Edgar Filing: FRANKLIN UNIVERSAL TRUST

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR/A

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES

Investment Company Act file number: 811-05569
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FRANKLIN UNIVERSAL TRUST
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(Exact name of registrant as specified in charter)

ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Address of principal executive offices) (Zip code)

CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 8/31
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Date of reporting period: 8/31/07
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ITEM 1. REPORTS TO STOCKHOLDERS.

[GRAPHIC OMITTED]

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AUGUST 31, 2007
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ANNUAL REPORT INCOME
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FRANKLIN UNIVERSAL TRUST

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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS

FRANKLIN o Templeton o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE(R)

Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.

FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with offices in over 25 countries, Templeton offers
investors a truly global perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.

TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
covering every major asset class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable, accurate and personal service that has
helped us become one of the most trusted names in
financial services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]

Not part of the annual report

Contents

ANNUAL REPORT

Franklin Universal Trust .................................................. 1

Performance Summary ....................................................... 5

Annual Shareholders' Meeting .............................................. 6

Important Notice to Shareholders .......................................... 7

Dividend Reinvestment and Cash Purchase Plan .............................. 8

Financial Highlights and Statement of Investments ......................... 11

Financial Statements ...................................................... 18

Notes to Financial Statements ............................................. 22

Report of Independent Registered Public Accounting Firm ................... 30

Tax Designation ........................................................... 31

Board Members and Officers ................................................ 32

Shareholder Information ................................................... 36

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Annual Report

Franklin Universal Trust

YOUR FUND'S GOALS AND MAIN INVESTMENTS: Franklin Universal Trust's primary
investment objective is to provide high, current income consistent with
preservation of capital. Its secondary objective is growth of income through
dividend increases and capital appreciation.

PORTFOLIO BREAKDOWN
Based on Total Investments*
8/31/07

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Corporate Bonds 67.8%
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Utilities Common Stocks 29.0%
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Natural Resources Common Stocks 1.0%
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Foreign Government & Agency Securities 0.1%
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Miscellaneous Common Stocks 0.0%**
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Cash & Other Net Assets 2.1%
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* Percentage of total investments of the Fund. Total investments of the Fund
include long-term and short-term investments and other net assets, excluding
long-term debt issued by the Fund.

** Rounds to less than 0.1% of total investments.

Dear Shareholder:

We are pleased to bring you Franklin Universal Trust's annual report for the
fiscal year ended August 31, 2007.

PERFORMANCE OVERVIEW

For the 12 months under review, the Fund's cumulative total returns were +10.95%
based on change in net asset value and +9.38% based on change in market price on
the New York Stock Exchange, as shown in the Performance Summary on page 5. For
comparison, the Credit Suisse (CS) High Yield Index returned +7.30%, and
utilities stocks, as measured by the Standard & Poor's (S&P) 500 Utilities
Index, returned +15.06% for the year ended August 31, 2007. 1

ECONOMIC AND MARKET OVERVIEW

The U.S. economy was resilient over the 12 months ended August 31, 2007.
Although growth slowed in the first calendar quarter of 2007 as a weakening

1. Sources: Credit Suisse; Standard & Poor's Micropal. The CS High Yield Index
is designed to mirror the investible universe of the U.S. dollar denominated
high yield debt market. The S&P 500 Utilities Index is a market
capitalization-weighted index that includes electric utility stocks in the S&P
500. The indexes are unmanaged and include reinvestment of any income or
distributions. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 12.

Annual Report | 1

TOP 10 HOLDINGS
Based on Total Investments*
8/31/07 vs. 8/31/06

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ISSUER 8/31/07
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Exelon Corp. 3.0%
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The Southern Co. 2.5%
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FPL Group Inc. 2.4%
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Edison International 2.3%
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Entergy Corp. 2.1%
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FirstEnergy Corp. 1.9%
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Constellation Energy Group 1.9%
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Dominion Resources Inc. 1.7%
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Public Service Enterprise Group Inc. 1.7%
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CenterPoint Energy Inc. 1.5%
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--------------------------------------------------------------------------------
8/31/06
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Exelon Corp. 2.5%
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FPL Group Inc. 2.5%
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The Southern Co. 2.3%
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Dominion Resources Inc. 2.2%
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FirstEnergy Corp. 1.7%
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Government of Mexico 1.6%
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Entergy Corp. 1.6%
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Duke Energy Corp. 1.5%
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Pinnacle West Capital Corp. 1.4%
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General Motors/General Motors Acceptance Corp. 1.4%
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* Percentage of total investments of the Fund. Total investments of the Fund
include long-term and short-term investments and other net assets, excluding
long-term debt issued by the Fund.

housing market and moderating profit growth dampened economic expansion, a tight
labor market and higher personal incomes helped support the consumer. Despite
ongoing housing market weakness, economic growth rebounded in the second quarter
and was supported by federal defense spending, accelerating exports and
declining imports, greater business inventory investment and increased spending
for nonresidential structures.

Oil prices continued to be volatile though inflation remained relatively
subdued. However, headline, or overall, inflation and core inflation, which
excludes food and energy costs, experienced some upward pressure. In August
2007, the headline Consumer Price Index (CPI) reported a 12-month rise of 2.0%,
while core CPI increased 2.1%. 2

The Federal Reserve Board (Fed) kept the federal funds target rate at 5.25%
during the reporting period. In terms of an overall bias, the Fed continued to
diligently assess economic data saying that growth remained relatively stable
"despite the ongoing adjustment in the housing sector." At period-end, the
financial markets generally expected the Fed to lower its target rate by
calendar year-end.

The 10-year Treasury note yield was range bound during the 12-month period,
beginning at 4.74% and ending the period at 4.54%. The intermediate portion of
the yield curve often reflects market expectations of the future direction of
inflation. A relatively moderate inflation environment, combined with modest
growth and profitability projections, contributed to this overall trend in
interest rates.

INVESTMENT STRATEGY

We invest primarily in two asset classes: high yield bonds and utility stocks.
Within the high yield portion of the portfolio, we use fundamental research to
invest in a diversified portfolio of bonds. Within the utility portion of the
portfolio, we focus on companies with attractive dividend yields and with a
history of increasing their dividends.

MANAGER'S DISCUSSION

During the fiscal year under review, the Fund benefited from positive returns in
its primary asset classes. High yield bonds enjoyed a favorable fundamental
environment, with continuing economic growth and a below-average default

2. Source: Bureau of Labor Statistics.

2 | Annual Report

rate. High yield bond spreads (the difference in yield compared with Treasuries)
tightened to a record-low level in early June 2007 before widening dramatically
through the Fund's fiscal year-end. This coincided with a broader credit market
sell-off that was triggered by the subprime mortgage crisis. Although partially
offset by a decline in Treasury yields, the spread widening caused high yield
bonds to generate below-coupon but still positive returns. Utility stocks posted
steady positive returns until late April, when many sold off in conjunction with
a rise in Treasury yields and increased equity market volatility. The utility
sector continued to hold traditionally defensive appeal, particularly in an
uncertain market environment, and fundamental earnings prospects remained
favorable in our view.

HIGH YIELD CORPORATE BONDS

The Fund benefited from its overweighted allocations in the chemicals and
industrials sectors relative to the CS High Yield Index during the fiscal year
under review. 3 In the chemicals sector, limited capacity growth during a period
of increasing demand boosted performance. An active leveraged buyout environment
resulted in acquisition announcements of two Fund holdings, Lyondell Chemical
and Huntsman International, by private companies. Bonds of these target
companies traded up on expectations that bonds would be repurchased at a price
premium as part of the acquisition financing. In the industrials sector,
increased capacity utilization driven by continued global economic growth
supported performance. Higher utilization led to improved pricing power, which
enabled companies to better pass through higher raw material costs and increase
operating cash flows.

Fund performance in the high yield sector was impeded by underweighted
allocations in the metals and mining and automotive sectors, which outperformed
the CS High Yield Index. 4 The metals and mining holdings appreciated as
commodity prices remained high during the reporting period. We reduced the
Fund's sector exposure, however, based on our belief that the industry cycle
might change, and considering fairly tight valuations, we believed we could find
more attractive investments elsewhere. Although the automotive sector also did
well, we limited the Fund's sector exposure due to our concerns about the
longer-term viability of domestic auto manufacturers.

3. Chemicals holdings are in the process industries sector in the SOI.
Industrials holdings are in the commercial services, industrial services and
producer manufacturing sectors in the SOI.

4. Metals and mining holdings are in the non-energy minerals sector in the SOI.
Automotive holdings are in the consumer durables and producer manufacturing
sectors in the SOI.

Annual Report | 3

UTILITY STOCKS

The Fund's utility sector exposure stayed fairly constant in spite of the S&P
500 Utilities Index's +15.06% return for the fiscal year. 1 Early in the period
we sought to take advantage of strong returns and slightly reduced exposure, and
later we used a voluntary tender offer from Dominion Resources to sell shares at
above-market prices. These share sales offset price appreciation and resulted in
virtually unchanged exposure for the Fund. Performance was primarily driven by
the need for infrastructure improvement, which translated to attractive
opportunities for utility companies. In addition, tight supply and demand and
the resulting requirement for new generating facilities helped drive the utility
sector's growth potential to above-historical levels. Our sector outlook
remained positive given good growth prospects from infrastructure projects and a
favorable regulatory environment.

Thank you for your continued participation in Franklin Universal Trust. We look
forward to serving your future investment needs.

Sincerely,

[PHOTO OMITTED] /s/ Christopher J. Molumphy

Christopher J. Molumphy, CFA
Senior Portfolio Manager

[PHOTO OMITTED] /s/ Glenn I. Voyles

Glenn I. Voyles, CFA
Portfolio Manager

Franklin Universal Trust

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF AUGUST 31, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.

