FRANKLIN UNIVERSAL TRUST, N-30D, 2000-11-13

FRANKLIN UNIVERSAL TRUST
N-30D, 2000-11-13

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SHAREHOLDER LETTER

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Your Trust's Objective: Franklin Universal Trust seeks to provide high, current
income consistent with preservation of capital.
--------------------------------------------------------------------------------

Dear Shareholder:

This annual report for Franklin Universal Trust covers the 12 months ended
August 31, 2000.

ECONOMIC OVERVIEW

The Trust's fiscal year began with strong economic growth across the globe, but
particularly in the U.S., where gross domestic product (GDP) grew at a 5.7%
annualized rate in the third quarter of 1999, followed by an unexpectedly robust
8.3% pace in the fourth quarter. The economy continued its strong growth trend
during the first and second quarters of 2000, as GDP increased at 4.8% and 5.6%
annualized rates. Concerned that rapid growth, combined with historically low
unemployment levels, would lead to inflationary pressures, the Federal Open
Market Committee (FOMC) raised the federal funds target rate four times during
the reporting period, with the last increase occurring in May when it brought
the rate to 6.5%. The Federal Reserve Board's (the Fed's) June and August
decisions to hold short-term rates steady, together with a moderate 0.2%
increase in July's Consumer Price

CONTENTS

<TABLE>
<S> <C>
Shareholder Letter ....................................................... 1
Performance Summary ...................................................... 8
Dividend Reinvestment and
Cash Purchase Plan ....................................................... 11
Financial Highlights &
Statement of Investments ................................................. 16
Financial Statements ..................................................... 23
Notes to
Financial Statements ..................................................... 27
Independent
Auditors' Report ......................................................... 30
Tax Designation .......................................................... 31
</TABLE>

The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Trust's Statement of Investments
(SOI). The SOI begins on page 17.

Index, suggest that the economy could be feeling the impact of the most recent
rate increases and growth may be slowing to a more sustainable pace.

The financial markets fluctuated wildly in this environment of strong growth and
rising interest rates. The Dow Jones(R) Industrial Average (the Dow), Standard &
Poor's 500(R) (S&P 500(R)) Composite Index and technology-heavy Nasdaq Composite
Index (Nasdaq(R)) all rose in the first quarter of the Trust's fiscal year,
ended calendar year 1999 in record territory, then experienced remarkable
volatility punctuated by steep plunges in value.(1) For example, the Dow fell
16% from mid-January through February 2000, and the S&P 500 and Nasdaq dropped
11.2% and 34.2% by April 14 from record highs set just weeks earlier.(2) All
three indexes enjoyed spring rallies, recovered their losses and were up for the
12 months under review. The benchmark 10-year U.S. Treasury note was similarly
volatile, starting the period yielding just under 6.0%, then spiking to a high
of 6.8% in January as interest rates notched up, before settling into the
6.2%-6.5% range in May. With signs of less restrictive monetary policy in the
offing, a summer bond rally caused yields to retreat further as bond prices
increased with renewed investor interest in fixed income securities. By August
31, 2000, the 10-year Treasury note yield stood at 5.7%.

1. The Dow Jones Industrial Average is a price-weighted index based on the
average market price of 30 blue chip stocks. The average is found by adding the
prices of the 30 stocks and dividing by a denominator that has been adjusted for
stock splits, stock dividends, and substitutions of stocks.

The S&P 500 Composite Index consists of 500 domestic stocks, comprising four
broad sectors: industrials, utilities, financials and transportation. The S&P
500 serves as the standard for measuring large-cap U.S. stock market
performance. Since some industries are characterized by companies of relatively
small stock capitalization, the index is not composed of the 500 largest
companies on the New York Stock Exchange.

The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S. based
common stocks listed on the Nasdaq Stock Market(R). The index is market-value
weighted and includes over 5,000 companies (as of 8/31/00).

2. Source: Standard & Poor's Micropal. Figures represent percentage change in
the Dow Jones Industrial Average between 1/14/00 and 2/25/00, change in the S&P
500 Index between 3/24/00 and 4/14/00, and change in the Nasdaq Composite Index
between 3/10/00 and 4/14/00.

The asset classes that make up a majority of the Trust also displayed volatile
behavior during this period. At the beginning of the Trust's fiscal year, high
yield bonds were showing slightly positive returns, as strong equity markets
combined with rapid economic growth resulted in favorable event risk that mostly
offset the impact of increasing interest rates. In an environment of favorable
event risk, high yield issuers are likely to be able to issue equity or become
attractive acquisition targets for higher-quality companies. When equity markets
plunged in the spring, high yield issues also fell as risk premiums increased
and investors feared that lower stock prices would contribute to an economic
slowdown. At the beginning of summer, however, with rate increases apparently
finished for the time being and the economy still in good shape, high yield
bonds recovered to end the year under review with a return of 2.12% as measured
by the CS First Boston Global High Yield Bond Index.(3) Meanwhile, the S&P
Electrical Companies Index, representing the asset class that comprises the
majority of the Trust's stock holdings, fell 19.41% during the first half of the
reporting period as rising interest rates and strong performance by the Nasdaq
and other stock indexes dampened investor interest in this traditionally
defensive sector.(4) Beginning with the stock market troubles in the spring and
later aided by the lack of further Fed rate increases, electric utilities staged
a strong rally, rising 35.93% since March 1 to end the Trust's fiscal year up
9.54%. In this volatile environment, the Trust's cumulative total return for the
year under review was +3.71% based on the change in net asset value, and -0.40%
based on the change in market price on the New York Stock Exchange.(5)

3. Source: Standard & Poor's Micropal (Credit Suisse First Boston). The
unmanaged index is constructed to mirror the high yield debt market and includes
reinvested interest. One cannot invest directly in an index, nor is an index
representative of the Trust's portfolio.

4. Source: Standard & Poor's Micropal. The S&P Electrical Companies Index is a
subsector of the Utilities Sector of the S&P 500. It includes all the companies
in the Electrical Companies industry that are in the S&P 500. This index,
calculated by Standard & Poor's, is a total return index with dividends
reinvested.

