UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES

Investment Company Act file number: 811-05569

FRANKLIN UNIVERSAL TRUST
(Exact name of registrant as specified in charter)

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

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

Registrant's telephone number, including area code: (650) 312-2000

Date of fiscal year end: 8/31

Date of reporting period: 8/31/13

Item 1. Reports to Stockholders.

FRANKLIN UNIVERSAL TRUST

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.

Dear Shareholder:

This annual report for Franklin Universal Trust covers the fiscal year ended August 31, 2013.

Performance Overview

For the 12 months under review, the Fund’s cumulative total returns were +8.04% based on net asset value and -2.45% based on market price, as shown in the Performance Summary on page 6. For comparison, the Credit Suisse (CS) High Yield Index, which is designed to mirror the investable universe of the U.S. dollar-denominated high yield debt market, produced a +7.50% total return, and utilities stocks, as measured by the Standard & Poor’s^® (S&P^®) 500 Utilities Index, which tracks all electric utility stocks in the broad S&P 500^® Index, posted a total return of +7.03% for the same period.¹

1. Source: © 2013 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar
and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of
this information. STANDARD & POOR’S^®, S&P^® and S&P 500^® are registered trademarks of Standard & Poor’s Financial
Services LLC. The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest
directly in an index, and an index is not 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 13.

Annual Report | 1

Economic and Market Overview

The U.S. economy, as measured by gross domestic product (GDP), grew during the 12-month period ended August 31, 2013. Despite a large decline in federal government spending during the fourth quarter of 2012, the pace of economic growth improved in the first quarter of 2013, supported by investment and consumer spending. This growth trend continued into the second quarter, but at an accelerated pace that exceeded expectations and reflected a surge in exports as well as strong consumer and real estate spending levels. These gains were partially offset by continued federal budget cuts. Accelerating home sales accompanied record-low mortgage rates, affordable housing prices, low inventories and a six-year low in U.S. foreclosures. Manufacturing, a mainstay of economic productivity, expanded during the period, and the unemployment rate fell to 7.3% in August 2013 from 8.1% a year earlier.²

Early in the reporting period, the Federal Reserve Board (Fed) acknowledged the need for further policy accommodation and announced a third round of quantitative easing (QE3). QE3 consisted of additional $40 billion monthly purchases of mortgage-backed securities until the labor market improves. The Fed also continued buying long-term Treasuries and selling short-term Treasuries in an effort to put downward pressure on long-term interest rates. In December, the Fed announced a 6.5% unemployment level as a guide to maintaining the historically low federal funds target rate.

In the fourth quarter, economists, business leaders and market watchers were concerned about the U.S. “fiscal cliff” when, unless Congress acted, automatic income tax increases and federal budget cuts were scheduled to take effect in 2013. They feared these events could cause another U.S. recession. Not knowing whether Congress and the President would avert these measures after the U.S. election, many businesses delayed major investment and hiring decisions. Budgetary agreement between Congress and the President on January 1, 2013, preserved lower income tax rates for most U.S. households, but concerns remained about how the expired payroll tax cut, far-reaching federal spending cuts, and future federal debt ceiling negotiations could affect the U.S. economic recovery. Washington’s lack of consensus on proposed expenditure reductions resulted in further across-the-board federal spending cuts starting in March.

In May, Fed Chairman Ben Bernanke said the Fed could gradually wind down its monthly purchases of mortgage-backed securities and Treasuries, assuming continued U.S. economic improvement. He clarified in June that such action could begin in the near future. Many investors sold their fixed income instruments seeking to avoid an interest rate rise, and the 10-year U.S. Treasury note

2. Source: Bureau of Labor Statistics.

2 | Annual Report

yield rose to 2.78% at fiscal year-end from 1.57% on August 31, 2012. During much of the 12-month period, investors sought higher bond yields and were willing to assume some additional risk. Below-investment-grade corporate bonds, as measured by the CS High Yield Index, delivered strong results and outperformed investment-grade fixed income markets, as measured by the Barclays U.S. Aggregate Index.

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.

*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.

Manager’s Discussion

During the 12 months under review, the Fund’s primary asset classes, high yield corporate bonds and utility stocks, generated positive returns. The Fund’s fiscal year began with the run-up to the U.S. presidential election and accompanying investor uncertainty over future fiscal policy and tax rates. Immediately after the election, market focus turned to the impending “fiscal cliff.” International factors, such as the ongoing European recession and concerns over a slowing Chinese economy, also weighed on U.S. markets. Although high yield corporate bonds and utility stocks initially sold off following the election, any weakness proved to be short-lived. Utility stocks rebounded when a tax deal was reached that was less onerous toward dividend income than the market had feared. High yield corporate bonds were buoyed by continued positive, albeit modest, economic growth, and by a seemingly insatiable investor appetite for income-producing investments. The robust high yield new-issue market enabled numerous companies to refinance their debt and extend maturities at lower interest rates. High yield corporate bonds and utility stocks enjoyed a largely uninterrupted run of positive performance from mid-November 2012 until the beginning of May 2013, when concerns about the Fed’s exit strategy from the ongoing stimulus programs caused interest rates to rise rapidly. Both asset classes sold off in May and into June before the Fed calmed the markets by indicating that its tapering would be phased in, dependent on continuing good economic data, and therefore would not abruptly change policy. For the year under review, high yield corporate bonds, as measured by the CS High Yield Index, returned +7.50%.¹ Refinancing activity