4 | Annual Report

Performance Summary as of 8/31/07

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. Total return reflects reinvestment of the Fund's dividends and
capital gain distributions, if any, and any unrealized gains or losses. Total
returns do not reflect any sales charges paid at inception or brokerage
commissions paid on secondary market purchases. The performance table does not
reflect any taxes that a shareholder would pay on Fund dividends, capital gain
distributions, if any, or realized gains on the sale of Fund shares.

PRICE AND DISTRIBUTION INFORMATION

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SYMBOL: FT CHANGE 8/31/07 8/31/06
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Net Asset Value (NAV) +$0.32 $7.41 $7.09
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Market Price (NYSE) +$0.16 $6.68 $6.52
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DISTRIBUTIONS (9/1/06-8/31/07)
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Dividend Income $0.4560
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PERFORMANCE

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1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1
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Based on change in NAV 2 +10.95% +102.16% +73.73%
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Based on change in market
price 3 +9.38% +50.48% +73.40%
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Average Annual Total Return 1
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Based on change in NAV 2 +10.95% +15.12% +5.68%
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Based on change in market
price 3 +9.38% +8.52% +5.66%
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Distribution Rate 4 6.83%
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.

ENDNOTES

THE RISKS ASSOCIATED WITH HIGHER-YIELDING, LOWER-RATED SECURITIES INCLUDE HIGHER
RISK OF DEFAULT AND LOSS OF PRINCIPAL. THESE SECURITIES CARRY A GREATER DEGREE
OF CREDIT RISK RELATIVE TO INVESTMENT GRADE SECURITIES. IN ADDITION TO OTHER
FACTORS, SECURITIES ISSUED BY UTILITY COMPANIES ARE PARTICULARLY SENSITIVE TO
INTEREST RATE MOVEMENTS. THE FUND'S SHARE PRICE AND YIELD WILL BE AFFECTED BY
INTEREST RATE MOVEMENTS. SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING,
INCLUDING CURRENCY VOLATILITY, ECONOMIC INSTABILITY AND POLITICAL DEVELOPMENTS
OF COUNTRIES WHERE THE FUND INVESTS. EMERGING MARKETS INVOLVE HEIGHTENED RISKS
RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE ASSOCIATED WITH THEIR
RELATIVELY SMALL SIZE AND LESSER LIQUIDITY.

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

2. Assumes reinvestment of distributions based on net asset value.

3. Assumes reinvestment of distributions based on the dividend reinvestment and
cash purchase plan.

4. Distribution rate is based on an annualization of the Fund's 3.8 cent per
share August dividend and the NYSE closing price of $6.68 on 8/31/07.

Annual Report | 5

Annual Shareholders' Meeting

MARCH 30, 2007

At an Annual Shareholders' Meeting of Franklin Universal Trust (the Fund) held
on March 30, 2007, shareholders took the following action:

1. Regarding the election of a Board of Trustees of the Fund.

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% OF WITHHELD % OF
SHARES OUTSTANDING % OF OR OUTSTANDING % OF
TRUSTEES FOR SHARES VOTED ABSTAIN SHARES VOTED
-------------------------------------------------------------------------------------------------------------

Harris J. Ashton ................. 21,359,277 79.17% 87.18% 3,141,282 11.64% 12.82%
Robert F. Carlson ................ 21,356,475 79.16% 87.17% 3,144,083 11.65% 12.83%
Edith E. Holiday ................. 21,335,339 79.08% 87.08% 3,165,219 11.73% 12.92%
Edward B. Jamieson ............... 21,380,573 79.25% 87.27% 3,119,985 11.56% 12.73%
Charles B. Johnson ............... 21,363,236 79.19% 87.19% 3,137,322 11.63% 12.81%
Rupert H. Johnson, Jr. ........... 21,385,156 79.27% 87.28% 3,115,403 11.55% 12.72%
Frank W.T. LaHaye ................ 21,355,779 79.16% 87.16% 3,144,779 11.66% 12.84%
Frank A. Olson ................... 21,350,962 79.14% 87.14% 3,149,597 11.67% 12.86%
John B. Wilson ................... 21,380,488 79.25% 87.27% 3,120,071 11.57% 12.73%

2. Shareholder Proposal

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% OF % OF % OF % OF
SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING BROKER OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAINING SHARES NON-VOTES SHARES
-----------------------------------------------------------------------------------------------------------

5,517,919 20.45% 9,030,592 33.47% 641,936 2.38% 9,310,112 34.51%

6 | Annual Report

Important Notice to Shareholders

SHARE REPURCHASE PROGRAM

The Fund's Board previously authorized an open-market share repurchase program,
pursuant to which the Fund may purchase Fund shares, from time to time, up to
10% of the Fund's common shares in open-market transactions, at the discretion
of management. This authorization remains in effect.

Annual Report | 7

Dividend Reinvestment and Cash Purchase Plan

The Fund's Dividend Reinvestment and Cash Purchase Plan (Plan) offers you a
prompt and simple way to reinvest dividends and capital gain distributions in
shares of the Fund. The Plan also allows you to purchase additional shares of
the Fund by making voluntary cash payments. PFPC Inc. (Plan Agent), P.O. Box
9223, Chelsea, MA 02150-9223, 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 Fund's Dividend Reinvestment and Cash Purchase Plan
Brochure. A copy of that Brochure may be obtained from the Fund 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 Fund declares a dividend or capital gain distribution payable either in
cash or in stock of the Fund and the market price of shares on the valuation
date equals or exceeds the net asset value, the Fund will issue new shares to
you at the higher of net asset value or 95% of the then current market price.
Whenever the Fund declares a distribution from capital gains or an income
dividend payable in either cash or shares, if the net asset value per share of
the Fund's common stock exceeds the market price per share on the valuation
date, the Plan Agent shall apply the amount of such dividend or distribution
payable to participants to the purchase of shares (less their pro rata share of
brokerage commissions incurred with respect to open market purchases in
connection with the reinvestment of such dividend or distribution). 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 Fund had issued new shares. All reinvestments
are in full and fractional shares, carried to three decimal places. The Fund
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 Fund. 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 PFPC Inc. and sent to PFPC Inc., Attn: Franklin Universal Trust, P.O.
Box 9223, Chelsea, MA 02150-9223.

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 Fund that are
purchased in the open market.

8 | Annual Report

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 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 Fund. 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 Fund 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 Fund 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.

Annual Report | 9

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 Fund 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 Fund.

10 | Annual Report

Franklin Universal Trust

FINANCIAL HIGHLIGHTS

----------------------------------------------------------
YEAR ENDED AUGUST 31,
2007 2006 2005 2004 2003
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)

Net asset value, beginning of year .................................... $ 7.09 $ 7.12 $ 6.48 $ 5.67 $ 5.13
----------------------------------------------------------
Income from investment operations a:
Net investment income b ............................................ 0.47 0.45 0.45 0.43 0.45
Net realized and unrealized gains (losses) ......................... 0.29 (0.05) 0.59 0.74 0.59
----------------------------------------------------------
Total from investment operations ...................................... 0.76 0.40 1.04 1.17 1.04
----------------------------------------------------------
Capital share repurchases ............................................. 0.02 0.01 -- -- --
----------------------------------------------------------
Less distributions from net investment income ......................... (0.46) (0.44) (0.40) (0.36) (0.50)
----------------------------------------------------------
Net asset value, end of year .......................................... $ 7.41 $ 7.09 $ 7.12 $ 6.48 $ 5.67
==========================================================
Market value, end of year c ........................................... $ 6.68 $ 6.52 $ 6.22 $ 5.65 $ 5.20
==========================================================

Total return (based on market value per share) ........................ 9.38% 12.48% 17.49% 15.79% (10.13)%

RATIOS TO AVERAGE NET ASSETS
Expenses .............................................................. 2.24% d 2.27% d 2.32% d 2.47% d 3.59%
Net investment income ................................................. 6.15% 6.47% 6.49% 6.85% 8.68%

SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................................... $190,968 $194,724 $198,861 $180,850 $158,364
Portfolio turnover rate ............................................... 29.30% 32.95% 34.60% 46.35% 65.15%
Total debt outstanding at end of year (000's) ......................... $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
Asset coverage per $1,000 of debt ..................................... $ 4,472 $ 4,540 $ 4,616 $ 4,288 $ 3,879
Average amount of senior fixed rate notes per share during the year ... $ 2.06 $ 1.97 $ 1.97 $ 1.97 $ 1.87

a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.

b Based on average daily shares outstanding.

c Based on the last sale on the New York Stock Exchange.

d Benefit of expense reduction rounds to less than 0.01%.