[PORTFOLIO BREAKDOWN BARCHART]

PORTFOLIO BREAKDOWN
Based on Total Market Value
8/31/00

<TABLE>
<S> <C>
Corporate Bonds .............................................. 58.02%

Utilities Stocks ............................................. 27.58%

Misc. Equities & Preferred Stocks ............................ 5.41%

Foreign Government U.S. Dollar-Denominated Bonds ............. 4.94%

Natural Resources Equities & Preferred Stocks ................ 1.40%

Convertible Bonds ............................................ 1.29%

Foreign Government Agencies .................................. 0.19%

Cash & Equivalents ........................................... 1.17%
</TABLE>

SECTOR DISCUSSIONS
CONSUMER SERVICES - CABLE

The cable sector's fixed income securities remained favorable investments
throughout most of the Trust's fiscal year, both domestically and in the
international arena. Recent cable industry consolidation brought economies of
scale and newly realized business advantages to its leading participants. In
addition, new services such as digital cable and cable modems for Internet
access provided growth opportunities. We sought to take advantage of the high
yield market's technical weakness at certain points of the reporting period by
adding to our position in Charter Communications and by establishing a position
in Century Communications. Both companies are large, domestic cable operators
that we believe offer an attractive mix of growth opportunities and a defensive,
non-cyclical nature.

TELECOMMUNICATIONS - WIRELESS

With wireless penetration (number of users) in the U.S. increasing, we continued
to search for the sector's attractive investment opportunities. Penetration was
31% on December 31, 1999, and growth has accelerated since then. As price
competition declined, the industry experienced fairly stable average
revenues-per-unit during most of the review period, enhancing the sector's
appeal. We purchased the bonds of Nextel Partners, an affiliate of Nextel
Communications, and VoiceStream Wireless. VoiceStream subsequently announced
that it was being acquired by Deutsche Telecom, a large, investment grade
competitor. As wireless use proliferates, the industry needs more transmitters,
which must be located on tall buildings or towers. Consequently, the towers
segment of the wireless industry is capitalizing on the same trends as the
wireless communication companies. The Trust added to its investment in Crown
Castle, a leading tower operator, in an effort to take advantage of this growth
opportunity.

5. Indexes are unmanaged and include reinvested dividends. One cannot invest
directly in an index, nor is an index representative of the Trust's portfolio.

GAMING

With stronger-than-expected results in Las Vegas, plus solid riverboat
performance, the gaming sector was one of the best performers in the high yield
bond universe and the Trust for the 12-month period. The gaming industry offers
stable operating results and strong cash flow generation, all backed by hard
asset protection. We increased our gaming sector exposure by purchasing the
bonds of Park Place Entertainment, the second-largest gaming operator in the
country. Park Place Entertainment combines a large, diversified operating base
with what we believe to be strong deleveraging potential and one of the best
management teams in the industry.

TELECOMMUNICATIONS

The macroeconomic trends driving the telecommunications sector remained strong.
Furthermore, deregulation, growing use of computer networks and the rapid
increase in the use of web-based data and databases combined to present
tremendous future growth opportunities. In the context of volatile capital
markets of the past 12 months, the Trust focused its investments on those
companies with strong liquidity and proven access to capital. We added to our
positions in PSI Net, a play on the growth of the Internet, and Williams
Communications. Williams carries much of SBC Communications' long-haul traffic
and is benefiting from the recent FCC decision to allow SBC to sell
long-distance telephone service in Texas.

TOP 10 HOLDINGS

Based on Total Market Value
8/31/00 vs. 8/31/99

<TABLE>
<CAPTION>
8/31/00
--------------------------------------------------------------------------------
<S> <C>
Republic of Brazil 2.70%

Duke Energy Corp. 2.33%

Southern Co. 2.16%

Millicom International
Cellular SA 1.85%

FPL Group Inc. 1.84%

Avecia Group 1.75%

TXU Corp. 1.71%

Williams Communications 1.67%

Consolidated
Container Co. LLC 1.58%

Level 3 Communications 1.48%
</TABLE>

8/31/99
--------------------------------------------------------------------------------
<S> <C>
Texas Utilities Co. 2.47%

Dominion Resources 2.24%

Southern Co. 1.82%

Duke Energy Corp. 1.67%

Nextel Communications Inc. 1.63%

ZSC Specialty Chemicals PLC 1.61%

Magnum Hunter
Resources Inc. 1.53%

Edison International 1.52%

Consolidated Container
Co. LLC 1.47%

Millicom International
Cellular SA 1.38%
</TABLE>

ELECTRIC UTILITIES

The performance of our electric utility stock portfolio was beneficial during
the 12-month period, especially after the sector's stocks bottomed out in early
March. As mentioned, the S&P Electrical Companies Index returned 9.54% for the
year ended August 31, but the return from March 10 through August 31 registered
42.66%, making up most of the index's positive performance. The turning point
for this group's performance coincided with peaking prices on the Nasdaq Stock
Market, as investor sentiment shifted toward the utilities sector due to its
historically low valuations and high relative yields compared to the overall
market. In addition, opportunities derived from electric industry deregulation
drove recent earnings growth increases. We anticipated this higher growth, as
stated in prior reports to our shareholders, and were pleased to see it
beginning to reach fruition. During the Trust's fiscal year, we acquired new
positions in two companies that we found leading the charge into electric
deregulation due to their experience gained from gas deregulation: Dynegy and
Enron. We believe the electric industry will continue to see improving earnings
prospects and provide significant value relative to other equity investments.

WHAT'S AHEAD

The outlook for the U.S. economy remains positive, despite the volatility of the
year under review. The Fed's rate increases over 1999 and so far in 2000 appear
to have kept inflation at bay without halting economic growth. A strong domestic
economy, combined with solid corporate earnings fundamentals and low inflation,
should provide a favorable environment for the Trust's major asset classes. With
the major stock indexes displaying unprecedented volatility, some investors may
consider diversifying their portfolios to include income-producing securities
such as those held in the Trust. Should this happen, the price of the Trust's
underlying securities could benefit. Meanwhile, both high yield bonds and
utility stock valuations remain attractive on a historical basis, providing the
Trust with attractive investment opportunities for the near future.

Sincerely,

/s/ Christopher Molumphy

Christopher Molumphy
Senior Portfolio Manager
Franklin Universal Trust

/s/ Glenn I. Voyles

Glenn I. Voyles
Portfolio Manager

Franklin Universal Trust

This discussion reflects our views, opinions and portfolio holdings as of
August 31, 2000, the end of the reporting period. The information provided is
not a complete analysis of every aspect of any country, industry, security or
the Trust. Our strategies and the Trust's portfolio composition will change
depending on market and economic conditions. Although historical performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.

