CONTENTS
Shareholder Letter .................................. 1
Manager's Discussion ................................ 4
Performance Summary ................................. 8
Dividend
Reinvestment Plan ................................... 11
Financial Highlights &
Statement of Investments ............................ 14
Financial Statements ................................ 22
Notes to
Financial Statements ................................ 25
SHAREHOLDER LETTER
Dear Shareholder:
We are pleased to bring you the semi-annual report for Franklin Universal Trust
for the period ended February 28, 1998.
The U.S. economy remained strong over the Trust's reporting period, and showed
no discernible indications of ending one of the longest, sustained economic
expansions in its history. This expansion continued to feature moderate growth
with few signs of inflation. Overall, interest rates have declined during the
six-month period, and the 30-year Treasury yield ended the period at 5.92%, down
from 6.61% on August 31, 1997. A generally benign inflationary environment and a
balanced budget agreement between the President and Congress, as well as
expectations for a 1998 budget surplus, contributed to declining rates.
However, not all news during the fund's reporting period was positive. Many
economists feared that the Asian crisis would have a negative effect on the U.S.
economy, but the worst of those concerns did not come to pass, as U.S. growth
continued. Although the International Monetary Fund's strong intervention in
many affected Asian countries clearly helped alleviate this crisis, it is still
likely that U.S. economic growth may slow somewhat in the future, as several of
its Asian trading partners attempt to rebuild their once-thriving economies.
The Tale of the Tortoise and the Hare
We can't promise that a positive economic environment will continue. It is
important to remember, then, that markets correct -- in our opinion, it is
desirable for them to do so. Consequently, investor concern about volatility and
the market's direction prompts us to comment on the importance of having your
own long-term investment strategy. And when you consider your investment
strategy, are you a tortoise or a hare?
We all know that familiar story: The tortoise won the race because he had a plan
and stuck to it, not allowing the hare's fast start to distract him. Much like
the tortoise, successful investors historically have achieved good results
through setting goals, diversifying their assets, and having patience. Wise
investors think like the tortoise. They know mutual fund investments are long
term, so daily market fluctuations and short-term volatility have minimal impact
on their overall investment goals. They understand that patience and discipline
are keys to successful investing. Remember, it's time -- not timing -- that
makes the difference.
We encourage you to discuss your financial goals with your investment
representative. He or she can address concerns about volatility and help you
diversify your investments and stay focused on the long term. Mutual funds offer
a level of diversification that is almost impossible for individual investors to
achieve on their own. A level of diversification whose importance the Asian
crisis has highlighted, as securities of that region have been negatively
influenced by the turmoil there, while other securities have been largely
unaffected.
Regardless of the market's direction, Franklin Templeton's disciplined
investment strategy remains the same. All of our portfolio managers are
dedicated to providing shareholders like you with careful selection and constant
professional supervision.
As always, we appreciate your support, welcome your questions and comments, and
look forward to serving your investment needs in the years ahead.
Sincerely,
Charles B. Johnson
President
Franklin Universal Trust
You may find a complete listing of the Fund's portfolio holdings, including the
number of shares and dollar value, beginning on page 15 of this report.
"Much like the tortoise, successful investors historically have achieved good
results through setting goals, diversifying their assets, and having patience."
MANAGER'S DISCUSSION
Your Fund's Objective: The Franklin Universal Trust seeks to provide high,
current income consistent with preservation of capital.
The Franklin Universal Trust (NYSE: FT) generated a cumulative total return of
13.43% for the six-month period ended February 28, 1998, based on its change in
market price on the New York Stock Exchange.
The Trust benefited from the strong performance of individual securities we
selected for its portfolio, in addition to solid, underlying economic and sector
fundamentals.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Sector Discussions
Wireless
The wireless industry continued to experience rapid subscriber growth. This
growth was propelled by several factors, including the general population's
increasing mobility, the movement toward a service-based economy, declining
costs of wireless service and a rise in the number of wireless companies
providing service in individual markets. The main driving force behind the
increase in wireless communication services available to consumers was the
introduction of PCS (Personal Communication Systems), which is a new wireless
communication technology. PCS has allowed new companies to enter many local
markets, and this has resulted in a wider breadth of services being available.
At the same time, better product marketing helped increase consumer awareness
and demand, while lower prices resulted in an increase in the customer base, as
more people bought wireless services. Increased consumer purchases of wireless
services largely offset the effects of price competition. The Trust's holdings
of Nextel and Sygnet Wireless benefited from these industry trends, as both
companies took advantage of these market opportunities.
Industrial/Metals
The Trust's investments in Allied Waste and Sheffield Steel experienced
significant gains, as the market reacted positively to their recent activities.
Allied Waste successfully completed its purchase of LaidLaw's solid waste
assets, spun off non-core assets and integrated its operations. Meanwhile,
Sheffield Steel continued with its downstream acquisition strategy by purchasing
cable-link fence manufacturers. These manufacturers should serve as a strong
source of revenue and demand for the steel rods Sheffield Steel produces.
Cable Television
Cablevision Systems, one of the Trust's investments, upgraded its systems at a
rate above the industry average and, partly as a result, enjoyed a strong return
over the reporting period. Also during the six-month period, the Trust continued
to seek out cable companies that were pursuing clustering strategies. We believe
those companies attempting to maximize their number of customers in a
concentrated geographic area (in order to minimize cost increases, while
increasing their subscription base) will perform well in the future.
Broadcasting
Sinclair Capital, one of the country's largest television broadcasters and a
holding of the Trust, benefited from rapid consolidation within the broadcasting
and media industry.