Annual Report |
The accompanying notes are an integral part of these financial statements. | 11

Franklin Universal Trust

STATEMENT OF INVESTMENTS, AUGUST 31, 2007

------------------------------------------------------------------------------------------------------------------------------------
COUNTRY SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS 126.1%
COMMON STOCKS 38.6%
NON-ENERGY MINERALS 1.3%
AngloGold Ashanti Ltd., ADR .......................................... South Africa 30,446 $ 1,188,307
Barrick Gold Corp. ................................................... Canada 35,800 1,164,216
---------------
2,352,523
---------------
PRODUCER MANUFACTURING 0.0% a
b Harvard Industries Inc. .............................................. United States 109,618 658
b,c,d VS Holdings Inc. ..................................................... United States 181,875 --
---------------
658
---------------
UTILITIES 37.3%
Alliant Energy Corp. ................................................. United States 55,000 2,083,400
Ameren Corp. ......................................................... United States 60,000 3,046,800
American Electric Power Co. Inc. ..................................... United States 30,000 1,334,400
Atmos Energy Corp. ................................................... United States 85,000 2,389,350
CenterPoint Energy Inc. .............................................. United States 226,600 3,675,452
Constellation Energy Group ........................................... United States 55,000 4,561,700
Dominion Resources Inc. .............................................. United States 50,000 4,259,000
DTE Energy Co. ....................................................... United States 45,000 2,151,450
Duke Energy Corp. .................................................... United States 124,700 2,286,998
Edison International ................................................. United States 65,000 3,426,150
Entergy Corp. ........................................................ United States 50,500 5,232,810
Exelon Corp. ......................................................... United States 104,000 7,349,680
FirstEnergy Corp. .................................................... United States 75,000 4,608,000
FPL Group Inc. ....................................................... United States 100,000 5,884,000
NSTAR ................................................................ United States 37,800 1,238,706
Pinnacle West Capital Corp. .......................................... United States 76,000 3,027,840
Progress Energy Inc. ................................................. United States 30,000 1,376,400
Public Service Enterprise Group Inc. ................................. United States 50,100 4,257,999
The Southern Co. ..................................................... United States 170,000 6,033,300
Spectra Energy Corp. ................................................. United States 62,350 1,449,638
TXU Corp. ............................................................ United States 24,000 1,617,600
---------------
71,290,673
---------------
TOTAL COMMON STOCKS (COST $46,429,764) ............................... 73,643,854
---------------

------------------
PRINCIPAL AMOUNT e
------------------

CORPORATE BONDS 87.4%
COMMERCIAL SERVICES 7.9%
Aramark Corp., senior note, 8.50%, 2/01/15 ........................... United States 2,000,000 2,002,500
f Ceva Group PLC, senior note, 144A, 10.00%, 9/01/14 ................... United Kingdom 1,500,000 1,498,125
Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 ................ United States 2,342,000 2,482,520
Iron Mountain Inc., senior sub. note, 8.75%, 7/15/18 ................. United States 2,400,000 2,442,000
JohnsonDiversey Inc., senior sub. note, B, 9.625%, 5/15/12 ........... United States 1,000,000 1,010,000
Lamar Media Corp., senior sub. note, 6.625%, 8/15/15 ................. United States 2,500,000 2,400,000
R.H. Donnelley Corp., senior note, 8.875%, 1/15/16 ................... United States 700,000 721,000
f Rental Service Corp., senior note, 144A, 9.50%, 12/01/14 ............. United States 2,500,000 2,459,375
---------------
15,015,520
---------------

12 | Annual Report

Franklin Universal Trust

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

------------------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT e VALUE
------------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
COMMUNICATIONS 6.9%
f Digicel Group Ltd., senior note, 144A, 8.875%, 1/15/15 ............... Jamaica 2,000,000 $ 1,832,600
Inmarsat Finance II PLC, senior note, zero cpn. to 11/15/08,
10.375% thereafter, 11/15/12 ...................................... United Kingdom 1,500,000 1,428,750
Intelsat Subsidiary Holding Co. Ltd., senior note, 8.25%,
1/15/13 ........................................................... Bermuda 2,500,000 2,525,000
f MetroPCS Wireless Inc., senior note, 144A, 9.25%, 11/01/14 ........... United States 900,000 891,000
Qwest Communications International Inc., senior note, 7.50%,
2/15/14 ........................................................... United States 2,000,000 1,975,000
f Wind Acquisition Finance SA, senior note, 144A, 10.75%,
12/01/15 .......................................................... Italy 2,500,000 2,587,500
Windstream Corp., senior note, 8.625%, 8/01/16 ....................... United States 1,900,000 1,995,000
---------------
13,234,850
---------------
CONSUMER DURABLES 6.0%
Beazer Homes USA Inc., senior note, 8.125%, 6/15/16 .................. United States 400,000 318,000
Ford Motor Credit Co. LLC,
7.80%, 6/01/12 .................................................. United States 1,500,000 1,383,276
senior note, 9.875%, 8/10/11 .................................... United States 2,000,000 1,975,928
General Motors Corp., senior deb., 8.25%, 7/15/23 .................... United States 1,500,000 1,203,750
Jarden Corp., senior sub. note, 7.50%, 5/01/17 ....................... United States 2,000,000 1,880,000
Jostens IH Corp., senior sub. note, 7.625%, 10/01/12 ................. United States 1,400,000 1,410,500
KB Home, senior note,
6.25%, 6/15/15 .................................................. United States 1,200,000 1,029,000
7.25%, 6/15/18 .................................................. United States 1,300,000 1,144,000
Visant Holding Corp., senior note, 8.75%, 12/01/13 ................... United States 1,100,000 1,105,500
---------------
11,449,954
---------------
CONSUMER NON-DURABLES 2.5%
Dole Foods Co., senior note, 7.25%, 6/15/10 .......................... United States 100,000 93,000
Reynolds American Inc., senior secured note, 7.625%, 6/01/16 ......... United States 2,500,000 2,630,717
Smithfield Foods Inc., senior note, 7.75%,
5/15/13 ......................................................... United States 1,000,000 1,010,000
7/01/17 ......................................................... United States 1,000,000 1,010,000
---------------
4,743,717
---------------
CONSUMER SERVICES 12.7%
c,d,g Atherton Franchise Capital, 13.073%, 12/01/08 ........................ United States 721,603 28,864
Cablevision Systems Corp., senior note, B, 8.00%, 4/15/12 ............ United States 2,000,000 1,925,000
CanWest Media Inc., senior sub. note, 8.00%, 9/15/12 ................. Canada 2,000,000 1,957,500
CCH II LLC, senior note, 10.25%, 9/15/10 ............................. United States 2,500,000 2,537,500
EchoStar DBS Corp., senior note, 7.125%, 2/01/16 ..................... United States 2,000,000 1,965,000
f Fontainebleau Las Vegas, 144A, 10.25%, 6/15/15 ....................... United States 1,100,000 948,750
LIN Television Corp., senior sub. note, 6.50%, 5/15/13 ............... United States 1,500,000 1,417,500
MGM MIRAGE, senior note,
6.875%, 4/01/16 ................................................. United States 2,000,000 1,905,000
7.50%, 6/01/16 .................................................. United States 500,000 496,250
f Outback Steakhouse Inc., senior note, 144A, 10.00%, 6/15/15 .......... United States 1,300,000 1,127,750
Quebecor Media Inc., senior note, 7.75%, 3/15/16 ..................... Canada 2,000,000 1,912,500

Annual Report | 13

Franklin Universal Trust

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
CONSUMER SERVICES (CONTINUED)
Radio One Inc., senior sub. note, 6.375%, 2/15/13 .................... United States 1,700,000 $ 1,491,750
Royal Caribbean Cruises Ltd., senior note,
8.00%, 5/15/10 .................................................. United States 1,200,000 1,253,842
6.875%, 12/01/13 ................................................ United States 800,000 784,787
Station Casinos Inc., senior sub. note,
6.50%, 2/01/14 .................................................. United States 300,000 255,750
6.875%, 3/01/16 ................................................. United States 2,200,000 1,853,500
f Univision Communications Inc., senior note, 144A, PIK, 9.75%,
3/15/15 ........................................................... United States 2,500,000 2,393,750
---------------
24,254,993
---------------
ELECTRONIC TECHNOLOGY 6.3%
DRS Technologies Inc., senior sub. note, 7.625%, 2/01/18 ............. United States 1,800,000 1,773,000
Freescale Semiconductor Inc., senior note, 8.875%, 12/15/14 .......... United States 2,200,000 2,040,500
f Hawker Beechcraft Acquisition Co., senior note, 144A, PIK, 8.875%,
4/01/15 ........................................................... United States 600,000 586,500
L-3 Communications Corp., senior sub. note, 6.375%, 10/15/15 ......... United States 2,500,000 2,431,250
NXP BV/NXP Funding LLC, senior secured note, 7.875%, 10/15/14 ........ Netherlands 1,900,000 1,721,875
Sanmina-SCI Corp.,
f,h senior note, 144A, FRN, 8.11%, 6/15/14 ........................... United States 700,000 663,250
senior sub. note, 6.75%, 3/01/13 ................................. United States 1,100,000 940,500
senior sub. note, 8.125%, 3/01/16 ................................ United States 400,000 348,000
TransDigm Inc., senior sub. note, 7.75%, 7/15/14 ..................... United States 1,500,000 1,515,000
---------------
12,019,875
---------------
ENERGY MINERALS 4.9%
Chesapeake Energy Corp., senior note, 6.25%, 1/15/18 ................. United States 2,500,000 2,353,125
Mariner Energy Inc., senior note, 7.50%, 4/15/13 ..................... United States 2,500,000 2,387,500
f Petroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14 ............ Switzerland 1,900,000 1,771,750
Pogo Producing Co., senior sub. note,
7.875%, 5/01/13 .................................................. United States 300,000 303,750
6.875%, 10/01/17 ................................................. United States 2,000,000 2,025,000
f Tesoro Corp., senior note, 144A, 6.50%, 6/01/17 ...................... United States 600,000 586,500
---------------
9,427,625
---------------
FINANCE 2.4%
GMAC LLC, 6.875%, 8/28/12 ............................................ United States 3,500,000 3,095,047
United Rentals North America Inc., senior sub. note, 7.75%,
11/15/13 .......................................................... United States 1,500,000 1,552,500
---------------
4,647,547
---------------
HEALTH SERVICES 6.4%
DaVita Inc., senior sub. note, 7.25%, 3/15/15 ........................ United States 2,500,000 2,462,500
HCA Inc., senior note, 6.50%, 2/15/16 ................................ United States 2,500,000 2,050,000
Tenet Healthcare Corp., senior note, 7.375%, 2/01/13 ................. United States 3,000,000 2,505,000
f,h U.S. Oncology Holdings Inc., senior note, 144A, FRN, 9.797%,
3/15/12 ........................................................... United States 2,000,000 1,860,000