ONE-YEAR PERFORMANCE SUMMARY
AS OF 8/31/00

Distributions will vary based on earnings of the Trust's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of the Trust's operating expenses. Past distributions are not indicative
of future trends. All total returns include reinvested distributions according
to the terms specified in the Trust's dividend reinvestment and cash purchase
plan.

<TABLE>
<S> <C>
One-Year Total Return +3.71% (Based on change in Net Asset Value)
-0.40% (Based on change in Market Price)
Net Asset Value (NAV) $8.21 (8/31/00) $8.91 (8/31/99)
Change in NAV -$0.70
Market Price (NYSE) $7.688 (8/31/00) $8.688 (8/31/99)
Change in Market Price -$1.000
Distributions (9/1/99 - 8/31/00) Dividend Income $0.8040
Short-Term Capital Gain $0.0573
--------------------------------
Total $0.8613
</TABLE>

ADDITIONAL PERFORMANCE
AS OF 9/30/00

<TABLE>
<CAPTION>
INCEPTION
1-YEAR 5-YEAR 10-YEAR (9/23/88)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1)
Based on change in NAV +9.47% +45.37% +274.38% +229.00%
Based on change in market price +3.41% +45.35% +296.39% +180.80%

Average Annual Total Return(1)
Based on change in NAV +9.47% +7.77% +14.11% +10.42%

Based on change in market price +3.41% +7.77% +14.77% +8.97%
</TABLE>

AS OF 8/31/00
Distribution Rate(2) 10.46%

1. Total return calculations represent the cumulative and average annual changes
in value of an investment over the periods indicated.

2. Distribution rate is based on an annualization of the Trust's current 6.7
cent ($0.0670) per share monthly dividend and the NYSE closing price of $7.688
on August 31, 2000.

Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility, and the economic,
social and political climates of countries where the Trust invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.

Past performance does not guarantee 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 and a member of several securities industry
associations. He has managed Franklin Universal Trust since 1991.

GLENN I. VOYLES

Portfolio Manager
Franklin Advisers, Inc.
--------------------------------------------------------------------------------

Glenn Voyles is a Chartered Financial Analyst and holds a Bachelor of Arts
degree in economics from Stanford University. He joined Franklin Templeton in
1993. He is a member of Security Analysts of San Francisco (SASF) and the
Association for Investment Management and Research (AIMR).

ANNUAL MEETING OF SHAREHOLDERS

At an Annual Meeting of Shareholders of Franklin Universal Trust (the "Fund")
held on May 9, 2000, shareholders approved the following:

1. Regarding the election of the nominees for Trustees:

<TABLE>
<CAPTION>
WITHHELD BROKER
SHARES FOR SHARES AGAINST OR ABSTAIN NON VOTE
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank H. Abbott 23,199,519.632 0 673,622.078 1
Harris J. Ashton 23,256,165.654 0 616,976.056 1
S. Joseph Fortunato 23,261,199.654 0 611,942.056 1
Edward B. Jamieson 23,258,671.840 0 614,469.870 1
Charles B. Johnson 23,256,904.654 0 616,237.056 1
Rupert H. Johnson, Jr. 23,281,944.286 0 591,197.424 1
Frank W. T. LaHaye 23,241,071.355 0 632,070.355 1
Gordon S. Macklin 23,236,433.534 0 636,708.176 1
</TABLE>

2. Regarding the ratification of the selection of PricewaterhouseCoopers LLP,
as independent auditors of the Fund for the fiscal year ending August 31,
2000:

3. Regarding granting the proxy holders the authority to vote upon any other
business that may legally come before the Meeting:

DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN

The Trust's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers you
a prompt and simple way to reinvest dividends and capital gain distributions in
shares of the Trust. The Plan also allows you to purchase additional shares of
the Trust by making voluntary cash payments. PNC Bank, N.A. (the "Plan Agent"),
Attn: Franklin Universal Trust, P.O. Box 8950, 400 Bellevue Parkway, Wilmington,
Delaware 19809, acts as your Plan Agent in administering the Plan. The complete
Terms and Conditions of the Dividend Reinvestment and Cash Purchase Plan are
contained in the Trust's Dividend Reinvestment and Cash Purchase Plan Brochure.
A copy of that Brochure may be obtained from the Trust at the address on the
back 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 Trust declares a dividend or capital gain distribution payable either in
cash or in stock of the Trust and the market price of shares on the valuation
date equals or exceeds the net asset value, the Trust will issue new shares to
you at the higher of net asset value or 95% of the then current market price. If
the market price is lower than net asset value and if dividends or capital gain
distributions are payable only in cash, then you will receive shares purchased
on the New York Stock Exchange or otherwise on the open market. If the price
exceeds the net asset value before the Plan Agent has completed its purchases,
the average purchase price may exceed the net asset value, resulting in fewer
shares being acquired than if the Trust had issued new shares. All reinvestments
are in full and fractional shares, carried to three decimal places. The Trust
will not issue shares under the Plan at a price below net asset value.

The Plan permits you on a voluntary basis to submit in cash payments of not less
than $100 each up to a total of $5,000 per month to purchase additional shares
of the Trust. It is entirely up to you whether you wish to buy additional shares
with voluntary cash payments, and you do not have to send in the same amount
each time if you do. These payments should be made by check or money order
payable to PNC Bank, N.A. and sent to PNC Bank, N.A., Attn: Franklin Universal
Trust, P.O. Box 8950, 400 Bellevue Parkway, Wilmington, Delaware 19809.

Your cash payment will be aggregated with the payments of other participants and
invested on your behalf by the Plan Agent in shares of the Trust which are
purchased in the open market.

The Plan Agent will invest cash payments on approximately the 5th of each month
in which no dividend or distribution is payable and, during each month in which
a dividend or distribution is payable, will invest cash payments beginning on
the dividend payment date. Under no circumstances will interest be paid on your
funds held by the Plan Agent. Accordingly, you should send any voluntary cash
payments that you wish to make shortly before an investment date but in
sufficient time to ensure that your payment will reach the Plan Agent not less
than two business days before an investment date. Payments received less than
two business days before an investment date will be invested during the next
month or, if there are more than 30 days until the next investment date, will be
returned to you. You may obtain a refund of any cash payment by written notice,
if the Plan Agent receives the written notice not less than 48 hours before an
investment date.

