SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
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FRANKLIN UNIVERSAL TRUST
(Name of Registrant as Specified in its Charter)
FRANKLIN UNIVERSAL TRUST
(Name of Person(s) Filing Proxy Statement)
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FRANKLIN TEMPLETON INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906
FIVE REASONS TO REJECT BULLDOG
Dear Franklin Universal Trust Shareholder:
You may have recently received proxy and tender offer material
from Bulldog Investors, a dissident hedge fund group that is trying
to take control of your Fund. If you want the Fund to survive as a
successful exchange-listed closed-end fund, it is extremely
important that you DO NOT RETURN BULLDOG'S GREEN PROXY CARD.
Instead, if you want to support the Fund's current Board and
management, then you should ONLY RETURN THE FUND'S WHITE PROXY CARD.
Here are five good reasons why we believe that you should
support the Fund's current Board and management and reject
Bulldog's attempt to take over your Fund.
1. BULLDOG'S TRUSTEE NOMINEES HAVE BEEN FINED FOR VIOLATING
SECURITIES LAWS. According to Bulldog's own proxy statement, four
of their six nominees have recently had a cease and desist order
and fines issued against them by the Securities Division of the
Massachusetts Secretary of State for violation of Massachusetts'
securities laws, and they remain embroiled in litigation. Compare
your Fund's nominees, many of whom have been Trustees since the
Fund was launched in 1988, and are also on the Boards of other
open-end and closed-end funds managed by Franklin Templeton
Investments. They have had experience as senior officers and
directors of major business corporations, and some have also held
senior positions in state and federal government.
2. BULLDOG'S TENDER OFFER IS UNFAIR TO SHAREHOLDERS. As
discussed in the Position Statement included in this mailing, your
Fund's Board encourages you to reject Bulldog's tender offer. It
will cost you a processing fee of $50 for each of your accounts
just to participate, which is substantially higher than the costs
typically associated with closed-end fund tender offers. If the
tender offer is completed (and it may not be), you would receive
95% of net asset value for your shares, less the $50 processing
fee, but Bulldog would then be able to redeem those same shares at
100% of net asset value upon open-ending the Fund. Plus, Bulldog
has included such broadly worded conditions to completing the
tender offer that it is entirely possible that Bulldog could win
the election of its nominees and still not purchase your tendered
shares. For these reasons, your Fund's Board believes that
Bulldog's tender offer is not in the best interests of the Fund's
shareholders.
3. BULLDOG TRIES TO MANIPULATE SHAREHOLDERS WITH MISLEADING
STATEMENTS. Bulldog's proxy statement would have you believe that
the Fund has lost 30% of its value since it began operations.
However, Bulldog ignores the effect of the reinvestment of
distributions, which is a critical component of total return--a
standard measure of investment performance. The truth is that from
inception through the end of January of this year, the Fund's total
return was 402.31%, or 8.70% per year, based on net asset value,(1)
and 353.22%, or 8.12% per year, based on market price (regardless
of any discounts).(2) Even in more recent periods the Fund
continued to have competitive performance, with the top ranking in
its Lipper Category for the 1-year and 3-year periods ended
December 31, 2007.(3) The Fund's average annual total returns for
the 1-year and 3-year periods ended December 31, 2007 were 6.38%
and 11.96%, respectively (based on change in market price), and
9.20% and 10.20%, respectively (based on change in net asset
value). The Fund's distribution yield for the 12 months ending
January 31, 2008 was 6.78% (based on market price) and 6.18% (based
on net asset value). The Fund may not be able to provide similar
returns if Bulldog succeeds in open-ending the Fund.
(1) Assumes reinvestment of distributions based on net asset
value.
(2) Assumes reinvestment of distributions based on the dividend
reinvestment and cash purchase plan.
(3) Source: Lipper Inc. The Lipper Closed-End High Current Yield
Fund (Leveraged) Universe is comprised of the Fund and all
closed-end debt leveraged high current yield funds regardless of
asset size or primary channel of distribution. Returns are based
on change in net asset value.