14 | Annual Report

Franklin Universal Trust

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
HEALTH SERVICES (CONTINUED)
f United Surgical Partners International Inc., senior sub. note, 144A,
PIK, 9.25%, 5/01/17 ................................................ United States 1,100,000 $ 1,050,500
Vanguard Health Holding Co. II LLC, senior sub. note, 9.00%,
10/01/14 ........................................................... United States 2,500,000 2,350,000
---------------
12,278,000
---------------
INDUSTRIAL SERVICES 5.7%
Allied Waste North America Inc., senior secured note, 6.875%,
6/01/17 ............................................................ United States 1,100,000 1,072,500
f Bristow Group Inc., senior note, 144A, 7.50%, 9/15/17 ................ United States 700,000 700,000
Compagnie Generale de Geophysique-Veritas, senior note,
7.50%, 5/15/15 .................................................... France 400,000 404,000
7.75%, 5/15/17 .................................................... France 600,000 609,000
Copano Energy LLC, senior note, 8.125%, 3/01/16 ...................... United States 1,500,000 1,515,000
El Paso Corp., senior note, 6.875%, 6/15/14 .......................... United States 2,400,000 2,433,590
Markwest Energy Partners LP, senior note, 6.875%, 11/01/14 ........... United States 2,000,000 1,880,000
The Williams Cos. Inc.,
8.75%, 3/15/32 .................................................... United States 800,000 914,000
senior note, 7.625%, 7/15/19 ...................................... United States 600,000 640,500
senior note, 7.875%, 9/01/21 ...................................... United States 700,000 754,250
---------------
10,922,840
---------------
NON-ENERGY MINERALS 1.8%
Freeport-McMoRan Copper & Gold Inc., senior note, 8.375%,
4/01/17 ............................................................ United States 1,700,000 1,814,750
Novelis Inc., senior note, 7.25%, 2/15/15 ............................ Canada 1,700,000 1,657,500
---------------
3,472,250
---------------
PROCESS INDUSTRIES 10.3%
Buckeye Technologies Inc., senior sub. note, 8.00%, 10/15/10 ......... United States 2,000,000 2,010,000
Crown Americas Inc., senior note, 7.75%, 11/15/15 .................... United States 2,500,000 2,537,500
Huntsman International LLC, senior sub. note, 7.875%, 11/15/14 ....... United States 2,500,000 2,625,000
f Ineos Group Holdings PLC, 144A, 8.50%, 2/15/16 ....................... United Kingdom 2,500,000 2,312,500
JSG Funding PLC, senior sub. note, 7.75%, 4/01/15 .................... Ireland 2,000,000 1,940,000
Lyondell Chemical Co., senior note,
8.00%, 9/15/14 .................................................... United States 1,200,000 1,311,000
6.875%, 6/15/17 ................................................... United States 1,000,000 1,087,500
f MacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17 ............... United States 800,000 748,000
Nalco Co., senior sub. note, 8.875%, 11/15/13 ........................ United States 2,000,000 2,055,000
Owens-Brockway Glass Container Inc., senior note, 6.75%,
12/01/14 ........................................................... United States 2,000,000 1,940,000
Verso Paper Holdings LLC, senior secured note, 9.125%, 8/01/14 ....... United States 1,100,000 1,105,500
---------------
19,672,000
---------------
PRODUCER MANUFACTURING 2.5%
Greenbrier Cos. Inc., senior note, 8.375%, 5/15/15 ................... United States 1,000,000 985,000
RBS Global & Rexnord Corp., senior note, 9.50%, 8/01/14 .............. United States 2,000,000 2,030,000
f TRW Automotive Inc., senior note, 144A, 7.25%, 3/15/17 ............... United States 2,000,000 1,830,000
---------------
4,845,000
---------------

Annual Report | 15

Franklin Universal Trust

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS 1.3%
Host Marriott LP, senior note,
M, 7.00%, 8/15/12 ................................................. United States 2,000,000 $ 1,945,000
O, 6.375%, 3/15/15 ................................................ United States 500,000 487,500
---------------
2,432,500
---------------
RETAIL TRADE 2.3%
f Dollar General Corp., senior note, 144A, 10.625%, 7/15/15 ............ United States 2,000,000 1,810,000
f Michaels Stores Inc., senior note, 144A, 10.00%, 11/01/14 ............ United States 2,500,000 2,518,750
---------------
4,328,750
---------------
TECHNOLOGY SERVICES 1.5%
d,g PSINet Inc.,
10.50%, 12/01/06 .................................................. United States 700,000 70
senior note, 11.00%, 8/01/09 ...................................... United States 3,250,000 325
SunGard Data Systems Inc.,
senior note, 9.125%, 8/15/13 ...................................... United States 900,000 933,750
senior sub. note, 10.25%, 8/15/15 ................................. United States 1,900,000 1,966,500
---------------
2,900,645
---------------
TRANSPORTATION 0.8%
Great Lakes Dredge & Dock Co., senior sub. note, 7.75%, 12/15/13 ..... United States 1,500,000 1,436,250
---------------
UTILITIES 5.2%
Aquila Inc., senior note, 14.875%, 7/01/12 ........................... United States 2,000,000 2,515,000
Dynegy Holdings Inc., senior note, 8.75%, 2/15/12 .................... United States 2,600,000 2,639,000
f Edison Mission Energy, senior note, 144A, 7.00%, 5/15/17 ............. United States 2,300,000 2,185,000
NRG Energy Inc., senior note, 7.375%,
2/01/16 ........................................................... United States 1,800,000 1,782,000
1/15/17 ........................................................... United States 700,000 689,500
---------------
9,810,500
---------------
TOTAL CORPORATE BONDS (COST $174,328,673) ............................ 166,892,816
---------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 0.1%
GOVERNMENT BONDS 0.1%
Eskom Holdings Ltd., 11.00%,
6/01/08 ........................................................... South Africa 783,334 ZAR 110,211
6/01/09 ........................................................... South Africa 783,333 ZAR 111,202
---------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES
(COST $423,142) .................................................... 221,413
---------------
TOTAL LONG TERM INVESTMENTS (COST $221,181,579) ...................... 240,758,083
---------------

16 | Annual Report

Franklin Universal Trust

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

SHORT TERM INVESTMENT (COST $1,559,867) 0.8%
MONEY MARKET FUND 0.8%
i Franklin Institutional Fiduciary Trust Money Market Portfolio,
4.98% .............................................................. United States 1,559,867 $ 1,559,867
---------------
TOTAL INVESTMENTS (COST $222,741,446) 126.9% ......................... 242,317,950
NOTES PAYABLE (28.8)% ................................................ (55,000,000)
OTHER ASSETS, LESS LIABILITIES 1.9% .................................. 3,649,928
---------------
NET ASSETS 100.0% .................................................... $ 190,967,878
===============

CURRENCY ABBREVIATIONS

ZAR - South African Rand

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
FRN - Floating Rate Note
PIK - Payment-In-Kind

a Rounds to less than 0.1% of net assets.

b Non-income producing for the twelve months ended August 31, 2007.

c See Note 10 regarding restricted securities.

d Security has been deemed illiquid because it may not be able to be sold within
seven days. At August 31, 2007, the aggregate value of these securities was
$29,259, representing 0.02% of net assets.

e The principal amount is stated in U.S. dollars unless otherwise indicated.

f Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and may be sold in transactions exempt from registration only to qualified
institutional buyers or in a public offering registered under the Securities Act
of 1933. These securities have been deemed liquid under guidelines approved by
the Fund's Board of Trustees. At August 31, 2007, the aggregate value of these
securities was $32,361,600, representing 16.95% of net assets.

g See Note 9 regarding defaulted securities.

h The coupon rate shown represents the rate at period end.

i See Note 8 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio. The rate shown is the annualized seven-day yield at
period end.

Annual Report |
The accompanying notes are an integral part of these financial statements. | 17

Franklin Universal Trust

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
August 31, 2007

Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................. $ 221,181,579
Cost - Sweep Money Fund (Note 8) ........................ 1,559,867
---------------
Total cost of investments ............................... $ 222,741,446
===============
Value - Unaffiliated issuers ............................ $ 240,758,083
Value - Sweep Money Fund (Note 8) ....................... 1,559,867
---------------
Total value of investments .............................. 242,317,950
Cash ...................................................... 1,138,500
Foreign currency, at value (cost $110,394) ................ 109,787
Receivables from dividends and interest ................... 3,740,943
Note issuance costs (Note 3) .............................. 43,409
---------------
Total assets .......................................... 247,350,589
---------------
Liabilities:
Payables:
Capital shares repurchased .............................. 162,277
Affiliates .............................................. 152,950
Distributions to shareholders ........................... 980,559
Senior fixed rate notes (Note 3) .......................... 55,000,000
Accrued expenses and other liabilities .................... 86,925
---------------
Total liabilities ..................................... 56,382,711
---------------
Net assets, at value ................................ $ 190,967,878
===============
Net assets consist of:
Paid-in capital ........................................... $ 240,206,709
Undistributed net investment income ....................... 2,621,423
Net unrealized appreciation (depreciation) ................ 19,575,848
Accumulated net realized gain (loss) ...................... (71,436,102)
---------------
Net assets, at value ................................ $ 190,967,878
===============
Shares outstanding ........................................... 25,779,994
===============
Net asset value per share .................................... $ 7.41
===============

18 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Franklin Universal Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended August 31, 2007