There is no direct charge to participants for reinvesting dividends and capital
gain distributions, since the Plan Agent's fees are paid by the Trust. However,
when shares are purchased in the open market, each participant will pay a pro
rata portion of any brokerage commissions incurred. The Plan Agent will deduct a
$5.00 service fee from each of your voluntary cash payments.

The automatic reinvestment of dividends and capital gain distributions does not
relieve you of any taxes which may be payable on dividends or distributions. In
connection with the reinvestment of dividends and capital gain distributions, if
the Trust issues new shares, shareholders receiving such shares generally will
be treated as having a distribution equal to the market value of the shares
received, and if shares are purchased on the open market, shareholders generally
will be treated as having received a distribution equal to the cash distribution
that would have been paid.

The Trust does not issue new shares in connection with voluntary cash payments.
All investments are in full and fractional shares, carried to three decimal
places. If the market price exceeds the net asset value at the time the Plan
Agent purchases the additional shares, you will receive shares at a price
greater than the net asset value.

You will receive a monthly account statement from the Plan Agent showing total
dividends and capital gain 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 its name or in the name of its nominee.
This convenience provides added protection against loss, theft or inadvertent
destruction of certificates. However, you may request that a certificate
representing your Plan shares be issued to you.

You may withdraw from the Plan without penalty at any time by notifying the Plan
Agent, in writing, at the address above. If you withdraw, you will receive,
without charge, stock certificates issued in your name for all full shares. The
Plan Agent will convert any fractional shares you hold at the time of your
withdrawal to cash at 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 your shares are not held in your name, you should
contact your brokerage firm, bank, or other nominee for more information and to
determine if your nominee will participate in the Plan on your behalf.

The Trust or the Plan Agent may amend or terminate the Plan. You will receive
written notice at least 90 days before the effective date of termination or of
any amendment. In the case of termination, you will receive written notice at
least 90 days before the record date of any dividend or capital gain
distribution by the Trust.

FRANKLIN UNIVERSAL TRUST

Financial Highlights

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $8.91 $9.28 $10.20 $9.53 $9.36
-------------------------------------------------------------------
Income from investment operations:
Net investment income(b) .......................... .81 .82 .85 .86 .82
Net realized and unrealized gains (losses) ........ (.65) (.35) (.63) .65 .20
-------------------------------------------------------------------
Total from investment operations ................... .16 .47 .22 1.51 1.02
-------------------------------------------------------------------
Less distributions from:
Net investment income ............................. (.80) (.84) (.80) (.83) (.85)
Net realized gains ................................ (.06) -- (.34) (.01) --
-------------------------------------------------------------------
Total distributions ................................ (.86) (.84) (1.14) (.84) (.85)
-------------------------------------------------------------------
Net asset value, end of year ....................... $8.21 $8.91 $9.28 $10.20 $9.53
===================================================================
Market value, end of year(a) ....................... $7.688 $8.688 $9.250 $9.500 $9.125
===================================================================
Total return (based on market value per share) ..... (.40%) 2.95% 9.40% 14.00% 12.84%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year (000's) .................... $220,742 $239,537 $248,419 $273,173 $255,200

Ratios to average net assets:
Expenses .......................................... 3.15% 2.92% 2.63% 2.72% 2.80%
Net investment income ............................. 9.92% 8.86% 8.29% 8.74% 8.56%
Portfolio turnover rate ............................ 29.59% 31.62% 36.66% 51.48% 19.24%
Total debt outstanding at end of year (000's) ...... $75,000 $75,000 $75,000 $74,987 $74,974
Asset coverage per $1,000 of debt .................. $3,948 $4,194 $4,312 $4,643 $4,404
Average amount of notes per share during the year .. $2.79 $2.79 $2.80 $2.80 $2.80
</TABLE>

(a) Based on the last sale on the New York Stock Exchange.

(b) Based on average shares outstanding effective year ended August 31, 1999.

See notes to financial statements.

FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 2000

<TABLE>
<CAPTION>
SHARES,
WARRANTS
COUNTRY & RIGHTS VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS, WARRANTS AND RIGHTS 39.2%
CONSUMER NON-DURABLES 1.0%
Nabisco Group Holdings Corp. .............................................. United States 54,000 $1,515,375
R.J. Reynolds Tobacco Holdings Inc. ....................................... United States 18,000 645,750
---------
2,161,125
---------
CONSUMER SERVICES
Marriott International Inc., A ............................................ United States 1,504 59,408
---------
ENERGY MINERALS 1.2%
(a)Abraxas Petroleum Corp. ................................................... United States 196,740 713,183
(a)Abraxas Petroleum Corp., rts., 11/01/04 ................................... United States 196,740 98,370
Devon Energy Corp. ........................................................ United States 3,286 192,419
(a)McMoRan Exploration Co. ................................................... United States 1,800 18,675
Ultramar Diamond Shamrock Corp. ........................................... United States 66,600 1,560,938
---------
2,583,585
---------

INDUSTRIAL SERVICES 2.9%
Dynegy Inc. ............................................................... United States 71,500 3,217,500
Enron Corp. ............................................................... United States 28,815 2,445,673
(a)R&B Falcon Corp., 144A, wts., 5/01/09 ..................................... United States 1,250 812,500
---------
6,475,673
---------

NON-ENERGY MINERALS .3%
AngloGold Ltd., ADR ....................................................... South Africa 30,446 603,211
Freeport-McMoRan Copper & Gold Inc., A .................................... United States 4,500 42,750
(a)Gulf States Steel Inc., wts., 4/15/03 ..................................... United States 4,000 4
---------
645,965
---------

PROCESS INDUSTRIES .1%
(a)Gaylord Container Corp., wts., 11/01/02 ................................... United States 46,137 138,411
---------

PRODUCER MANUFACTURING .1%
(a)Harvard Industries Inc. ................................................... United States 109,618 328,854
---------

TELECOMMUNICATIONS 3.8%
AT&T Corp ................................................................. United States 125,000 3,937,500
Bellsouth Corp ............................................................ United States 81,200 3,029,775
(a)Loral Space & Communications Ltd., wts., 1/15/07 .......................... United States 5,000 18,229
(a)Poland Telecom Finance, 144A, wts., 12/01/07 .............................. Poland 3,000 38
Verizon Communications .................................................... United States 30,500 1,330,563
---------
8,316,105
---------
UTILITIES 29.8%
Allegheny Energy Inc. ..................................................... United States 30,000 1,076,250
American Electric Power Co. Inc. .......................................... United States 60,000 2,115,000
CMS Energy Corp. .......................................................... United States 12,900 337,013
Constellation Energy Group Inc. ........................................... United States 94,500 3,614,625
Dominion Resources Inc. ................................................... United States 70,000 3,710,000
DTE Energy Co. ............................................................ United States 100,000 3,475,000
Duke Energy Corp. ......................................................... United States 90,000 6,733,125
Florida Progress Corp. .................................................... United States 50,000 2,593,750
FPL Group Inc. ............................................................ United States 100,000 5,337,500
</TABLE>

FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2000 (CONT.)

