Foreign Currency Translation: (cont.)
that the transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are recognized when reported by the
custodian.
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.
Realized foreign exchange gains or losses arise from sales and maturities of
denominated short-term securities, sales of foreign currencies, gains or losses
realized between the trade and settlement dates on security transactions, the
difference between the amounts of dividends and 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 or
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 the end of the reporting period, 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. A repurchase agreement is accounted for as
a loan by the Fund to the seller, collateralized by underlying U.S. government
securities, which are delivered to the Fund's custodian. The market value,
including accrued interest, of the initial collateralization is required to be
at least 102% of the dollar amount invested by the Fund, with the value of the
underlying securities marked to market daily to maintain coverage of at least
100%. At February 29, 1996, all outstanding 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 February 29, 1996, is
$74,557,500. 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 six months
ended February 29, 1996.
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 February 29, 1996 by $30,939.
NOTE 5 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Under the terms of an agreement, Franklin Advisers, Inc. (Advisers), 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 $1,252,267 for the six months ended
February 29, 1996. Certain officers and Trustees of the Fund are also officers
and/or directors of Advisers, a wholly owned subsidiary of Franklin Resources,
Inc.
NOTE 6 - TRUST SHARES
At February 29, 1996, there was an unlimited number of shares of $.01 par value
authorized. At February 29, 1996, 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 six months ended February 29, 1996
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 $2,381,727.
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 (1933
Act). The Fund may purchase restricted securities through a private offering
which cannot be sold without prior registration under the 1933 Act 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 February 29, 1996, the Fund held restricted securities
with a value aggregating $2,299,791, representing .87% of the Fund's net assets.
Such securities are:
<TABLE>
<CAPTION>
Face Acquisition
Amount Security Date Cost Value
-------- -------------------------------------------- ------- -------- --------
<S> <C> <C> <C> <C>
$2,199,275 Atherton Franchise Capital, L.P., 11.00%, 05/01/06......... 04/28/94 $2,199,275 $1,847,391
Units
--------
5 PG Partners, L.P., Preference Units........................ 03/31/93 237,612 452,400
</TABLE>
NOTE 9 - RULE 144A SECURITIES
Rule 144A of the 1933 Act provides a non-exclusive safe harbor exemption from
the registration requirements for specified resale of restricted securities to
qualified institutional investors. The Fund values these securities as disclosed
in Note 2. At February 29, 1996, the Fund held 144A securities with a value
aggregating $12,752,580, representing 4.85% 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, 65.97% 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. At February 29, 1996, the Fund
held two defaulted securities issued by two companies with a value aggregating
$898,250 representing .34% of the Fund's net assets. These securities are
identified on the accompanying Statement of Investments in Securities and Net
Assets.
<TABLE>
<CAPTION>
NOTE 11 - FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest
outstanding throughout each period are as follows:
Period Ended August 31,
Six Months Ended ---------------------------------------------------
February 29, 1996 1995 1994 1993 1992 1991
----------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period..... $9.36 $8.71 $9.81 $8.94 $7.50 $7.01
----------- ------- ------- ------- ------- -------
Net investment income................... 0.41 0.85 0.84 0.88 0.80 0.84
Net realized and unrealized gain (loss)
on securities........................... 0.49 0.61 (1.08) 0.74 1.465 0.654
----------- ------- ------- ------- ------- -------
Total from investment operations......... 0.90 1.46 (0.24) 1.62 2.265 1.494
----------- ------- ------- ------- ------- -------
Less distributions:
From net investment income.............. (0.44) (0.81) (0.86) (0.750) (0.797) (0.934)
From return of capital.................. -- -- -- -- (0.028) (0.070)
----------- ------- ------- ------- ------- -------
Total distributions...................... (0.44) (0.81) (0.86) (0.750) (0.825) (1.004)
----------- ------- ------- ------- ------- -------
Net asset value, end of period........... $9.82 $9.36 $8.71 $9.81 $8.94 $7.50
=========== ======= ======= ======= ======= =======
Market value per share, end of period1... $9.25 $8.875 $8.125 $9.50 $8.50 $7.25
=========== ======= ======= ======= ======= =======
Total Investment Return:
Based on market value per share2........ 9.43% 20.42% (5.60)% 21.16% 32.39% 26.47%
Ratio to Average Net Assets:
Expenses................................ 2.17%+ 2.26% 2.30% 3.24% 3.36% 4.01%
Net investment income................... 6.58%+ 7.30% 7.04% 7.39% 7.28% 9.04%
Supplemental Data:
Net assets at end of period (000's omitted) $263,076 $250,734 $233,302 $262,793 $239,486 $200,891
Portfolio turnover rate................. 8.83% 27.41% 36.76% 39.49% 30.44% 38.57%
Average commission rate4 ............... $.0545 -- -- -- -- --
Total debt outstanding at end of period
(000's omitted)......................... $ 74,967 $ 74,961 $ 74,948 $ 74,523 $ 71,475 $ 71,356
Asset coverage per $1,000 of debt ...... $ 3,509 $ 3,345 $ 3,113 $ 3,526 $ 3,351 $ 2,815
</TABLE>
<TABLE>
<CAPTION>
NOTE 11 - FINANCIAL HIGHLIGHTS (cont.)
(For Notes outstanding throughout the year)
Face Amount of Average Monthly Average Monthly Average Amount of
Period Notes Outstanding Face Amount of Number of Shares Notes Per Share
Ended End of Period Notes Outstanding Outstanding During the Period
----- ------------- ----------------- --------------- -----------------
<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
19963 $75,000,000 $75,000,000 26,779,333 $2.80
</TABLE>
+Annualized.
1Based on last sale on the New York Stock Exchange.
2Total return measures the change in value of an investment over the periods
indicated. It is not annualized. 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.
3For the six months ended February 29, 1996.
4Represents the average broker commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transaction in equity
securities.