Investment income:
Dividends:
Unaffiliated issuers ...................................................... $ 2,727,192
Sweep Money Fund (Note 8) ................................................. 92,291
Interest .................................................................... 14,165,290
--------------
Total investment income ................................................. 16,984,773
--------------
Expenses:
Management fees (Note 4a) ................................................... 1,921,325
Interest expense (Note 3) ................................................... 2,277,000
Transfer agent fees ......................................................... 82,084
Custodian fees (Note 5) ..................................................... 16,387
Reports to shareholders ..................................................... 42,982
Professional fees ........................................................... 105,478
Trustees' fees and expenses ................................................. 18,205
Amortization of note issuance costs (Note 3) ................................ 41,634
Other ....................................................................... 35,687
--------------
Total expenses .......................................................... 4,540,782
Expense reductions (Note 5) ............................................. (1,937)
--------------
Net expenses .......................................................... 4,538,845
--------------
Net investment income ............................................... 12,445,928
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................... 2,830,383
Foreign currency transactions ............................................. (415)
--------------
Net realized gain (loss) ............................................ 2,829,968
--------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................... 4,787,846
Translation of assets and liabilities denominated in foreign currencies ... (533)
--------------
Net change in unrealized appreciation (depreciation) ................ 4,787,313
--------------
Net realized and unrealized gain (loss) ........................................ 7,617,281
--------------
Net increase (decrease) in net assets resulting from operations ................ $ 20,063,209
==============

Annual Report |
The accompanying notes are an integral part of these financial statements. | 19

Franklin Universal Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

-------------------------------
YEAR ENDED AUGUST 31,
2007 2006
-------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ............................................................ $ 12,445,928 $ 12,556,216
Net realized gain (loss) from investments and foreign currency transactions ...... 2,829,968 6,140,024
Net change in unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign currencies ........ 4,787,313 (7,530,713)
-------------------------------
Net increase (decrease) in net assets resulting from operations ............... 20,063,209 11,165,527
Distributions to shareholders from net investment income ............................ (12,153,252) (12,359,649)
Capital share transactions (Note 2) ................................................. (11,666,494) (2,942,222)
-------------------------------
Net increase (decrease) in net assets ......................................... (3,756,537) (4,136,344)
Net assets:
Beginning of year ................................................................... 194,724,415 198,860,759
-------------------------------
End of year ......................................................................... $ 190,967,878 $ 194,724,415
===============================
Undistributed net investment income included in net assets:
End of year ......................................................................... $ 2,621,423 $ 2,307,162
===============================

20 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Franklin Universal Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF CASH FLOWS
for the year ended August 31, 2007

Cash flow from operating activities:
Dividends and interest received ..................................................... $ 16,550,296
Operating expenses paid ............................................................. (2,173,096)
Interest expense paid ............................................................... (2,277,000)
Purchases of long-term investments .................................................. (74,158,447)
Sales and maturities of long-term investments ....................................... 87,343,513
Net purchases of short-term investments ............................................. (1,433,714)
--------------
Cash provided - operating activities ............................................. 23,851,552
--------------
Cash flow from financing activities:
Open-market shares repurchased ...................................................... (11,504,217)
Distributions to shareholders ....................................................... (12,216,241)
--------------
Cash used - financing activities ................................................. (23,720,458)
--------------
Net increase (decrease) in cash ........................................................ 131,094
Cash at beginning of period ............................................................ 1,117,800
--------------
Cash at end of period .................................................................. $ 1,248,894
==============

RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATING
ACTIVITIES
for the year ended August 31, 2007

Net increase (decrease) in net assets resulting from operating activities .............. $ 20,063,209
Adjustments to reconcile net increase (decrease) in net assets resulting from
operating activities to net cash provided by operating activities:
Amortization of note issuance costs ............................................... 41,634
Net amortization income ........................................................... (354,772)
Reinvested dividends from Sweep Money Fund ........................................ (92,291)
Other investment transactions ..................................................... 150,755
Decrease in dividends and interest receivable ..................................... 12,586
Decrease in other receivables ..................................................... 1,406
Increase in other liabilities ..................................................... 47,115
Decrease in cost of investments ................................................... 8,769,223
Increase in unrealized appreciation on investments ................................ (4,787,313)
--------------
Net cash provided by operating activities .............................................. $ 23,851,552
==============

Annual Report |
The accompanying notes are an integral part of these financial statements. | 21

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 amended, (the 1940 Act) as a diversified, closed-end investment
company.

The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.

Corporate debt securities and government securities generally trade in the
over-the-counter market rather than on a securities exchange. The Fund may
utilize independent pricing services, quotations from bond dealers, and
information with respect to bond and note transactions, to assist in determining
a current market value for each security. The Fund's pricing services may use
valuation models or matrix pricing which considers information with respect to
comparable bond and note transactions, quotations from bond dealers, or by
reference to other securities that are considered comparable in such
characteristics as rating, interest rate and maturity date, option adjusted
spread models, prepayment projections, interest rate spreads and yield curves,
to determine current value.

Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.

The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. The investment manager monitors price movements
following the close of trading in foreign stock markets through a series of
country specific market proxies (such as baskets of

22 | Annual Report

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

American Depository Receipts, futures contracts and exchange traded funds).
These price movements are measured against established trigger thresholds for
each specific market proxy to assist in determining if an event has occurred. If
such an event occurs, the securities may be valued using fair value procedures,
which may include the use of independent pricing services. All security
valuation procedures are approved by the Fund's 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, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Trustees.

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 on the
Statement of Operations.

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. FOREIGN CURRENCY CONTRACTS

When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate at a future date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.

Annual Report | 23

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. INCOME TAXES

No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.

E. 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. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividend income is recorded on the ex-dividend date. Distributions to
shareholders are recorded on the ex-dividend date and are determined according
to income tax regulations (tax basis). Distributable earnings determined on a
tax basis may differ from earnings recorded in accordance with accounting
principles generally accepted in the United States of America. These differences
may be permanent or temporary. Permanent differences are reclassified among
capital accounts to reflect their tax character. These reclassifications have no
impact on net assets or the results of operations. Temporary differences are not
reclassified, as they may reverse in subsequent periods.

F. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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.

G. GUARANTEES AND INDEMNIFICATIONS

Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. Currently, the Trust expects the
risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At August 31, 2007, there were an unlimited number of shares authorized ($0.01
par value). During the years ended August 31, 2007 and August 31, 2006 there
were no shares issued; all reinvested distributions were satisfied with
previously issued shares purchased in the open market.

24 | Annual Report

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

The Fund's Board of Trustees previously authorized an open-market share
repurchase program pursuant to which the Fund may purchase from time to time
Fund shares in open-market transactions, at the discretion of management. This
authorization remains in effect. Through August 31, 2007, the Fund had
repurchased a total of 2,144,300 shares.

Transactions in the Fund's shares were as follows:

--------------------------------------------------
YEARS ENDED AUGUST 31,
2007 2006
--------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------

Shares repurchased ................. 1,681,800 $ 11,666,494 462,500 $ 2,942,222

Weighted average discount of market
price to net asset value of shares
repurchased ...................... 8.78% 8.35%

3. SENIOR FIXED RATE NOTES

On August 29, 2003, the Fund issued $55 million principal amount of a new class
of five-year senior fixed rate 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 4.14% per year,
to maturity on August 29, 2008. The Fund may prepay the Notes at par at any
time; therefore, market value approximates the principal amount of 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 in the Note
Agreement, and is required under the 1940 Act to maintain asset coverage for the
Notes of at least 300%. The Fund has met these requirements during the year
ended August 31, 2007.

The issuance costs of $200,000 incurred by the Fund are deferred and amortized
on an interest method basis over the term of the Notes.

4. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:

--------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
--------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment Manager
Franklin Templeton Services, LLC (FT Services) Administrative Manager

Annual Report | 25

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. TRANSACTIONS WITH AFFILIATES (CONTINUED)

A. MANAGEMENT FEES

The Fund pays an investment management fee to Advisers of 0.75% per year of the
average weekly managed assets. Managed assets are defined as the Fund's gross
asset value minus the sum of accrued liabilities, other than the principal
amount of the Notes.

B. ADMINISTRATIVE FEES

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. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended August 31, 2007, the
custodian fees were reduced as noted in the Statement of Operations.

6. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At August 31, 2007, the capital loss carryforwards were as
follows:

Capital loss carryforwards expiring in:
2008 ................................... $ 2,437,234
2009 ................................... 1,167,255
2010 ................................... 6,827,086
2011 ................................... 34,372,527
2012 ................................... 18,676,213
2013 ................................... 3,246,257
2014 ................................... 4,662,560
-------------
$ 71,389,132
=============

During the year ended August 31, 2007, the Fund utilized $2,650,961 of capital
loss carryforwards.

For tax purposes, realized currency losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At August 31, 2007, the Fund deferred realized currency losses of
$106,970.

26 | Annual Report

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES (CONTINUED)

The tax character of distributions paid during the years ended August 31, 2007
and 2006, was as follows:

-----------------------------
2007 2006
-----------------------------
Distributions paid from ordinary income ... $ 12,153,252 $ 12,359,649

At August 31, 2007, the cost of investments, net unrealized appreciation
(depreciation) and undistributed ordinary income for income tax purposes were as
follows:

Cost of investments ...................................... $ 222,994,600
==============

Unrealized appreciation .................................. $ 33,901,770
Unrealized depreciation .................................. (14,578,420)
--------------
Net unrealized appreciation (depreciation) ............... $ 19,323,350
==============

Distributable earnings - undistributed ordinary income ... $ 3,911,725
==============

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities, foreign currency
transactions, bond discounts and premiums and Note offering costs.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions and bond
discounts and premiums.

7. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
year ended August 31, 2007, aggregated $74,158,447 and $87,964,571,
respectively.

8. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Fund are reduced on assets invested in the
Sweep Money Fund, in an amount not to exceed the management and administrative
fees paid by the Sweep Money Fund.

9. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 69.0% of its portfolio invested in below investment grade 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.

Annual Report | 27

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. CREDIT RISK AND DEFAULTED SECURITIES (CONTINUED)

The Fund held defaulted securities and/or other securities for which the income
has been deemed uncollectible. At August 31, 2007, the aggregate value of these
securities was $29,259, representing 0.01% of the Fund's portfolio. The Fund
discontinues accruing income on securities for which income has been deemed
uncollectible and provides an estimate for losses on interest receivable. The
securities have been identified on the accompanying Statement of Investments.