COMMON STOCKS, WARRANTS AND RIGHTS (CONT.)
UTILITIES (CONT.)
Montana Power Co. ......................................................... United States 80,000 $2,885,000
Northwestern Corp. ........................................................ United States 81,300 1,768,275
PECO Energy Co. ........................................................... United States 70,000 3,373,125
PG&E Corp. ................................................................ United States 70,000 2,025,625
Pinnacle West Capital Corp. ............................................... United States 65,000 2,677,188
Reliant Energy Inc. ....................................................... United States 96,200 3,571,425
Southern Co. .............................................................. United States 208,800 6,250,950
TXU Corp. ................................................................. United States 141,500 4,943,656
Unicom Corp. .............................................................. United States 66,000 3,015,375
Utilicorp United Inc. ..................................................... United States 158,000 3,762,375
Xcel Energy Inc. .......................................................... United States 104,470 2,618,279
----------
65,883,536
----------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS (COST $68,242,656) ............... 86,592,662
----------

PREFERRED STOCKS 3.3%
CONSUMER SERVICES 1.6%
Sinclair Capital, 11.625%, pfd ............................................ United States 40,000 3,600,000
----------
INDUSTRIAL SERVICES .9%
R&B Falcon Corp., 13.875%, pfd., PIK ...................................... United States 1,487 1,836,791
----------
PROCESS INDUSTRIES .8%
Asia Pulp & Paper Co. Ltd., 12.00%, 2/15/04 ............................... Indonesia 4,000,000 1,810,000
----------
TOTAL PREFERRED STOCKS (COST $9,438,293) .................................. 7,246,791
----------
CONVERTIBLE PREFERRED STOCKS 2.6%
CONSUMER SERVICES .8%
MediaOne Group Inc., 7.00%, cvt. pfd ...................................... United States 44,400 1,798,200
----------
REAL ESTATE INVESTMENT TRUST .7%
Archstone Communities Trust, $1.75, cvt. pfd., A United States 45,000 1,513,125
----------
UTILITIES 1.1%
Utilicorp United Inc., 9.75%, cvt. pfd .................................... United States 91,000 2,405,813
----------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $5,332,475) ...................... 5,717,138
----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(d)
----------
BONDS 84.6%
COMMERCIAL SERVICES 2.4%
<S> <C> <C> <C>
(c)AmeriServe Food Distribution Inc., senior note, 8.875%, 10/15/06 .......... United States $1,000,000 45,000
(c)AmeriServe Food Distribution Inc., senior sub. note,10.125%, 7/15/07 ...... United States 2,700,000 67,500
Fleming Cos. Inc., senior sub. note, B, 10.50%, 12/01/04 .................. United States 3,025,000 2,777,706
Intertek Finance PLC, senior sub. note, B, 10.25%, 11/01/06 ............... United Kingdom 2,800,000 2,450,000
----------
5,340,206
----------

CONSUMER DURABLES 1.2%
E&S Holdings Corp., senior sub. note, B, 10.375%, 10/01/06 ................. United States 1,750,000 743,750
Revlon Consumer Products Corp., senior sub. note, 8.625%, 2/01/08 .......... United States 3,500,000 1,820,000
----------
2,563,750
----------
</TABLE>

FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2000 (CONT.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT(D) VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
CONSUMER NON-DURABLES 1.2%
Packaged Ice Inc., senior sub. note, B, 9.75%, 2/01/05 ............................ United States $800,000 $708,000

Premier International Foods, senior note, 12.00%, 9/01/09 ......................... United States 2,000,000 1,690,000
(c)Specialty Retailers Inc., senior note, B, 8.50%, 7/15/05 .......................... United States 2,000,000 210,000
----------
2,608,000
----------

CONSUMER SERVICES 20%
Advantica Restaurant Group, senior note, 11.25%, 1/15/08 .......................... United States 1,598,325 1,022,928

AMFM Inc., senior note, 8.00%, 11/01/08 ........................................... United States 2,000,000 2,002,500
AMFM Inc., senior sub. note, B, 8.75%, 6/15/07 .................................... United States 2,000,000 2,050,000
(b)Atherton Franchise Capital, LP, 11.00%, 5/01/06 ................................... United States 1,352,546 1,095,563
Century Communications Corp., B, senior disc. note, 1/15/08 ....................... United States 5,000,000 2,100,000

Charter Communications Holdings LLC, senior disc. note, zero cpn.
to 4/01/04, 9.92% thereafter, 4/01/11 ............................................ United States 5,750,000 3,478,750
Charter Communications Holdings LLC, senior note, zero cpn.
to 1/15/05, 11.75% thereafter, 1/15/10 ............................................ United States 1,750,000 1,058,750
CSC Holdings Inc., senior sub. deb., 9.875%, 4/01/23 .............................. United States 3,000,000 3,075,000

Diamond Holdings PLC, senior note, 9.125%, 2/01/08 ................................ United Kingdom 3,000,000 2,835,000

Family Restaurant Inc., senior note, 9.75%, 2/01/02 ............................... United States 2,000,000 410,000

Fox/Liberty Networks LLC, senior disc. note, zero cpn. to 8/15/02, 9.75%
thereafter, 8/15/07 ............................................................... United States 4,000,000 3,330,000
Hollinger International Inc., senior sub. note, 9.25%, 2/01/06 .................... United States 1,000,000 1,010,000
Horseshoe Gaming Holding Corp., senior sub. note, 8.625%, 5/15/09 ................. United States 4,000,000 3,920,000
LIN Holdings Corp., senior disc. note, zero cpn. to 3/01/03,
10.00% thereafter, 3/01/08 ........................................................ United States 2,000,000 1,390,000
Lodgian Finance Corp., 12.25%, 7/15/09 ............................................ United States 4,000,000 3,420,000
Park Place Entertainment, 9.375%, 2/15/07 ......................................... United States 4,000,000 4,120,000
Regal Cinemas Inc., senior sub. note, 9.50%, 6/01/08 .............................. United States 3,000,000 270,000