Government deregulation spurred consolidation, while rising demand for
advertising increased industry revenue and helped finance this trend.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Utilities
Government deregulation of the domestic utility industry continued to progress
over the six-month reporting period. Although the transition to a deregulated
electric utility sector is not yet complete, much of the uncertainty surrounding
the process has been resolved. Several states have passed legislation outlining
this sector's restructuring over the next five to ten years. California,
Massachusetts and Illinois passed deregulation laws in 1997, and as many as
twenty more states may follow with similar legislation in 1998.
As more state legislatures address the uncertainties regarding deregulation
issues, securities in the utility sector will generally benefit, in our opinion.
Furthermore, we believe those companies best positioned to compete in a more
open marketplace will outperform their peers. We sought to buy utility companies
with strong management teams, attractive service territories and efficient, low
cost operations. During the reporting period, our investment strategy in the
utility sector rewarded us with some strong gains. Our position in BellSouth
contributed a 38.49% six-month total return, as it continued to post strong
earnings fueled by the expansion of its cellular and local telephone services.
At the same time, Duke Energy generated a 14.7% total return for the Trust.
Duke's stellar performance was largely a result of the successful closure of its
merger with PanEnergy, as the new company realized synergies from the
integration of its gas and electric businesses.
What's Ahead
Recent economic data suggests continued moderate economic growth accompanied by
relatively stable interest rates, while inflation appears to remain under
control. If this environment persists, high-yield corporate bonds and utility
equities should remain attractive investments over the short- to
intermediate-term, and this would bode favorably for the Franklin Universal
Trust.
Please remember, this discussion reflects our views and opinions as of February
28, 1998, the end of the reporting period. However, market and economic
conditions are changing constantly, which may affect our strategies and
portfolio holdings. Although historic performance is no guarantee of future
results, these insights may help you understand our investment and management
philosophy.
"During the reporting period, our investment strategy in the utility sector
rewarded us with some strong gains."
PERFORMANCE SUMMARY
Franklin Universal Trust's share price on the New York Stock Exchange (NYSE)
increased 50 cents from $9.50 on August 31, 1997, to $10.00 on February 28,
1998. The Trust's share price, as measured by net asset value, increased 10
cents, from $10.20 to $10.30 for the same period.
During the six-month reporting period, the Trust's distributions totaled 74.6
cents ($0.746) per share. This included a December 1997 distribution consisting
of the monthly dividend of 6.7 cents ($0.067), a long-term capital gain of 24.02
cents ($0.2402) and a short-term capital gain of 10.38 cents ($0.1038).
Distributions will vary based on the earnings of the fund's portfolio, and past
distributions are not predictive of future trends.
Based on an annualization of February's monthly per-share dividend of 6.7 cents
($0.067) and the NYSE closing price of $10.00 on February 28, 1997, the Trust's
distribution rate was 8.04%.
Franklin Universal Trust reported a 13.43% cumulative total return for the
six-month period ended February 28, 1998. Total return reflects the change in
the Trust's market price on the NYSE. Based on the change in net asset value (as
opposed to market price), total return for the same period was 8.81%. All total
returns assume reinvestment of dividends and capital gains according to the
terms specified in the Trust's dividend reinvestment plan.
We urge you to view your investment in the Franklin Universal Trust with a
long-term perspective. As the chart below shows, the Trust reported a cumulative
total return of 217.20%, based on net asset value, since its inception on
September 23, 1988.
Franklin Universal Trust
Periods ended 2/28/98
Since
Inception
1-Year 5-Year (9/23/88)
Cumulative Total Return1
Based on change in net asset value 15.57% 82.23% 217.20%
Based on change in market price 21.60% 86.02% 184.32%
Average Annual Total Return1
Based on change in net asset value 15.57% 12.75% 13.02%
Based on change in market price 21.60% 13.22% 11.72%
Distribution Rate2 8.04%
1. Total return calculations represent the change in value of an investment over
the periods indicated and assume reinvestment of all distributions 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
cent per share monthly dividend and the New York Stock Exchange closing price of
$10.00 on February 28, 1998.
Past performance is not predictive of future results.
PORTFOLIO OPERATIONS
Christopher Molumphy
Senior Portfolio Manager
Franklin Advisers, Inc.
Christopher Molumphy earned his Bachelor of Arts degree in economics from
Stanford University and his Master's degree in finance from the University of
Chicago. He has been with Franklin Advisers, Inc. since 1988. Mr. Molumphy is a
Chartered Financial Analyst (CFA) and a member of several securities industry
associations. He has managed the Franklin Universal Trust since 1991.
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. Franklin Universal Trust, c/o PNC Bank, National Association (the
"Plan Agent") 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 three 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 a monthly 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
Financial Highlights
Six Months Ended
February 28, 1998 Year Ended August 31,
(unaudited) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ... $10.20 $9.53 $9.36 $8.71 $9.81 $8.94
Income from investment operations:
Net investment income.................. .43 .86 .82 .85 .84 .88
Net realized and unrealized gains (losses) .41 .65 .20 .61 (1.08) .74
Total from investment operations........ .84 1.51 1.02 1.46 (.24) 1.62
Less distributions from:
Net investment income.................. (.40) (.83) (.85) (.81) (.86) (.75)
Net realized gain...................... (.34) (.01) -- -- -- --
Total distributions..................... (.74) (.84) (.85) (.81) (.86) (.75)
Net asset value, end of period ......... $10.30 $10.20 $9.53 $9.36 $8.71 $9.81
Market value per share, end of period+ . $10.000 $9.500 $9.125 $8.875 $8.125 $9.500
Total return (based on market value per share)1 13.43% 14.00% 12.84% 20.42% (5.60)% 21.16%
Ratios/supplemental data
Net assets, end of period (000's)....... $275,808 $273,173 $255,200 $250,734 $233,302 $262,793
Ratios to average net assets:
Expenses............................... 2.62%2 2.72% 2.80% 2.97% 3.01% 4.23%
Net investment income.................. 8.36%2 8.74% 8.56% 9.59% 9.22% 9.65%
Portfolio turnover rate................. 19.06% 51.48% 19.24% 27.41% 36.76% 39.49%
Average commission rate paid*........... $.0507 $.0507 $.0528 -- -- --
Total debt outstanding at end of
period (000's omitted)................. $74,993 $74,987 $74,974 $74,961 $74,948 $74,523
Asset coverage per $1,000 of debt ...... $4,678 $4,643 $4,404 $4,345 $4,113 $4,526
Average amount of notes per share during the period $2.80 $2.80 $2.80 $2.80 $2.80 $2.68
</TABLE>
*Relates to purchases and sales of equity securities. Prior to August 31, 1996
disclosure of average commission rate was not required.