10. RESTRICTED SECURITIES

The Fund may invest in securities that are restricted under the Securities Act
of 1933 (the 1933 Act) or which are subject to legal, contractual, or other
agreed upon restrictions on resale. Restricted securities are often purchased in
private placement transactions, and cannot be sold without prior registration
unless the sale is pursuant to an exemption under the 1933 Act. Disposal of
these securities may require greater effort and expense, and prompt sale at an
acceptable price may be difficult. The Fund may have registration rights for
restricted securities. The issuer generally incurs all registration costs.

At August 31, 2007, the Fund held investments in restricted securities,
excluding 144A securities deemed to be liquid, valued in accordance with
procedures approved by the Fund's Board of Trustees as reflecting fair value, as
follows:

---------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT/ ACQUISITION
SHARES ISSUER DATE COST VALUE
---------------------------------------------------------------------------------------------------------------

$ 721,603 Atherton Franchise Capital, 13.073%, 12/01/08 ..... 4/28/94 $ 721,603 $ 28,864
181,875 VS Holdings Inc. ................................... 12/06/01 181,875 --
---------
TOTAL RESTRICTED SECURITIES (0.02% of Net Assets) .. $ 28,864
=========

11. REGULATORY AND LITIGATION MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.

On June 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006.

28 | Annual Report

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. REGULATORY AND LITIGATION MATTERS (CONTINUED)

On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Once the SEC approves the final
plan of distribution, disbursements of settlement monies will be made promptly
to individuals who were shareholders of the designated funds during the relevant
period, in accordance with the terms and conditions of the settlement and plan.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above.

The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or their shareholders whole, as appropriate.

12. NEW ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period beginning after
December 16, 2006. The Fund believes the adoption of FIN 48 will have no
material impact on its financial statements.

In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
("SFAS 157"), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Fund believes the adoption of SFAS 157
will have no material impact on its financial statements.

Annual Report | 29

Franklin Universal Trust

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 and 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, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
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, 2007 by correspondence with the
custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
October 18, 2007

30 | Annual Report

Franklin Universal Trust

TAX DESIGNATION (UNAUDITED)

Under Section 854(b)(2) of the Internal Revenue Code (Code), the Fund designates
16.05% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended August 31, 2007.

Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $2,609,469 as qualified dividends for purposes of the
maximum rate under Section 1(h)(11) of the Code for the fiscal year ended August
31, 2007. In January 2008, shareholders will receive Form 1099-DIV which will
include their share of qualified dividends distributed during the calendar year
2007. Shareholders are advised to check with their tax advisors for information
on the treatment of these amounts on their individual income tax returns.

Under Section 871(k)(1)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $8,777,875 as interest related dividends for purposes
of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year
ended August 31, 2007.

Annual Report | 31

Franklin Universal Trust

BOARD MEMBERS AND OFFICERS

The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Fund, principal occupation during
the past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Generally, each board member serves
until that person's successor is elected and qualified.

INDEPENDENT BOARD MEMBERS

------------------------------- --------------- ------------------ ----------------------- -------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
------------------------------- --------------- ------------------ ----------------------- -------------------------------------

HARRIS J. ASHTON (1932) Trustee Since 1988 139 Bar-S Foods (meat packing company).
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since 2000 120 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS);
and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and
Chief Counsel, California Department of Transportation.
------------------------------------------------------------------------------------------------------------------------------------
SAM GINN (1937) Trustee Since April 2007 120 Chevron Corporation (global energy
One Franklin Parkway company) and ICO Global
San Mateo, CA 94403-1906 Communications (Holdings) Limited
(satellite company).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief
Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone holding
company) (1988-1994).
------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 2004 139 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J. Heinz
San Mateo, CA 94403-1906 Company (processed foods and allied
products), RTI International Metals,
Inc. (manufacture and distribution of
titanium), Canadian National Railway
(railroad) and White Mountains
Insurance Group, Ltd. (holding
company).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
------------------------------------------------------------------------------------------------------------------------------------

32 | Annual Report

FRANK W.T. LAHAYE (1929) Trustee Since 1988 120 Center for Creative Land Recycling
One Franklin Parkway (brownfield redevelopment).
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since 2005 139 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and Sentient
San Mateo, CA 94403-1906 Jet (private jet service).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
------------------------------------------------------------------------------------------------------------------------------------
LARRY D. THOMPSON (1945) Trustee Since April 2007 139 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and formerly,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General,
U.S. Department of Justice (2001-2003).
------------------------------------------------------------------------------------------------------------------------------------
JOHN B. WILSON (1959) Trustee Since 2006 120 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer
and Executive Vice President - Finance Strategy, Staples, Inc. (office supplies) (1992-1996); Executive Vice President - Corporate
Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).
------------------------------------------------------------------------------------------------------------------------------------

INTERESTED BOARD MEMBERS AND OFFICERS

**EDWARD B. JAMIESON (1948) Trustee, Trustee, President 1 None
One Franklin Parkway President and since 1993 and
San Mateo, CA 94403-1906 Chief Chief Executive
Executive Officer -
Officer - Investment
Investment Management
Management since 2002

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton
Institutional, LLC; and officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc.
and of four of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 33

**CHARLES B. JOHNSON (1933) Trustee and Trustee since 139 None
One Franklin Parkway Chairman of 1988 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director; Templeton Worldwide, Inc.;
and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42
of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (1940) Trustee and Since 1988 55 None
One Franklin Parkway Senior Vice
San Mateo, CA 94403-1906 President

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin
Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Since 2004 Not Applicable Not Applicable
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 30 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the
investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------

34 | Annual Report

KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 30 of the investment companies in Franklin
Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman & Sterling,
LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 46 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and
1991-2004).
------------------------------------------------------------------------------------------------------------------------------------

* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments fund
complex. These portfolios have a common investment manager or affiliated
investment managers.

** Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be interested
persons of the Fund under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources, Inc., which
is the parent company of the Fund's investment manager and distributor. Edward
B. Jamieson is considered to be an interested person of the Fund under the
federal securities laws due to his position as officer and director of the
Fund's investment manager.

Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.

Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.

THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER
OF STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2006. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. WILSON HAS ACQUIRED AN
UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL
STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION WITH THE
ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND EVALUATING
FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY OF
ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. WILSON IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES OR THE LISTING STANDARDS APPLICABLE TO THE FUND.

Annual Report | 35

Franklin Universal Trust

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures (Policies) that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

CERTIFICATIONS

The Fund's Chief Executive Officer - Finance and Administration is required by
the New York Stock Exchange's Listing Standards to file annually with the
Exchange a certification that he is not aware of any violation by the Fund of
the Exchange's Corporate Governance Standards applicable to the Fund. The Fund
has filed such certification.

In addition, the Fund's Chief Executive Officer - Finance and Administration and
Chief Financial Officer and Chief Accounting Officer are required by the rules
of the U.S. Securities and Exchange Commission to provide certain certifications
with respect to the Fund's Form N-CSR and Form N-CSRS (which include the Fund's
annual and semiannual reports to shareholders) that are filed semiannually with
the Commission. The Fund has filed such certifications with its Form N-CSRS for
the six months ended February 28, 2007. Additionally, the Fund expects to file,
on or about October 30, 2007, such certifications with its Form N-CSR for the
year ended August 31, 2007.

36 | Annual Report

Literature Request

LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.

FRANKLIN TEMPLETON FUNDS

INTERNATIONAL

Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund 1

GLOBAL

Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund 1
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small Cap Growth Fund II 2
Franklin Small-Mid Cap Growth Fund

VALUE

Franklin Balance Sheet Investment Fund 1
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 1
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND

Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

INCOME

Franklin Adjustable U.S. Government Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund 4
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund

Franklin U.S. Government Securities Fund 4
Templeton Global Bond Fund
Templeton Income Fund

TAX-FREE INCOME 6

NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 7

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC

Alabama
Arizona
California 8
Colorado
Connecticut
Florida 8
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 7
Michigan 7
Minnesota 7
Missouri
New Jersey
New York 8
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 9

1. The fund is open only to existing shareholders and select retirement plans.

2. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

3. The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.

4. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy remained the
same.

6. For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.

7. The fund invests primarily in insured municipal securities.

8. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).

9. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

05/07 Not part of the annual report

[LOGO](R)
FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906

ANNUAL REPORT

FRANKLIN UNIVERSAL TRUST

INVESTMENT MANAGER

Franklin Advisers, Inc.
1-800/DIAL BEN(R)

TRANSFER AGENT

PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

FUT A2007 10/07

ITEM 2. CODE OF ETHICS.

(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.

(2) The audit committee financial expert is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Audit Fees

The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $38,082 for the fiscal year ended August 31, 2007 and $22,209 for the
fiscal year ended August 31, 2006.

(b) Audit-Related Fees

The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4 were $0 for the
fiscal year ended August 31, 2007 and $8,736 for fiscal year ended August 31,
2006. The services for which these fees were paid included attestation services.

There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.

There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.

The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $46,000 for the fiscal year ended
August 31, 2007 and $0 for the fiscal year ended August 31, 2006. The services
for which these fees were paid included tax compliance and advice.

(d) All Other Fees

The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended August 31, 2007
and $110 for the fiscal year ended August 31, 2006. The services for which these
fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended August 31,
2007 and $175,751 for the fiscal year ended August 31, 2006. The services for
which these fees were paid included review of materials provided to the fund
Board in connection with the investment management contract renewal process.

(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:

(i) pre-approval of all audit and audit related services;

(ii) pre-approval of all non-audit related services to be provided to the
Fund by the auditors;

(iii)pre-approval of all non-audit related services to be provided to the
registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and

(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $46,000 for the fiscal year ended August 31, 2007 and $184,597
for the fiscal year ended August 31, 2006.