Six Flags Entertainment Corp., senior unsecured note, 8.875%, 4/01/06 ............. United States 2,250,000 2,137,500
Telewest Communications PLC, 144A, zero cpn. to 2/01/05,11.375% thereafter, 2/01/10 United Kingdom 3,500,000 1,960,000
Telewest Communications PLC, senior disc. note, zero cpn. to 4/15/04,
9.25% thereafter, 4/15/09 ......................................................... United Kingdom 1,500,000 855,000
United Pan-Europe Communications NV, senior disc. note, zero cpn. to 8/01/04,
12.50% thereafter, 8/01/09 ........................................................ Netherlands 5,250,000 2,493,750
----------
44,034,741
----------

ELECTRONIC TECHNOLOGY .8%
Amkor Technology Inc., cvt., 144A, 5.00%, 3/15/07 ................................. United States 2,000,000 1,772,500
----------
ENERGY MINERALS 2.7%
Abraxas Petroleum Corp., senior note, D, 11.50%, 11/01/04 ......................... United States 2,310,000 2,032,800
P&L Coal Holdings Corp., senior note, B, 8.875%, 5/15/08 .......................... United States 500,000 493,750
P&L Coal Holdings Corp., senior sub. note, B, 9.625%, 5/15/08 ..................... United States 3,500,000 3,456,250
----------
5,982,800
----------

FINANCE 1.3%
Sovereign Bancorp Inc., senior note, 10.50%, 11/15/06 ............................. United States 2,900,000 2,950,750
----------
</TABLE>

FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 2000 (CONT.)

<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT(d) VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
GOVERNMENT BONDS 6.5%

Republic of Brazil, 12.75%, 1/15/20 ............................................. Brazil $8,000,000 $7,830,000
Republic of Bulgaria, FRN, 7.063%, 7/28/11 ...................................... Bulgaria 4,000,000 3,250,000
United Mexican States, 11.375%, 9/15/16 ......................................... Mexico 2,750,000 3,231,250
----------
14,311,250
----------

HEALTH SERVICES 2.0%
HCA-The Healthcare Co., 8.75%, 9/01/10 .......................................... United States 1,500,000 1,519,115
Magellan Health Services Inc., senior sub. note, 9.00%, 2/15/08 ................. United States 2,300,000 1,334,000
Omnicare Inc., cvt. sub. deb., 5.00%, 12/01/07 .................................. United States 1,500,000 1,091,250
(c)Vencor Operating Inc., senior sub. note, 9.875%, 5/01/05 ...................... United States 3,200,000 384,000
----------
4,328,365
----------

INDUSTRIAL SERVICES 4.3%
Allied Waste North America Inc., senior note, B, 7.875%, 1/01/09 ................ United States 3,700,000 3,357,750
Great Lakes Dredge & Dock Corp., senior sub. note, 11.25%, 8/15/08 .............. United States 500,000 494,375
R&B Falcon Corp., senior note, 12.25%, 3/15/06 .................................. United States 1,400,000 1,652,000
RBF Finance Co., senior note, 11.375%, 3/15/09 .................................. United States 1,200,000 1,368,000
Universal Compression Inc., senior disc. note, zero cpn. to 2/15/03, 9.875%
thereafter, 2/15/08 ............................................................. United States 3,550,000 2,680,250
----------
9,552,375
----------

NON-ENERGY MINERALS 3.2%
LTV Corp., senior note, 8.20%, 9/15/07 .......................................... United States 2,050,000 1,445,250
Ormet Corp., senior secured note, 144A, 11.00%, 8/15/08 ......................... United States 4,000,000 3,640,000
Sheffield Steel Corp., first mortgage, B, 11.50%, 12/01/05 ...................... United States 2,000,000 1,190,000
Trizec Hahn Corp., cvt. senior deb., 3.00%, 1/29/21 ............................. Canada 1,500,000 885,000
----------
7,160,250
----------

PROCESS INDUSTRIES 10.9%
Anchor Glass, first mortgage, 11.25%, 4/01/05 ................................... United States 4,200,000 3,171,000
Avecia Group PLC, senior notes, 11.00%, 7/01/09 ................................. United Kingdom 5,000,000 5,062,500
Consolidated Container Co. LLC, senior note, 10.125%, 7/15/09 ................... United States 4,500,000 4,567,500
Container Corp. of America, senior note, A, 9.75%, 4/01/03 ...................... United States 3,000,000 3,022,500
Georgia Gulf Corp., senior sub. note, 10.375%, 11/01/07 ......................... United States 2,000,000 2,085,000
Huntsman ICI Chemicals, zero cpn., 12/31/09 ..................................... United States 7,500,000 2,625,000
Lyondell Chemical Co., senior secured notes, 9.875%, 5/01/07 .................... United States 1,850,000 1,868,500
Pindo Deli Finance Mauritius, senior note, 11.75%, 10/01/17 ..................... Indonesia 3,000,000 1,657,500
----------
24,059,500
----------

PRODUCER MANUFACTURING 3.8%
Derlan Industries Ltd., senior note, 10.00%, 1/15/07 ............................ Canada 1,165,000 1,112,575

Nortek Inc., senior note, B, 9.125%, 9/01/07 .................................... United States 2,000,000 1,910,000
Nortek Inc., 8.875%, 8/01/08 .................................................... United States 1,000,000 935,000
Talon Automotive Group Inc., senior sub. note, B, 9.625%, 5/01/08 ............... United States 2,250,000 911,250
Terex Corp., 8.875%, 4/01/08 .................................................... United States 1,000,000 940,000
Terex Corp., senior sub. note, 8.875%, 4/01/08 .................................. United States 2,650,000 2,491,000
----------
8,299,825
----------
</TABLE>

FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2000 (CONT.)