+Based on the last sale on the New York Stock Exchange
1Total return is not annualized.
2Annualized
See notes to financial statements.
FRANKLIN UNIVERSAL TRUST
Statement of Investments, February 28, 1998 (unaudited)
<TABLE>
<CAPTION>
SHARES,
WARRANTS
& RIGHTS VALUE
a,b Common Stocks, Warrants and Rights 30.4%
<S> <C> <C>
Automotive
a Harvard Industries, Inc., Class B .................................................. 60,800 $ 47,503
-------------
Cable Television
a Wireless One, Inc., warrants ....................................................... 6,000 60
-------------
Consumer Products .7%
RJR Nabisco Holdings Corp. ......................................................... 54,000 1,866,375
-------------
Containers & Packaging .1%
a Gaylord Container Corp., warrants .................................................. 46,137 317,192
-------------
Energy .9%
a McMoRan Oil & Gas Co. .............................................................. 9,000 39,375
a Santa Fe Energy Resources, Inc. .................................................... 14,935 167,085
Ultramar Diamond Shamrock Corp. .................................................... 66,600 2,376,788
-------------
2,583,248
-------------
Health Care 1.0%
a Kendall International, Inc., Class A, warrants ..................................... 4,066 1,005,906
a Kendall International, Inc., Class B, warrants ..................................... 4,348 1,053,236
a Kendall International, Inc., rights ................................................ 2,456 607,601
-------------
2,666,743
-------------
Industrial .1%
a Thermadyne Industries, Inc. ........................................................ 7,254 246,183
-------------
Lodging
a Host Marriott Corp. ................................................................ 752 14,899
Marriott International, Inc. ....................................................... 752 56,964
-------------
71,863
-------------
Metals & Mining 1.2%
Driefontein Consolidated Mines, Ltd., Sponsored ADR (South Africa) ................. 228,000 1,510,500
Free State Consolidated Gold Mines, Ltd., ADR (South Africa) ....................... 131,350 640,331
Freeport-McMoRan Copper & Gold, Inc., Class A ...................................... 4,500 64,687
Freeport-McMoRan Copper & Gold, Inc., Class B ...................................... 63,156 951,287
a Gulf States Steel, warrants ........................................................ 4,000 19,200
-------------
3,186,005
-------------
Real Estate
a Security Capital Group, Inc., Class B, warrants .................................... 3,190 11,763
-------------
Telecommunications 1.3%
BellSouth Corp. .................................................................... 40,600 2,476,600
a Orion Network Systems, Inc., warrants .............................................. 5,000 59,410
SBC Communications, Inc. ........................................................... 15,300 1,157,063
-------------
3,693,073
-------------
Utilities 25.1%
American Electric Power Co., Inc. .................................................. 123,600 5,932,800
CINergy Corp. ...................................................................... 205,600 7,157,450
Delmarva Power & Light Co. ......................................................... 79,700 1,713,550
Dominion Resources, Inc. ........................................................... 150,000 $ 5,981,250
DPL, Inc. .......................................................................... 417,000 7,584,187
Duke Energy Corp. .................................................................. 70,000 3,889,375
Edison International ............................................................... 74,600 2,060,825
Florida Progress Corp. ............................................................. 100,000 3,868,750
New Century Energies, Inc. ......................................................... 100,000 4,662,500
New England Electric System ........................................................ 35,300 1,487,013
New Jersey Resources Corp. ......................................................... 90,000 3,285,000
OGE Energy Corp. ................................................................... 45,000 2,430,000
Pinnacle West Capital Corp. ........................................................ 77,000 3,142,563
SCANA Corp. ........................................................................ 109,200 3,139,500
Southern Co. ....................................................................... 289,300 7,142,094
Texas Utilities Co. ................................................................ 141,500 5,721,906
-------------
69,198,763
-------------
Wireless
a Nextel Communications, Inc. ........................................................ 4,647 137,377
-------------
Total Common Stocks, Warrants & Rights (Cost $58,543,084) 84,026,148
-------------
Partnership Units
Financial Services
a,bPG Partners, L.P., Preference Units (Cost $0) ..................................... 5 136,663
-------------
Preferred Stocks 9.7%
Automotive
a Harvard Industries, Inc., 14.25% pfd., PIK ......................................... 69,017 25,881