(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Members of the Audit Committee are: Robert F. Carlson, Frank W. T. LaHaye and
John B. Wilson.

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

The board of trustees of the Fund has delegated the authority to vote proxies
related to the portfolio securities held by the Fund to the Fund's manager
Franklin Advisers, Inc. in accordance with the Proxy Voting Policies and
Procedures (Policies) adopted by the manager.

The manager has delegated its administrative duties with respect to the voting
of proxies to the Proxy Group within Franklin Templeton Companies, LLC (Proxy
Group), an affiliate and wholly owned subsidiary of Franklin Resources, Inc. All
proxies received by the Proxy Group will be voted based upon the manager's
instructions and/or policies.

To assist it in analyzing proxies, the manager subscribes to RiskMetrics Group
(RiskMetrics), an unaffiliated third party corporate governance research service
that provides in-depth analyses of shareholder meeting agendas, vote
recommendations, recordkeeping and vote disclosure services. In addition, the
manager subscribes to Glass, Lewis & Co., LLC (Glass Lewis), an unaffiliated
third party analytical research firm, to receive analyses and vote
recommendations on the shareholder meetings of publicly held U.S. companies.
Although RiskMetrics' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from RiskMetrics, Glass Lewis or any other third party to be
determinative of the manager's ultimate decision. The manager votes proxies
solely in the interests of the Fund and its shareholders. As a matter of policy,
the officers, directors/trustees and employees of the Fund, the manager and the
Proxy Group will not be influenced by outside sources whose interests conflict
with the interests of the Fund and its shareholders. Efforts are made to resolve
all conflicts in the interests of the manager's clients. Material conflicts of
interest are identified by the Proxy Group based upon analyses of client, broker
and vendor lists, information periodically gathered from directors and officers,
and information derived from other sources, including public filings. In
situations where a material conflict of interest is identified, the Proxy Group
may defer to the voting recommendation of RiskMetrics, Glass Lewis or those of
another independent third party provider of proxy services; or send the proxy
directly to the Fund with a recommendation regarding the vote for approval. If
the conflict is not resolved by the Fund, the Proxy Group may refer the matter,
along with the recommended course of action by the manager to an
interdepartmental Proxy Review Committee (which may include portfolio managers
and/or research analysts employed by the manager), for evaluation and voting
instructions. The Proxy Review Committee may defer to the voting recommendation
of RiskMetrics, Glass Lewis or those of another independent third party provider
of proxy services; or send the proxy directly to the Fund. Where the Proxy Group
or the Proxy Review Committee refers a matter to the Fund, it may rely upon the
instructions of a representative of the Fund, such as the board of trusteesor a
committee of the board.

Where a material conflict of interest has been identified, but the items on
which the manager's vote recommendations differ from Glass Lewis, RiskMetrics,
or another independent third party provider of proxy services relate
specifically to (1) shareholder proposals regarding social or environmental
issues or political contributions, (2) "Other Business" without describing the
matters that might be considered, or (3) items the manager wishes to vote in
opposition to the recommendations of an issuer's management, the Proxy Group may
defer to the vote recommendations of the manager rather than sending the proxy
directly to the Fund for approval.

To avoid certain potential conflicts of interest, the manager will employ echo
voting, if possible, in the following instances: (1) when the Fund invests in an
underlying fund in reliance on Sections 12(d)(1) of the 1940 Act, or pursuant to
an SEC exemptive order; (2) when the Fund invests uninvested cash in affiliated
money market funds pursuant to an SEC exemptive order ("cash sweep
arrangement"); or (3) when required pursuant to the Fund's governing documents
or applicable law. Echo voting means that the Investment Manager will vote the
shares in the same proportion as the vote of all of the other holders of the
fund's shares.

The recommendation of management on any issue is a factor which the manager
considers in determining how proxies should be voted, but is not determinative
of the manager's ultimate decision. As a matter of practice, the votes with
respect to most issues are cast in accordance with the position of the company's
management. Each issue, however, is considered on its own merits, and the
manager will not support the position of the company's management in any
situation where it deems that the ratification of management's position would
adversely affect the investment merits of owning that company's shares.

MANAGER'S PROXY VOTING POLICIES AND PRINCIPLES The manager has adopted general
proxy voting guidelines, which are summarized below. These guidelines are not an
exhaustive list of all the issues that may arise and the manager cannot
anticipate all future situations. In all cases, each proxy will be considered
based on the relevant facts and circumstances.

BOARD OF DIRECTORS. The manager supports an independent board of directors, and
prefers that key committees such as audit, nominating, and compensation
committees be comprised of independent directors. The manager will generally
vote against management efforts to classify a board and will generally support
proposals to declassify the board of directors. The manager may withhold votes
from directors who have attended less than 75% of meetings without a valid
reason. While generally in favor of separating Chairman and CEO positions, the
manager will review this issue as well as proposals to restore or provide for
cumulative voting on a case-by-case basis, taking into consideration factors
such as the company's corporate governance guidelines or provisions and
performance.

RATIFICATION OF AUDITORS OF PORTFOLIO COMPANIES. In light of several high
profile accounting scandals, the manager will closely scrutinize the role and
performance of auditors. On a case-by-case basis, the manager will examine
proposals relating to non-audit relationships and non-audit fees. The manager
will also consider, on a case-by-case basis, proposals to rotate auditors, and
will vote against the ratification of auditors when there is clear and
compelling evidence of accounting irregularities or negligence.

MANAGEMENT AND DIRECTOR COMPENSATION. A company's equity-based compensation plan
should be in alignment with its shareholders' long-term interests. The manager
believes that executive compensation should be directly linked to the
performance of the company. The manager evaluates plans on a case-by-case basis
by considering several factors to determine whether the plan is fair and
reasonable, including the RiskMetrics quantitative model utilized to assess such
plans and/or the Glass Lewis evaluation of the plans. The manager will generally
oppose plans that have the potential to be excessively dilutive, and will almost
always oppose plans that are structured to allow the repricing of underwater
options, or plans that have an automatic share replenishment "evergreen"
feature. The manager will generally support employee stock option plans in which
the purchase price is at least 85% of fair market value, and when potential
dilution is 10% or less.

Severance compensation arrangements will be reviewed on a case-by-case basis,
although the manager will generally oppose "golden parachutes" that are
considered to be excessive. The manager will normally support proposals that
require a percentage of directors' compensation to be in the form of common
stock, as it aligns their interests with those of shareholders. The manager will
review on a case-by-case basis any shareholder proposals to adopt policies on
expensing stock option plans.

ANTI-TAKEOVER MECHANISMS AND RELATED ISSUES. The manager generally opposes
anti-takeover measures since they tend to reduce shareholder rights. On
occasion, the manager may vote with management when the research analyst has
concluded that the proposal is not onerous and would not harm the Fund or its
shareholders' interests. The manager generally supports proposals that require
shareholder rights' plans ("poison pills") to be subject to a shareholder vote
and will closely evaluate such plans on a case-by-case basis to determine
whether or not they warrant support. The manager will generally vote against any
proposal to issue stock that has unequal or subordinate voting rights. The
manager generally opposes any supermajority voting requirements as well as the
payment of "greenmail." The manager generally supports "fair price" provisions
and confidential voting.

CHANGES TO CAPITAL STRUCTURE. The manager will review, on a case-by-case basis,
proposals by companies to increase authorized shares and the purpose for the
increase and proposals seeking preemptive rights. The manager will generally not
vote in favor of dual-class capital structures to increase the number of
authorized shares where that class of stock would have superior voting rights.
The manager will generally vote in favor of the issuance of preferred stock in
cases where the company specifies the voting, dividend, conversion and other
rights of such stock and the terms of the preferred stock issuance are deemed
reasonable.

MERGERS AND CORPORATE RESTRUCTURING. Mergers and acquisitions will be subject to
careful review by the research analyst to determine whether each will be
beneficial to shareholders. The manager will analyze various economic and
strategic factors in making the final decision on a merger or acquisition.
Corporate restructuring and reincorporation proposals are also subject to a
thorough examination on a case-by-case basis.

SOCIAL AND CORPORATE POLICY ISSUES. The manager will generally give management
discretion with regard to social, environmental and ethical issues, although the
manager may vote in favor of those that are believed to have significant
economic benefits or implications for the Fund and its shareholders.

GLOBAL CORPORATE GOVERNANCE. Many of the tenets discussed above are applied to
proxy voting decisions for international companies. However, the manager must be
more flexible in these instances and must be mindful of the varied market
practices of each region.

The manager will attempt to process every proxy it receives for all domestic and
foreign issuers. However, there may be situations in which the manager cannot
process proxies, for example, where a meeting notice was received too late, or
sell orders preclude the ability to vote. If a security is on loan, the manager
may determine that it is not in the best interests of the Fund to recall the
security for voting purposes. Also, the manager may abstain from voting under
certain circumstances or vote against items such as "Other Business" when the
manager is not given adequate information from the company.

Shareholders may view the complete Policies online at franklintempleton.com.
Alternatively, shareholders may request copies of the Policies free of charge by
calling the Proxy Group collect at 1-954/527-7678 or by sending a written
request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite
1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Fund's
proxy voting records are available online at franklintempleton.com and posted on
the SEC website at WWW.SEC.GOV. The proxy voting records are updated each year
by August 31 to reflect the most recent 12-month period ended June 30.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.

(a)(1) As of January 25, 2087, the portfolio managers of the Fund are as
follows:

CHRISTOPHER J. MOLUMPHY CFA/(R)(1), Director and Executive Vice President of
Advisers
Mr. Molumphy has been a manager of the Fund since 1991. He has primary
responsibility for the investments of the Fund. Mr. Molumphy has final authority
over all aspects of the Fund's investment portfolio, including but not limited
to, purchases and sales of individual securities, portfolio risk assessment, and
the management of daily cash balances in accordance with anticipated management
requirements. The degree to which he may perform these functions, and the nature
of these functions, may change from time to time. He joined Franklin Templeton
Investments in 1988.