TECHNOLOGY SERVICES .3%
Anacomp Inc., senior sub. note, D, 10.875%, 4/01/04 ................................. United States $3,100,000 $ 759,500
-----------
TELECOMMUNICATIONS 21.8%

Call-Net Enterprises Inc., senior note, 9.375%, 5/15/09 ............................. Canada 3,750,000 2,137,500
Crown Castle International Corp., senior disc. note, zero cpn. to 8/01/04,
11.25% thereafter, 8/01/11 ......................................................... United States 6,000,000 3,960,000
Dobson/Sygnet Communications Co., senior note, 12.25%, 12/15/08 ..................... United States 4,000,000 4,100,000
Intermedia Communications Inc., senior disc. note, B, zero cpn. to 7/15/02,
11.25% thereafter, 7/15/07 ......................................................... United States 5,000,000 3,175,000
Level 3 Communications Inc., zero cpn to 12/01/03,10.50% thereafter, 2/01/08 ........ United States 7,000,000 4,287,500
Loral Space and Communications Ltd., senior disc. note, zero cpn. to 1/15/02,
12.50% thereafter, 1/15/07 ......................................................... United States 5,000,000 2,025,000
Metrocall Inc., senior sub. note, 9.75%, 11/01/07 United States 4,000,000 2,870,000
Millicom International Cellular SA, senior disc. note, zero cpn. to 6/01/01,
13.50% thereafter, 6/01/06 ......................................................... Luxembourg 6,000,000 5,370,000
Nextel Communications Inc., senior disc. note, zero cpn. to 2/15/03, 9.95%
thereafter, 2/15/08 ................................................................ United States 5,000,000 3,825,000
Nextel Partners Inc., 144A, 11.00%, 3/15/10 ......................................... United States 1,500,000 1,500,000
NEXTLINK Communications Inc., senior note, 9.625%, 10/01/07 ......................... United States 2,000,000 1,850,000
NEXTLINK Communications Inc., senior note, 9.00%, 3/15/08 ........................... United States 2,000,000 1,795,000
Poland Telecom Finance, senior note, B, 14.00%, 12/01/07 ............................ Poland 3,000,000 457,500
PSINet Inc., senior note, 10.50%, 12/01/06 .......................................... United States 700,000 607,250
PSINet Inc., senior note, 11.00%, 8/01/09 ........................................... United States 3,250,000 2,811,250
Voicestream Wireless Corp., senior disc. note, zero cpn. to 11/15/04, 11.875%
thereafter, 11/15/09 ............................................................... United States 3,500,000 2,537,500
Williams Communications, Group Inc., senior note, 10.875%, 10/01/09 ................. United States 5,000,000 4,837,500
-----------
48,146,000
-----------
TRANSPORTATION 1.0%
American Commercial Lines LLC, senior note B, 10.25%, 6/30/08 ....................... United States 2,500,000 2,137,500
-----------

UTILITIES 1.2%
AES Corp., senior note, 9.50%, 6/01/09 .............................................. United States 2,000,000 2,030,000
ESCOM, E168, utility deb., 11.00%, 6/01/08 .......................................... South Africa 4,350,000 ZAR 540,436
-----------
2,570,436
-----------

TOTAL BONDS (COST $226,059,813) ..................................................... 186,577,748
-----------
TOTAL LONG TERM INVESTMENTS (COST $309,073,237) ..................................... 286,134,339
-----------
</TABLE>

FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 2000 (CONT.)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(e)REPURCHASE AGREEMENT 1.5%
Joint Repurchase Agreement, 6.603%, 09/01/00 (Maturity Value $3,397,207) (COST $3,396,584) .... $ 3,396,584 $ 3,396,584
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Lehman Brothers Inc.
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corporation
Societe Generale
UBS Warburg
------------
TOTAL INVESTMENTS (COST $312,469,821) 131.2% .................................................. 289,530,923
OTHER ASSETS, LESS LIABILITIES (31.2%) ........................................................ (68,789,180)
-----------
NET ASSETS 100.0% ............................................................................. $220,741,743
===========
</TABLE>

CURRENCY ABBREVIATION:

ZAR - South African Rand

(a) Non-income producing.

(b) See Note 8 regarding restricted securities.

(d) The principal amount is stated in U.S. dollars unless otherwise indicated.

(e) Investment is through participation in a joint account with other funds
managed by the investment advisor. At August 31, 2000, all repurchase agreements
had been entered into on that date.

See notes to financial statements.

FRANKLIN UNIVERSAL TRUST

Financial Statements

STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000

<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $312,469,821) ............................................. $ 289,530,923
Receivables:
Investment securities sold ......................................................................... 1,751,944
Dividends and interest ............................................................................. 4,689,399
Notes issuance costs (Note 3) ....................................................................... 119,412
-------------
Total assets ................................................................................... 296,091,678
-------------
Liabilities:
Payables:
Affiliates ......................................................................................... 205,210
Notes (Note 3) ..................................................................................... 75,000,000
Other liabilities ................................................................................... 144,725
-------------
Total liabilities .............................................................................. 75,349,935
-------------
Net assets, at value .......................................................................... $ 220,741,743
=============
Net assets consist of:
Undistributed net investment income ................................................................. $ 5,017,339
Net unrealized depreciation ......................................................................... (22,939,042)
Accumulated net realized loss ....................................................................... (9,309,807)
Capital shares ...................................................................................... 247,973,253
Net assets, at value .......................................................................... $ 220,741,743
=============
Net asset value per share ($220,741,743 / 26,897,361 shares outstanding) ............................. $ 8.21
=============
</TABLE>

See notes to financial statements.

FRANKLIN UNIVERSAL TRUST
Financial Statements (continued)

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED AUGUST 31, 2000
<TABLE>
<S> <C>
Investment income:
Dividends ............................................................................................ $ 4,775,878
Interest ............................................................................................. 24,046,276
------------
Total investment income ......................................................................... 28,822,154
------------
Expenses:
Management fees (Note 4) ............................................................................. 2,220,927
Transfer agent fees .................................................................................. 116,079
Custodian fees ....................................................................................... 3,455
Reports to shareholders .............................................................................. 12,569
Professional fees .................................................................................... 36,426
Trustees' fees and expenses .......................................................................... 15,387
Amortization of note issuance costs (Note 3) ......................................................... 39,913
Other ................................................................................................ 47,906
------------
Expenses before interest expense .................................................................... 2,492,662
Interest expense (Note 3) ........................................................................... 4,455,000
------------
Total expenses .................................................................................. 6,947,662
------------
Net investment income .......................................................................... 21,874,492
------------
Realized and unrealized losses:
Net realized loss from:
Investments ......................................................................................... (5,570,041)
Foreign currency transactions ....................................................................... (3,487)
------------
Net realized loss ............................................................................... (5,573,528)
Net unrealized depreciation on:

Investments ......................................................................................... (11,929,331)
Translation of assets and liabilities denominated in foreign currencies ............................. (222)
------------
Net unrealized depreciation ..................................................................... (11,929,553)
------------
Net realized and unrealized loss ...................................................................... (17,503,081)
------------
Net increase in net assets resulting from operations .................................................. $ 4,371,411
============
</TABLE>

See notes to financial statements.