-------------
Broadcasting 2.2%
Sinclair Capital, 11.625% pfd. ..................................................... 40,000 4,390,000
Triathlon Broadcasting Co., 9.00% cvt. pfd. ........................................ 142,190 1,564,090
-------------
5,954,090
-------------
Cable Television 1.5%
a Cablevision Systems Corp., 11.125% pfd., PIK, Series L ............................. 36,864 4,267,008
-------------
Consumer Products .7%
Ralston Purina Co., 7.00% cvt. pfd. ................................................ 31,000 1,991,750
-------------
Energy 1.6%
CMS Energy Corp., 7.75% cvt. pfd. .................................................. 70,000 4,265,275
-------------
Financial Services 1.0%
DECS Trust, 8.50% cvt. pfd. ....................................................... 77,200 1,389,600
Security Capital Pacific, $1.75 cvt. pfd., Series A ................................ 45,000 1,397,813
-------------
2,787,413
-------------
Lodging .3%
Hilton Hotels Corp., 8.00% cvt. pfd. ............................................... 28,000 773,500
-------------
Paper & Forest Products 1.1%
Asia Pulp & Paper Co., Ltd., 12.00% pfd. (Indonesia) ............................... 4,000,000 3,070,000
-------------
Telecommunications .8%
Nortel Inversora, SA, 10.00% cvt. pfd. (Argentina) ................................. 35,000 $ 2,301,250
-------------
Transportation .5%
CNF Trust I, Series A, 5.00% cvt. pfd. ............................................. 22,900 1,351,100
-------------
Total Preferred Stocks (Cost $26,443,061) 26,787,267
-------------
PRINCIPAL
AMOUNT*
Non-Convertible Bonds 83.0%
Automotive 3.6%
Advanced Accessory Systems, Inc., senior sub. notes, 144A, 9.75%, 10/01/07 ......... $1,000,000 1,015,000
Aetna Industries, Inc., senior notes, 11.875%, 10/01/06 ............................ 2,600,000 2,483,000
Cambridge Industries, Inc., senior sub. notes, 10.25%, 7/15/07 ..................... 1,000,000 1,050,000
Collins & Aikman Corp., senior sub. notes, 11.50%, 4/15/06 ......................... 2,000,000 2,255,000
c Harvard Industries, Inc., senior notes, 12.00%, 7/15/04 ............................ 4,000,000 1,460,000
Key Plastics, Inc., Series B, senior sub. notes, 10.25%, 3/15/07 ................... 1,500,000 1,591,875
-------------
9,854,875
-------------
Broadcasting 2.8%
Chancellor Media Corp., senior sub. notes, 8.75%, 6/15/07 .......................... 4,000,000 4,210,000
e Lin Holdings Corp., senior disc. notes, 10.00%, 3/01/08 ............................ 2,400,000 1,494,000
e Lin Television Corp., senior sub. notes, 8.375%, 3/01/08 ........................... 2,100,000 2,105,250
-------------
7,809,250
-------------
Cable Television 1.7%
Cablevision Systems Corp., senior sub. deb., 9.875%, 4/01/23 ....................... 3,000,000 3,315,000
Comcast Corp., senior sub. deb., 9.50%, 1/15/08 .................................... 1,000,000 1,067,500
Wireless One, Inc., senior disc. notes, zero coupon to 8/01/01,
13.50% thereafter, 8/01/06 ......................................................... 2,400,000 372,000
-------------
4,754,500
-------------
Chemicals 1.7%
Climachem, Inc., senior sub. notes, 144A, 10.75%, 12/01/07 ......................... 1,000,000 1,057,500
Huntsman Corp., senior sub. notes, 144A, 9.50%, 7/01/07 ............................ 3,500,000 3,622,500
-------------
4,680,000
-------------
Consumer Products 2.6%
E&S Holdings Corp., senior sub. notes, Series AI, 10.375%, 10/01/06 ................ 1,750,000 1,579,375
Revlon Consumer Products Corp., senior sub. notes, 144A, 8.625%, 2/01/08 ........... 4,000,000 4,010,000
RJR Nabisco, Inc., senior notes, 9.25%, 8/15/13 .................................... 1,500,000 1,669,202
-------------
7,258,577
-------------
Containers & Packaging 4.0%
Anchor Glass, first mortgage, 144A, 11.25%, 4/01/05 ................................ 4,000,000 4,420,000
Container Corp. of America, senior notes, 9.75%, 4/01/03 ........................... 3,000,000 3,255,000
Graham Packaging Co., senior sub. notes, 144A, 8.75%, 1/15/08 ...................... 800,000 810,000
Graham Packaging Holdings, senior disc. notes, 144A, zero coupon
to 01/15/03, 10.75% thereafter, 01/15/09 ........................................... 600,000 375,000
U.S. Can Corp., senior sub. notes, 10.125%, 10/15/06 ............................... 2,100,000 2,215,500
-------------
11,075,500
-------------
Energy 6.6%
Abraxas Petroleum Corp., senior notes, 11.50%, 11/01/04 ............................ $ 900,000 $ 933,750
Abraxas Petroleum Corp., senior notes, 144A, 11.50%, 11/01/04 ...................... 2,400,000 2,484,000
Clark R&M, Inc., senior sub. notes, 144A, 8.875%, 11/15/07 ......................... 4,000,000 4,060,000
Dailey International, Inc., senior notes, 144A, 9.50%, 2/15/08 ..................... 500,000 510,000
Dawson Production Services, Inc., senior notes, 9.375%, 2/01/07 .................... 900,000 940,500
Forcenergy, Inc., senior sub. notes, 9.50%, 11/01/06 ............................... 2,000,000 2,100,000
Magnum Hunter Resources, Inc., senior notes, 10.00%, 6/01/07 ....................... 5,000,000 4,950,000