GLENN I. VOYLES CFA/(R)(1), Vice President of Advisers
Mr. Voyles has been a manager of the Fund since 1999, providing research and
advice on the purchases and sales of individual securities, and portfolio risk
assessment for the global income component of the Fund. He joined Franklin
Templeton Investments in 1993.

1. CFA/(R) and Chartered Financial Analyst/(R) are trademarks owned by CFA
Institute.

(a)(2) This section reflects information about the portfolio managers as of the
fiscal year ended August 31, 2007.

The following table shows the number of other accounts managed by each portfolio
manager and the total assets in the accounts managed within each category:

-------------------------------------------------------------------------------
Name Number of Assets of Assests of
Other Other Other
Registered Registered Number of Pooled Assests
Investment Investment Other Investment of Other
Companies Companies Pooled Vehicles Number of Accounts
Managed Managed Investments Managed Other Managed
(x $1 Vehicles (x $1 Accounts (x $1
million) Managed/(1) million)/(1) Managed/(1) million)
/(1)
----------------------------------------------------------------------------------
Christopher
J. Molumphy 7 7,786.9 4 1,208.2 1 338.3
----------------------------------------------------------------------------------
Glenn I.
Voyles 0 N/A 0 N/A 0 N/A
----------------------------------------------------------------------------------

1. The various pooled investment vehicles and accounts listed are managed by a
team of investment professionals. Accordingly, the individual managers listed
would not be solely responsible for managing such listed amounts.

Portfolio managers that provide investment services to the Fund may also provide
services to a variety of other investment products, including other funds,
institutional accounts and private accounts. The advisory fees for some of such
other products and accounts may be different than that charged to the Fund and
may include performance based compensation. This may result in fees that are
higher (or lower) than the advisory fees paid by the Fund. As a matter of
policy, each fund or account is managed solely for the benefit of the beneficial
owners thereof. As discussed below, the separation of the trading execution
function from the portfolio management function and the application of
objectively based trade allocation procedures helps to mitigate potential
conflicts of interest that may arise as a result of the portfolio managers
managing accounts with different advisory fees.

CONFLICTS. The management of multiple funds, including the Fund, and accounts
may also give rise to potential conflicts of interest if the funds and other
accounts have different objectives, benchmarks, time horizons, and fees as the
portfolio manager must allocate his or her time and investment ideas across
multiple funds and accounts. The manager seeks to manage such competing
interests for the time and attention of portfolio managers by having portfolio
managers focus on a particular investment discipline. Most other accounts
managed by a portfolio manager are managed using the same investment strategies
that are used in connection with the management of the Fund. Accordingly,
portfolio holdings, position sizes, and industry and sector exposures tend to be
similar across similar portfolios, which may minimize the potential for
conflicts of interest. As noted above, the separate management of the trade
execution and valuation functions from the portfolio management process also
helps to reduce potential conflicts of interest. However, securities selected
for funds or accounts other than the Fund may outperform the securities selected
for the Fund. Moreover, if a portfolio manager identifies a limited investment
opportunity that may be suitable for more than one fund or other account, the
Fund may not be able to take full advantage of that opportunity due to an
allocation of that opportunity across all eligible funds and other accounts. The
manager seeks to manage such potential conflicts by using procedures intended to
provide a fair allocation of buy and sell opportunities among funds and other
accounts.

The structure of a portfolio manager's compensation may give rise to potential
conflicts of interest. A portfolio manager's base pay and bonus tend to increase
with additional and more complex responsibilities that include increased assets
under management. As such, there may be an indirect relationship between a
portfolio manager's marketing or sales efforts and his or her bonus.

Finally, the management of personal accounts by a portfolio manager may give
rise to potential conflicts of interest. While the funds and the manager have
adopted a code of ethics which they believe contains provisions reasonably
necessary to prevent a wide range of prohibited activities by portfolio managers
and others with respect to their personal trading activities, there can be no
assurance that the code of ethics addresses all individual conduct that could
result in conflicts of interest.

The manager and the Fund have adopted certain compliance procedures that are
designed to address these, and other, types of conflicts. However, there is no
guarantee that such procedures will detect each and every situation where a
conflict arises.

COMPENSATION. The manager seeks to maintain a compensation program that is
competitively positioned to attract, retain and motivate top-quality investment
professionals. Portfolio managers receive a base salary, a cash incentive bonus
opportunity, an equity compensation opportunity, and a benefits package.
Portfolio manager compensation is reviewed annually and the level of
compensation is based on individual performance, the salary range for a
portfolio manager's level of responsibility and Franklin Templeton guidelines.
Portfolio managers are provided no financial incentive to favor one fund or
account over another. Each portfolio manager's compensation consists of the
following three elements:

BASE SALARY Each portfolio manager is paid a base salary.

ANNUAL BONUS Annual bonuses are structured to align the interests of the
portfolio manager with those of the Fund's shareholders. Each portfolio
manager is eligible to receive an annual bonus. Bonuses generally are
split between cash (50% to 65%) and restricted shares of Franklin
Resources stock (17.5% to 25%) and mutual fund shares (17.5% to 25%). The
deferred equity-based compensation is intended to build a vested interest
of the portfolio manager in the financial performance of both Franklin
Resources and mutual funds advised by the manager. The bonus plan is
intended to provide a competitive level of annual bonus compensation that
is tied to the portfolio manager achieving consistently strong investment
performance, which aligns the financial incentives of the portfolio
manager and Fund shareholders. The Chief Investment Officer of the manager
and/or other officers of the manager, with responsibility for the Fund,
have discretion in the granting of annual bonuses to portfolio managers in
accordance with Franklin Templeton guidelines. The following factors are
generally used in determining bonuses under the plan:

o INVESTMENT PERFORMANCE. Primary consideration is given to the
historic investment performance over the 1, 3 and 5 preceding years
of all accounts managed by the portfolio manager. The pre-tax
performance of each fund managed is measured relative to a relevant
peer group and/or applicable benchmark as appropriate.

o NON-INVESTMENT PERFORMANCE. The more qualitative contributions of a
portfolio manager to the manager's business and the investment
management team, including professional knowledge, productivity,
responsiveness to client needs and communication, are evaluated in
determining the amount of any bonus award.

o RESPONSIBILITIES. The characteristics and complexity of funds managed
by the portfolio manager are factored in the manager's appraisal.

ADDITIONAL LONG-TERM EQUITY-BASED COMPENSATION Portfolio managers may also
be awarded restricted shares or units of Franklin Resources stock or
restricted shares or units of one or more mutual funds, and options to
purchase common shares of Franklin Resources stock. Awards of such
deferred equity-based compensation typically vest over time, so as to
create incentives to retain key talent.

Portfolio managers also participate in benefit plans and programs available
generally to all employees of the manager.

OWNERSHIP OF FUND SHARES. The manager has a policy of encouraging portfolio
managers to invest in the funds they manage. Exceptions arise when, for example,
a fund is closed to new investors or when tax considerations or jurisdictional
constraints cause such an investment to be inappropriate for the portfolio
manager. The following is the dollar range of Fund shares beneficially owned by
each portfolio manager (such amounts may change from time to time):

--------------------------------------------
Dollar Range of Fund
Shares Beneficially
Portfolio Manager Owned
--------------------------------------------
Christopher J. None
Molumphy
--------------------------------------------
Glenn I. Voyles None
--------------------------------------------

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END
MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

----------------------------------------------------------------------
(C)
TOTAL NUMBER (D)
OF SHARES MAXIMUM NUMBER OF
PURCHASED AS SHARES THAT MAY YET
(A) PART OF BE PURCHASED UNDER
TOTAL (B) PUBLICLY THE PLANS OR
NUMBER OF AVERAGE ANNOUNCED PROGRAMS
PERIOD SHARES PRICE PAID PLANS OR
PURCHASED PER SHARE PROGRAM
----------------------------------------------------------------------
Month #1 129,500.000 7.07 129,500.000 1,544,429.000
(03/01/07-
03/31/07
----------------------------------------------------------------------
Month #2 165,000.000 7.33 165,000.000 1,379,429.000
(04/01/07-
04/30/07)
----------------------------------------------------------------------
Month #3 179,400.000 7.44 179,400.000 1,200,029.000
(05/01/07-
05/31/07)
----------------------------------------------------------------------
Month #4 207,300.000 7.17 207,300.000 992,729.000
(06-/01/07-
06/30/07)
----------------------------------------------------------------------
Month #5 155,800.000 6.87 155,800.000 836,929.000
(07/01/07-
7/31/07
----------------------------------------------------------------------
Month #6 188,800.000 6.51 188,800.000 648,129.000
(08/01/07-
08/31/07
----------------------------------------------------------------------
Total 1,025,800.000 7.07 1,025,800.000 648,129.000
----------------------------------------------------------------------

The repurchase program was announced on January 19, 2006. The Board of Trustees
approved an open-market share repurchase program, pursuant to which the Fund may
purchase, from time to time, up to 2,792,429 of the Fund's common shares in
open-market transactions, at the discretion of management.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.

ITEM 11. CONTROLS AND PROCEDURES. (A) EVALUATION OF DISCLOSURE CONTROLS
AND PROCEDURES. The Registrant maintains disclosure controls and procedures that
are designed to ensure that information required to be disclosed in the
Registrant's filings under the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 is recorded, processed, summarized and reported
within the periods specified in the rules and forms of the Securities and
Exchange Commission. Such information is accumulated and communicated to the
Registrant's management, including its principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure. The Registrant's management, including the principal executive
officer and the principal financial officer, recognizes that any set of controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 12. EXHIBITS.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN UNIVERSAL TRUST

By /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 24, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 24, 2008

By /S/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date January 24, 2008