FRANKLIN UNIVERSAL TRUST
Financial Statements (continued)

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE YEARS ENDED AUGUST 31, 2000 AND 1999

<TABLE>
<CAPTION>
2000 1999
----------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................... $ 21,874,492 $ 22,101,607
Net realized gain (loss) from investments and foreign currency transactions .............. (5,573,528) 154,470
Net unrealized depreciation on investments and translation of assets and liabilities
denominated in foreign currencies ......................................................... (11,929,553) (9,587,574)
----------------------------------
Net increase in net assets resulting from operations ................................. 4,371,411 12,668,503
Distributions to shareholders from:
Net investment income .................................................................... (21,625,478) (22,657,771)
Net realized gains ....................................................................... (1,541,218) --
----------------------------------
Total distributions to shareholders ....................................................... (23,166,696) (22,657,771)
Capital share transactions (Note 2) ....................................................... -- 1,107,711
----------------------------------
Net decrease in net assets ........................................................... (18,795,285) (8,881,557)

Net assets:
Beginning of year ......................................................................... 239,537,028 248,418,585
----------------------------------
End of year ............................................................................... $ 220,741,743 $ 239,537,028
==================================
Undistributed net investment income included in net assets:
End of year ............................................................................... $ 5,017,339 $ 2,766,868
==================================
</TABLE>

See notes to financial statements.

FRANKLIN UNIVERSAL TRUST
Financial Statements (continued)

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED AUGUST 31, 2000

<TABLE>
<S> <C>
Cash flow from operating activities:
Dividends and interest received .................................................................... $ 23,502,098
Operating expenses paid ............................................................................ (2,417,408)
Interest expense paid .............................................................................. (4,455,000)
---------------
Cash provided - operations .................................................................... 16,629,690
===============
Cash flow from investing activities:

Investment purchases ............................................................................... (1,495,119,787)
Investment sales and maturities .................................................................... 1,501,656,793
---------------
Cash provided - investments ................................................................... 6,537,006
===============
Cash flow from financing activities:

Distributions to shareholders ...................................................................... (23,166,696)
---------------
Cash used - financing ......................................................................... (23,166,696)
===============
Net change in cash .................................................................................. --
Cash at beginning of year ........................................................................... --
---------------
Cash at end of year ................................................................................. $ --
===============

RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000

Net investment income ............................................................................... $ 21,874,492
Amortization income ................................................................................ (5,582,118)
Amortization of note issuance costs ................................................................ 39,913
Decrease in dividends and interest receivable ...................................................... 262,062
Increase in other liabilities ...................................................................... 35,341
---------------
Cash provided - operations .......................................................................... $ 16,629,690
===============
</TABLE>

See notes to financial statements.

FRANKLIN UNIVERSAL TRUST

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Universal Trust (the Fund) is registered under the Investment Company
Act of 1940 as a diversified, closed-end investment company. The Fund has two
classes of securities: senior fixed-rate 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. dollar
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 to
distribute substantially 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 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 expense during the reporting
period. Actual results could differ from those estimates.

FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

At August 31, 2000, there were an unlimited number of shares authorized ($0.01
par value). During the year ended August 31, 2000, there were no share
transactions; all reinvested distributions were satisfied with previously issued
shares purchased in the open market. During the year ended August 31 ,1999,
118,028 shares were issued for $1,107,711 from the reinvested distributions.

3. SENIOR FIXED-RATE NOTES

On August 24, 1998, the Fund issued $75 million principal amount of a new class
of five-year senior notes (the Notes). 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 5.94% per year,
to maturity on August 31, 2003. The Notes were issued in a private placement,
and are not available for resale; therefore, no market value can be obtained for
the Notes. The Fund is required to maintain on a monthly basis a specified
discounted asset value for its portfolio in compliance with guidelines
established by Standard & Poor's Corporation, and is required to maintain asset
coverage for the Notes of at least 300%. The Fund has met these requirements
during the year ended August 31, 2000.

The issuance costs of $200,000 incurred by the Fund are deferred and amortized
on a straight line basis over the term of the Notes.

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 August 31, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $312,500,760 was as follows:

<TABLE>
<S> <C>
Unrealized appreciation ............................. $ 27,432,628
Unrealized depreciation ............................. (50,402,465)
----------
Net unrealized depreciation ......................... $(22,969,837)
==========
</TABLE>

At August 31, 2000, the fund has tax basis capital losses of $5,088,195 which
may be carried over to offset future capital gains. Such losses expire in 2008.

FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (continued)

5. INCOME TAXES (CONT.)

At August 31, 2000, the Fund has deferred capital losses and deferred currency
losses occurring subsequent to October 31, 1999 of $4,187,186 and $3,487
respectively. For income tax purposes, such losses will be reflected in the year
ending August 31, 2001.

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities and foreign currency
transactions.

Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sale and foreign currency
transactions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 2000 aggregated $84,986,699 and $90,587,417, respectively.

7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 61.40% 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 August 31, 2000, the
Fund held defaulted securities with a value aggregating $706,500 representing
.32% 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.

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. At
August 31, 2000, the fund held one restricted security representing .50% of the
Fund's net assets.

<TABLE>
<CAPTION>
PRINCIPAL ACQUISITION
AMOUNT ISSUER DATE COST VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,352,546 Atherton Franchise Capital, LP, 11.00%, 5/01/06 ............. 4/28/94 $1,352,546 $1,095,563
</TABLE>

FRANKLIN UNIVERSAL TRUST

Independent Auditors' Report

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
FRANKLIN UNIVERSAL TRUST

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations, of
changes in net assets, and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of Franklin Universal
Trust (the "Fund") at August 31, 2000, the results of its operations and its
cash flows for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at August 31,
2000 by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.

PricewaterhouseCoopers LLP

San Francisco, California
October 4, 2000

FRANKLIN UNIVERSAL TRUST

Tax Designation

Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
15.24% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended August 31, 2000.