Pride Petroleum Services, Inc., senior notes, 9.375%, 5/01/07 ...................... 1,000,000 1,075,000
Rutherford-Moran Oil Corp., senior sub. notes, 10.75%, 10/01/04 .................... 1,000,000 1,055,000
-------------
18,108,250
-------------
Financial Services 1.3%
First Nationwide Holdings, Inc., senior sub. notes, 10.625%, 10/01/03 .............. 3,300,000 3,704,250
-------------
Food & Beverages 3.7%
AmeriServ Food Co., senior notes, 8.875%, 10/15/06 ................................ 1,000,000 1,037,500
AmeriServ Food Co., senior sub. notes, 10.125%, 7/15/07 ............................ 3,000,000 3,262,500
Packaged Ice, Inc., senior notes, 144A, 9.75%, 2/01/05 ............................. 1,000,000 1,022,500
PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 9/01/03 ............... 2,800,000 2,989,000
Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 8/15/01 ........... 2,000,000 2,010,000
-------------
10,321,500
-------------
Food Retailing 3.8%
c Bruno's, Inc., senior sub. notes, 10.50%, 8/01/05 .................................. 2,000,000 470,000
Fleming Cos., Inc., senior sub. notes, 144A, 10.50%, 12/01/04 ...................... 4,000,000 4,270,000
Penn Traffic Co., senior notes, 8.625%, 12/15/03 ................................... 1,000,000 835,000
Penn Traffic Co., senior notes, 10.375%, 10/01/04 .................................. 2,000,000 1,710,000
Ralphs Grocery Co., sub. notes, 10.45%, 6/15/04 .................................... 1,000,000 1,145,000
Shoppers Food Warehouse Corp., senior notes, 9.75%, 6/15/04 ........................ 2,000,000 2,050,000
-------------
10,480,000
-------------
Gaming & Leisure 1.8%
Showboat, Inc., senior sub. notes, 13.00%, 8/01/09 ................................. 4,000,000 4,895,000
-------------
Health Care 4.6%
Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 ................... 4,000,000 4,210,000
Magellan Health Services, Inc., senior sub. notes, 144A, 9.00%, 2/15/08 ............ 2,300,000 2,328,750
Maxxim Medical, Inc., senior sub. notes, 10.50%, 8/01/06 ........................... 1,500,000 1,665,000
Vencor, Inc., senior sub. notes, 8.625%, 7/15/07 ................................... 4,000,000 4,450,000
-------------
12,653,750
-------------
Industrial 8.2%
Airxcel, Inc., senior sub. notes, 144A, 11.00%, 11/15/07 ........................... 1,500,000 1,608,750
Allied Waste Industries, Inc., senior disc. notes, zero coupon to 6/01/02,
11.30% thereafter, 6/01/07 ........................................................ 5,000,000 3,650,000
American Standard, Inc., S.F., senior sub. deb., zero coupon to 6/01/98,
10.50% thereafter, 6/01/05 ........................................................ 1,000,000 1,032,500
Amphenol Corp., senior sub. notes, 9.875%, 5/15/07 ................................. 1,000,000 1,085,000
Derlan Industries, Ltd., senior notes, 10.00%, 1/15/07 ............................. 2,000,000 2,080,000
Falcon Building Products, Inc., notes, Series B, zero coupon to 6/15/02,
10.50% thereafter, 6/15/07 ........................................................ 2,000,000 1,395,000
Intertek Finance, Plc., senior sub. notes, 10.25%, 11/01/06 (United Kingdom) ....... 2,000,000 2,110,000
Industrial (cont.)
Nortek, Inc., senior notes, 9.125%, 9/01/07 ........................................ $2,000,000 $ 2,080,000
Oshkosh Truck Corp., senior sub. notes, 144A, 8.75%, 3/01/08 ....................... 1,500,000 1,511,250
Thermadyne Industries, Inc., sub. notes, 10.75%, 11/01/03 .......................... 5,035,000 5,425,212
Universal Compression, Inc., senior disc. notes, 144A, 9.875%, 2/15/08 ............. 1,200,000 750,000
-------------
22,727,712
-------------
Information/Technology Systems .8%
Celestica International, Inc., senior sub. notes, 10.50%, 12/31/06 ................. 2,000,000 2,130,000
-------------
Lodging 1.6%
Prime Hospitality Corp., senior sub. notes, Series B, 9.75%, 4/01/07 ............... 4,000,000 4,300,000
-------------
Media 5.1%
Big Flower Press Holdings, Inc., senior sub. notes, 144A, 8.875%, 7/01/07 .......... 1,500,000 1,533,750
Fox Kids Worldwide, Inc., senior disc. notes, 144A, zero coupon to 11/01/02,
10.25% thereafter, 11/01/07 ....................................................... 4,500,000 2,767,500
Fox Kids Worldwide, Inc., senior notes, 144A, 9.25%, 11/01/07 ...................... 1,250,000 1,240,625
Fox/Liberty Networks, L.L.C., senior disc. notes, zero coupon to 8/15/02,
9.75% thereafter, 8/15/07 ......................................................... 4,000,000 2,725,000
Hollinger International Publishing, senior sub. notes, 9.25%, 2/01/06 .............. 1,000,000 1,065,000
Outdoor Systems, Inc., senior sub. notes, 8.875%, 6/15/07 .......................... 4,500,000 4,741,875
-------------
14,073,750
-------------
Metals & Mining 5.3%
Armco, Inc., senior notes, 9.00%, 9/15/07 .......................................... 1,000,000 1,035,000
Envirosource, Inc., senior notes, 9.75%, 6/15/03 ................................... 3,000,000 3,075,000
Envirosource, Inc., senior notes, 144A, 9.75%, 6/15/03 ............................. 1,000,000 1,020,000
LTV Corp., notes, 8.20%, 9/15/07 ................................................... 4,000,000 4,030,000