4. BULLDOG IS A "HIT AND RUN" HEDGE FUND GROUP. Hedge fund
groups like Bulldog target closed-end funds because they can make a
quick profit by arbitraging the discount. These hedge funds rarely
stick around after a closed-end fund has been open-ended. Instead,
they usually redeem shares and take their profits, leaving
long-term shareholders in a depleted open-end fund, typically with
higher expenses, fewer assets, lower returns and less investment
flexibility.
5. BULLDOG'S PLAN COULD CRIPPLE YOUR FUND. Your Fund's
combination of investments in utility stocks and high yield bonds
is unique in the marketplace--there is no other closed-end or
open-end fund quite like it. As a closed-end fund, your Fund can
use leverage in the form of debt securities to help increase
returns. Unlike open-end funds, your Fund does not have to
maintain cash reserves to meet redemptions and can be fully
invested. Plus, your Fund trades all day long on the New York
Stock Exchange. If Bulldog succeeds in open-ending your Fund,
however, it will no longer be able to use leverage or trade on the
NYSE, it may not be able to stay fully invested, and it will only
be priced once a day. Your Board believes that Bulldog's plans to
open-end the Fund are not in the best interests of the Fund's
long-term shareholders.
FOR THESE REASONS, WE ARE ASKING YOU TO VOTE FOR YOUR FUND'S
CURRENT TRUSTEES AND AGAINST THE SHAREHOLDER PROPOSAL IN PROPOSAL
2.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS VERY
IMPORTANT. WE URGE YOU TO SUPPORT YOUR CURRENT BOARD OF TRUSTEES
BY VOTING FOR YOUR BOARD'S NOMINEES AND DISCARDING BULLDOG'S GREEN
PROXY CARD.
Please complete, sign and date the enclosed WHITE proxy card and
return it in the enclosed postage-paid envelope. Again, please
discard any GREEN proxy cards that you receive.
If you have any questions, please call the Fund's proxy solicitor,
The Altman Group, at 1-800-336-5159.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
TRUSTEE AND CHAIRMAN OF THE BOARD,
FRANKLIN UNIVERSAL TRUST
YOUR VOTE IS IMPORTANT.
PLEASE SIGN AND RETURN MANAGEMENT'S PROXY CARD TODAY!
o If you hold your shares in a brokerage or bank account (in
"street name"), your broker or bank cannot vote your shares this
year (as it has in past routine annual meetings) unless you
complete, sign and return the enclosed WHITE proxy voting form.
o Please do not send back any GREEN proxy cards that you
receive, even to vote against the dissident nominees. Doing so
will cancel any prior vote you cast supporting your current Board
and against the shareholder proposal (Proposal 2). Please return
only the WHITE proxy card.
o If you have already returned the dissident shareholders' GREEN
proxy card, you can still support your Board by returning the
enclosed WHITE proxy card. Only your latest dated proxy card
will count.
FRANKLIN TEMPLETON INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906
BOARD OF TRUSTEES OF FRANKLIN UNIVERSAL TRUST
RECOMMENDS THAT SHAREHOLDERS REJECT BULLDOG'S TENDER OFFER
San Mateo, CA, February 27, 2008 - The Board of Trustees of
Franklin Universal Trust (the "Fund") [NYSE:FT] unanimously
recommends that the Fund's shareholders reject the conditional
tender offer by Bulldog Investors General Partnership ("Bulldog")
announced on February 15, 2008 to purchase shares of the Fund.