Neenah Corp., senior sub. notes, Series B, 11.125%, 5/01/07 ........................ 1,000,000 1,111,250
Sheffield Steel Corp., first mortgage, 144A, 11.50%, 12/01/05 ...................... 4,000,000 4,200,000
-------------
14,471,250
-------------
Paper & Forest Products 2.1%
Bear Island Paper Co., senior notes, 144A, 10.00%, 12/01/07 ........................ 1,500,000 1,545,000
Fort Howard Corp., sub. deb., 11.00%, 1/02/02 ...................................... 1,685,346 1,853,881
Pindo Deli Financial Mauritius, notes, 144A, 11.75%, 10/01/17 (Indonesia) .......... 3,000,000 2,332,500
-------------
5,731,381
-------------
Restaurants 1.8%
b Atherton Franchise Capital, L.P., 11.00%, 5/01/06 .................................. 1,792,765 1,505,923
Family Restaurants, Inc., senior notes, 9.75%, 2/01/02 ............................. 2,000,000 1,650,000
Flagstar Corp., senior notes, 10.875%, 12/01/02 .................................... 1,500,000 1,704,215
-------------
4,860,138
-------------
Retail .8%
Specialty Retailers, Inc., notes, Series B, 8.50%, 7/15/05 ......................... 2,000,000 2,070,000
-------------
Telecommunications 4.7%
Diamond Holdings, Plc., senior notes, 144A, 9.125%, 2/01/08 (United Kingdom)........ 1,000,000 997,500
Flag, Ltd., senior notes, 144A, 8.25%, 01/30/08 (Bermuda)........................... 800,000 816,000
Intermedia Communications, Inc., senior disc. notes, Series B,
zero coupon to 7/15/02, 11.25% thereafter, 7/15/07 ................................ 5,000,000 3,687,500
NEXTLINK Communications, Inc., senior notes, 9.625%, 10/01/07 ...................... 2,000,000 2,092,500
NEXTLINK Communications, Inc., senior notes, 144A, 9.00%, 3/15/08 .................. $2,000,000 $ 2,025,000
Poland Telecom Finance, units, 144A, 14.00%, 12/01/07 (Poland) ..................... 3,000,000 3,236,250
-------------
12,854,750
-------------
Textiles & Apparel 1.2%
Collins & Aikman Floor Covering, Inc., Series B, senior sub. notes, 10.00%, 1/15/07 3,300,000 3,432,000
-------------
Utilities 1.1%
AES Corp., senior sub. notes, 144A, 8.50%, 11/01/07 ................................ 2,000,000 2,070,000
ESI Tractebel Acquisition Corp., 144A, 7.99%, 12/30/11 ............................. 1,000,000 1,000,000
-------------
3,070,000
-------------
Wireless 12.1%
Arch Communications Group, Inc., senior disc. notes,
zero coupon to 3/15/01, 10.875% thereafter, 3/15/08 ............................... 6,000,000 3,345,000
Comcast Cellular Corp., senior notes, Series B, 9.50%, 5/01/07 ..................... 4,000,000 4,235,000
Metrocall, Inc., senior sub. notes, 144A, 9.75%, 11/01/07 .......................... 4,000,000 4,040,000
Millicom International Cellular, SA, senior disc. notes, zero coupon to 6/01/00, 13.50%
thereafter, 6/01/06 (Luxembourg) .................................................. 6,000,000 4,590,000
Nextel Communications, Inc., senior disc. notes, zero coupon, 8/15/04 .............. 5,000,000 4,800,000
Orion Network Systems, Inc., units, senior disc. notes,
zero coupon to 1/15/02, 12.50% thereafter, 1/15/07 ................................ 5,000,000 3,875,000
Paging Network, Inc., senior sub. notes, 10.00%, 10/15/08 .......................... 4,000,000 4,170,000
Sygnet Wireless, Inc., senior notes, 11.50%, 10/01/06 .............................. 4,000,000 4,420,000
-------------
33,475,000
-------------
Total Non-Convertible Bonds (Cost $222,430,796) .................................... 228,791,433
-------------
Convertible Bonds 3.9%
Electronics 2.1%
Dovatron International, Inc., cvt. sub. notes, 144A, 6.00%, 10/15/02 ............... 2,000,000 2,985,000
DSC Communications Corp., cvt. sub. notes, 144A, 7.00%, 8/01/04 .................... 1,750,000 1,663,593
Reptron Electronics, Inc., cvt. sub. notes, 6.75%, 8/01/04 ......................... 1,300,000 1,059,500
-------------
5,708,093
-------------
Financial Services
Peregrine Investment Finance, cvt. bank guaranteed, 144A, 4.50%, 12/01/00 (Cayman Islands)1,000,000 75,000
-------------
Health Care .4%
U.S. Diagnostic Labs, Inc., cvt. sub. deb., 144A, 9.00%, 3/31/03 ................... 1,375,000 1,058,750
-------------
Real Estate Investment Trust 1.0%
Macerich Co., cvt. sub. notes, 144A, 7.25%, 12/15/02 ............................... 2,750,000 2,732,812
-------------
Retail .4%
Rent-Way, Inc., cvt. sub. deb., 7.00%, 2/01/07 ..................................... 500,000 960,000
-------------
Total Convertible Bonds (Cost $11,231,114).......................................... 10,534,655
-------------
Foreign Government Agencies .3%
ESCOM, E168, utility deb., 11.00%, 6/01/08 (South Africa) (Cost $1,043,063) ........ 4,350,000 ZAR 760,139
-------------
Total Bonds (Cost $234,704,973)..................................................... 240,086,227
-------------
a,dRepurchase Agreements .7%
Joint Repurchase Agreement, 5.610%, 3/02/97, (Maturity Value $1,923,724)
(Cost $1,922,825) ..................................................................... $1,922,825 $ 1,922,825
BancAmerica Robertson Stephens
Barclays Capital Group, Inc.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Wood Gundy Securities Corp.
Deutsche Morgan Grenfell/C.J. Lawrence, Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
UBS Securities, L.L.C.
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $321,613,943) 128.0%....................................... 352,959,130
Other Assets, less Liabilities (28.0)% ............................................. (77,151,239)
-------------
Net Assets 100.0%................................................................... $275,807,891
=============
CURRENCY ABBREVIATIONS:
ZAR - South African Rand
*Securities traded in U.S. dollars unless otherwise indicated.
aNon-income producing.
bSee Note 8 regarding restricted securities.
cSee Note 7 regarding defaulted securities.
dInvestment is through participation in a joint account with other funds
managed by the investment advisor. At 02/28/98, all repurchase agreements
held by the Fund had been entered into on 02/27/98.
eSufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN UNIVERSAL TRUST
Financial Statements
Statement of Assets and Liabilities
February 28, 1998 (unaudited)
Assets:
Investments in securities, at value (cost $321,613,943)................................... $352,959,130
Receivables from dividends and interest................................................... 5,805,633
Note issuance costs (Note 3).............................................................. 62,029
-------------
Total assets............................................................................... 358,826,792
-------------
Liabilities:
Payables:
Investment securities purchased............................................................ 5,565,246
Notes (Note 3)........................................................................... 74,993,475
Accrued interest (Note 3).................................................................. 2,109,375
Affiliates................................................................................. 219,185
Funds advanced by custodian............................................................... 34,508
Other liabilities......................................................................... 97,112
-------------
Total liabilities.......................................................................... 83,018,901
-------------
Net assets, at value...................................................................... $275,807,891
=============
Net assets consist of:
Undistributed net investment income....................................................... $ 2,870,420
Net unrealized appreciation............................................................... 31,345,040
Accumulated net realized loss............................................................. (5,273,111)
Capital shares............................................................................ 246,865,542
-------------
Net assets, at value....................................................................... $275,807,891
=============
Net asset value per share ($275,807,891 / 26,779,333 shares outstanding)................... $10.30
=============
</TABLE>
See notes to financial statements.
FRANKLIN UNIVERSAL TRUST
Financial Statements (continued)
Statement of Operations
for the six months ended February 28, 1998 (unaudited)
<TABLE>
<CAPTION>
Investment income:
(net of foreign taxes of $1,314)
<S> <C> <C>
Dividends................................................................... $ 3,061,317
Interest.................................................................... 12,145,661
--------------
Total investment income...................................................... $15,206,978
Expenses:
Management fees (Note 4).................................................... 1,319,334
Transfer agent fees......................................................... 67,495
Custodian fees.............................................................. 2,606
Reports to shareholders..................................................... 12,966
Professional fees........................................................... 20,098
Trustees' fees and expenses................................................. 10,947
Amortization of note issuance costs......................................... 62,028
Other....................................................................... 26,293
--------------
Total expenses............................................................... 1,521,767
Interest expense (Note 3).................................................... 2,115,900
-------------
Net expenses................................................................. 3,637,667
-------------
Net investment income....................................................... 11,569,311
-------------
Realized and unrealized gains (losses):
Net realized loss from:
Investments................................................................ (5,233,886)
Foreign currency transactions.............................................. (2,190)
--------------
Net realized loss........................................................... (5,236,076)
Net unrealized appreciation on:
Investments.................................................................. 16,278,634
Translation of assets and liabilities denominated in foreign currencies...... 505
--------------
Net unrealized appreciation.................................................. 16,279,139
-------------
Net realized and unrealized gain............................................. 11,043,063
-------------
Net increase in net assets resulting from operations......................... $22,612,374
=============
See notes to financial statements.
FRANKLIN UNIVERSAL TRUST
Financial Statements (continued)
Statements of Changes in Net Assets
for the six months ended February 28, 1998 (unaudited)
and the year ended August 31, 1997
Six Months Year
Ended Ended
February 28, 1998 August 31, 1997
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income........................................................... $ 11,569,311 $ 23,006,827
Net realized gain (loss) from investments and foreign currency transactions..... (5,236,076) 9,444,319
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies.............................................. 16,279,139 8,096,901
-------------------------------
Net increase in net assets resulting from operations............................ 22,612,374 40,548,047
Distributions to shareholders from:
Net investment income........................................................... (10,765,292) (22,200,067)
Net realized gains.............................................................. (9,212,091) (374,911)
-------------------------------
Total distributions to shareholders............................................ (19,977,383) (22,574,978)
-------------------------------
Net increase in net assets...................................................... 2,634,991 17,973,069
Net assets:
Beginning of period............................................................ 273,172,900 255,199,831
-------------------------------
End of period.................................................................. $275,807,891 $273,172,900
===============================
Undistributed net investment income included in net assets
End of period.................................................................. $ 2,870,420 $ 2,066,401
===============================
Statement of Cash Flows
for the six months ended February 28, 1998 (unaudited)
Dividends and interest received............................................ $ 10,973,885
Operating expenses paid.................................................... (1,436,307)
Interest expense paid...................................................... (2,109,375)
-------------
Cash provided - operations................................................ 7,428,203
=============
Investment purchases....................................................... (498,178,648)
Investment sales........................................................... 510,734,184
-------------
Cash provided - investments............................................... 12,555,536
=============
Distributions to shareholders.............................................. (19,977,383)
-------------
Cash used - financing activities.......................................... (19,977,383)
=============
Net increase in cash....................................................... 6,356
Cash at beginning of period................................................ (40,864)
-------------
Cash at end of period...................................................... $ (34,508)
=============
</TABLE>
See notes to financial statements.