The Board has carefully considered Bulldog's tender offer and found
that it is not in the best interests of shareholders. The Board's
reasons for its conclusion included the following:
o THE FUND PROVIDES REAL BENEFITS TO SHAREHOLDERS AS A
CLOSED-END FUND. Bulldog has announced that it is making its
tender offer to help elect its slate of trustees, who support
measures that include converting the Fund to an open-end
fund. The Fund's Board strongly believes that open-ending is
not in the best interests of the Fund's long-term
shareholders. Conversion to an open-end fund would require
the Fund to maintain cash balances to meet redemptions,
thereby potentially reducing the Fund's yield and total
return. In addition, as an open-end fund, the Fund would be
unable to use leverage as it currently does, which could
impair the Fund's ability to enhance investment return. The
Board also believes that open-ending the Fund may result in
increased expenses for Fund shareholders--experience has shown
that hedge fund arbitrageurs like Bulldog redeem their shares
immediately after a closed-end fund converts to an open-end
fund, thereby reducing the fund assets and causing the fund's
expense ratio to increase.
o BULLDOG'S TENDER OFFER IS EXCESSIVELY CONDITIONAL. Bulldog is
not required to consummate its tender offer if shareholders do
not elect its slate of trustee candidates. However, even if
Bulldog's candidates are elected, the other conditions of the
Bulldog tender offer are worded so broadly as to make it
uncertain whether the offer would actually be consummated.
For example, if Bulldog determines that there have been
certain changes in the financial markets or any material
change with respect to the financial condition of the Fund,
Bulldog could elect not to consummate the offer. By tying
completion of its tender offer to the election of its trustee
candidates--and thus closing the tender offer after the 2008
Annual Meeting--Bulldog could induce shareholders to elect its
slate of trustees, but rely on a loophole condition to avoid
consummating its tender offer.
o BULLDOG'S TENDER OFFER GIVES IT A QUICK PROFIT AT SHAREHOLDER
EXPENSE. Bulldog's offer requires shareholders to tender
their shares at 95% of the Fund's NAV. Yet, if the Fund is
open-ended as Bulldog essentially proposes, Bulldog would be
able to redeem those same shares at 100% of the Fund's NAV,
giving Bulldog a quick 5% profit (assuming NAV remains
constant) that would have otherwise been available to the
tendering shareholders. Bulldog has also stated that it
intends to seek reimbursement of Bulldog's solicitation
expenses, estimated at $100,000, paid out of the Fund's
assets.
o THE TERMS OF BULLDOG'S TENDER OFFER ARE UNFAIR TO
shareholders. Bulldog would assess a $50 processing fee to
each shareholder who tenders. This amount is substantially
higher than most closed-end funds typically charge to
tendering shareholders--even when the tenders are conducted at
100% of NAV--and many closed-end fund tender offers charge no
fees at all. For shareholders who hold shares in multiple
names, a separate tender would be required for each account,
and the $50 fee would be charged each time. The $50
processing fee could significantly reduce the return realized
by certain small shareholders.
o BULLDOG REFUSES TO DISCLOSE ITS FINANCIAL RESOURCES. While
Bulldog states that its tender offer is not subject to a
financing condition, Bulldog has not provided any information
about its ability to complete the tender offer, other than to
state that it would pay the aggregate costs of its tender
offer using its investment capital. No Bulldog financial
statements are included as part of its Schedule TO.
In light of the factors described above, the Board has determined
that the tender offer is not in the best interests of the Fund's
shareholders. Therefore, the Board recommends that shareholders of
the Fund reject the tender offer and not tender their shares to
Bulldog.
In connection with the tender offer, the Fund has filed a
Solicitation/Recommendation Statement on Schedule 14D-9 with the
Securities and Exchange Commission (the "SEC"). Investors and
security holders are strongly advised to read the
Solicitation/Recommendation Statement because it contains important
information about the Bulldog Offer. Free copies of the
Solicitation/Recommendation Statement are available at
WWW.FRANKLINTEMPLETON.COM and on the SEC's website at WWW.SEC.GOV.
Franklin Universal Trust is a closed-end investment company managed
by Franklin Advisers, Inc. Franklin Advisers, Inc. is a wholly
owned subsidiary of Franklin Resources, Inc. [NYSE:BEN], a global
investment management organization operating as Franklin Templeton
Investments.
* * * * *
The foregoing is not an offer to sell, nor a solicitation of an
offer to buy, shares of any fund.
If you have any questions, please call the Fund's proxy solicitor,
The Altman Group, at 1-800-336-5159.