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Universal Trust (the Fund) is registered under the Investment Company
Act of 1940 as a closed-end, diversified investment company. The Fund has two
classes of securities: senior fixed-rate notes (the Notes) and shares of
beneficial interest (the Shares). The Fund seeks high current income consistent
with preservation of capital. The following summarizes the Fund's significant
accounting policies.
a. Security Valuation:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Restricted securities and securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.
b. Foreign Currency Translation:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes, and the U.S. dollars
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
c. Income Taxes:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and
distribute all of its taxable income.
d. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount is
amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
e. Accounting Estimates:
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
At February 28, 1998, there were an unlimited number of shares authorized ($0.01
par value). During the period ended February 28, 1998, there were no share
transactions; all reinvested distributions were satisfied with previously issued
shares purchased in the open market.
3. SENIOR FIXED-RATE NOTES
On August 30, 1993, the Fund issued $75 million principal amount of a new class
of five-year senior 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 Trust shares and all existing or
future unsecured indebtedness of the Fund.
The Notes bear interest, payable semi-annually, at the rate of 5.625% per year,
to maturity on September 1, 1998. The market value of the Notes as of February
28, 1998, is $74,985,000. The Fund is required to maintain on a semi-monthly
basis a specified discounted asset value for its portfolio in compliance with
guidelines established by Standard & Poors Corporation, and is required to
maintain asset coverage for the Notes of at least 300%. The Fund has met these
requirements during the period ended February 28, 1998.
The issuance costs of $620,282 incurred by the Fund are deferred and amortized
on a straight line basis over the term of the Notes. The discount of $65,250
relating to the issuance of the Notes is being amortized to interest expense
over five years.
4. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers or directors of
Franklin Advisers, Inc. (Advisers) and Franklin Templeton Services, Inc. (FT
Services), the Fund's investment manager and administrative manager,
respectively.
The Fund pays an investment management fee to Advisers of .75% per year of the
average weekly net assets of the Fund excluding the principal amount of the
Notes.
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
5. INCOME TAXES
At February 28, 1998, the net unrealized appreciation based on the cost of
investments for income tax purposes of $321,644,882 was as follows:
Unrealized appreciation....................... $46,638,562
Unrealized depreciation....................... (15,324,314)
Net unrealized appreciation................... $31,314,248
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted security and foreign currency
transactions.
Net realized capital gains differ for financial statement and tax purposes
primarily due to differing treatment of wash sales and foreign currency
transactions.
6. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 28, 1998 aggregated $66,449,529 and $71,079,021,
respectively.
7. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 66.54% of its portfolio invested in lower rated and comparable
quality unrated high yield securities, which tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At February 28, 1998, the
Fund held two defaulted securities with a value aggregating $1,930,000
representing .7% of the Fund's net assets. For information as to specific
securities, see the accompanying Statement of Investments.
For financial reporting purposes, the fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.
The Fund has investments in excess of 10% of its total net assets in the
Wireless industry. Such concentration may subject the Fund more significantly to
economic changes occurring within that industry.
8. RESTRICTED SECURITIES
The Fund may purchase securities through a private offering that generally
cannot be resold to the public without prior registration under the Securities
Act of 1933. The costs of registering such securities are paid by the issuer.
Restricted securities held at February 28, 1998 are as follows:
<TABLE>
<CAPTION>
Face Acquisition
Amount Issuer Date Cost Value
<S> <C> <C> <C> <C>
1,792,765 Atherton Franchise Capital, L.P. 11.00%, 5/01/06............ 04/28/94 $1,792,765 $1,505,923
Units
5 PG Partners, L.P. Preference Units.......................... 3/31/93 0 136,663
Total Restricted Securities $1,642,586
(0.60% of Net Assets)
</TABLE>
9. OTHER CONSIDERATIONS
Advisers, as the Fund's manager, may serve as a member of various credit
committees, representing credit interests in certain corporate restructuring
negotiations. Currently, the manager serves on the credit committees for Harvard
Industries. As a result of this involvement, Advisers may be in possession of
certain material non-public information. The Fund's manager has not nor does it
intend to sell any of its holdings in these securities while in possession of
this information.
10. STATEMENT OF CASH FLOWS
Cash provided from operations differs from net investment income by $4,141,108
due to amortization of bond discount and note issuance costs, and year-end
income and expense accrual changes.
Franklin Universal Trust
Semi-Annual Report
February 28, 1998.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM 304
(a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in bar format the Portfolio Breakdown based on total market
value as of 2/28/98.
Corporate Bonds 64.82%
Utilities Stocks 19.61%
Miscellaneous Equities & Preferred Stock 8.99%
Convertible Bonds 2.98%
Natural Resources Equities & Preferred Stocks 2.84%
Cash & Equivalents .54%
Foreign Government Agencies .22%
GRAPHIC MATERIAL (2)
This chart shows the top 10 holdings as a percentage of total market value as of
8/31/97 and 2/28/98.
As of 8/31/97
Thermadyne Industries, Inc. 2.66%
Cablevision Systems Corp. 2.04%
CINergy Corp. 1.97%
DPL Inc. 1.91%
Southern Company 1.76%
Acme Metals, Inc. 1.65%
Collins & Aikman, Inc. 1.64%
Dominion Resources, Inc. 1.56%
American Electric Power Co., Inc. 1.56%
Comcast Corp. 1.51%
As of 2/28/98
DPL Inc. 2.15%
Cablevision Systems Corp. 2.15%
CINergy Corp. 2.03%
Southern Company 2.02%
Dominion Resources, Inc. 1.69%
American Electric Power Co., Inc. 1.68%
Texas Utilities Company 1.62%
Collins & Aikman, Inc. 1.61%
Thermadyne Industries, Inc. 1.61%
Comcast Corp. 1.50%