Annual Report | 3

*Excludes money market funds.
**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.

combined with ongoing economic growth helped keep the high yield default rate well below historical average levels, which supported increasing valuations in the form of lower yields and spreads over Treasuries in the high yield market. The index’s average yield fell from 6.8% at the beginning of the year to 5.3% in April before increasing to end the year at 6.4%.³ The spread over Treasuries fell from 6.1 to 5.0 percentage points for the 12-month period, reflecting strong investor demand and expectations for a continued below-average default rate.³ Utility stocks, as measured by the S&P 500 Utilities Index, returned +7.03% for the fiscal year, having given up double-digit gains achieved through April when interest rates began rising in May and June.¹

High Yield Corporate Bonds

The Fund benefited from its overweighted position in the broadcasting industry and its underweighted position in the paper and forest products industry.⁴ Growth in paid advertising, as well as sector consolidation, buoyed the broadcasting industry. In addition, bonds of Clear Channel, one of the sector’s largest issuers, rallied as the company was able to refinance debt to extend maturities.⁵ Bonds of paper and forest products companies trailed the index, as the industry suffered from overcapacity owing to reduced demand related to the continuing move to a more digital world.

The Fund’s performance in the high yield asset class was impeded by an overweighting in utilities and an underweighting in the financials sector.⁶ Utilities companies suffered because low natural gas prices pressured electricity prices. Financials outperformed the index as the sector’s credit quality improved, with credit losses near cyclical lows leading to faster-than-expected debt reduction.

Utility Stocks

Although the utilities sector delivered positive performance during the period, it significantly underperformed the general equity market. Most of the sector’s underperformance took place during the second half of the period in conjunction with a rise in long-term interest rates. Utilities stocks remained highly correlated to interest rate movements, as the sector pays out a relatively high percentage of its earnings in the form of dividends. Regulated utilities continued to display positive fundamentals, with the possibility for growth related to necessary investment on aging, existing infrastructure networks and continued demands from environmental regulations. Relatively low commodity prices

3. Source: Credit Suisse.
4. Broadcasting holdings are in media in the SOI. Paper and forest products holdings are in materials in the SOI.
5. Clear Channel comprises Clear Channel Communications and Clear Channel Worldwide Holdings in the SOI.
6. Financials holdings are in banks and diversified financials in the SOI.

4 | Annual Report

also benefited regulated utilities, helping offset the pricing impact customers would ordinarily feel from increased levels of capital investment. Thus, investments made by most regulated utilities during the period translated into positive earnings growth. Extended low commodity prices, however, weighed on the earnings capability of utilities that sell their electric output at wholesale price levels. Overall, however, the Fund continued to focus on regulated, dividend-paying utilities.

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

Sincerely,

CFA^® is a trademark owned by CFA Institute.

The foregoing information reflects our analysis, opinions and portfolio holdings as of August 31, 2013, 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 consid-
ered 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 under-
stand our investment management philosophy.

Performance Summary as of 8/31/13

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 gains distributions, if any, or any realized gains on the sale of Fund shares.

Endnotes

All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. As
prices of bonds in a fund adjust to a rise in interest rates, the fund’s share price may decline. Investments in lower rated bonds include higher
risk of default and loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies,
particular industries or sectors, or general market conditions. In addition to having sensitivity to other factors, securities issued by utility com-
panies have historically been sensitive to interest rate changes. When interest rates fall, utility securities prices, and thus a utilities fund’s share
price, tend to rise; when interest rates rise, their prices generally fall. The Fund is actively managed but there is no guarantee that the manager’s
investment decisions will produce the desired results.

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. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

6 | Annual Report

Annual Shareholders’ Meeting

March 22, 2013

An annual shareholders’ meeting of Franklin Universal Trust (Fund) was held on March 22, 2013. At the meeting, the holders of 21,279,092 shares of the Fund’s common stock were represented in person or by proxy, constituting a quorum. The following persons were elected by the shareholders to serve as Trustees of the Fund.

Annual Report | 7

Important Notice to Shareholders

Franklin Universal Trust Refinances Senior Fixed Rate Notes

On August 28, 2013, the Fund refinanced its 5.87% senior fixed rate notes due August 28, 2013, which had an outstanding principal balance of $42 million. The Fund issued new 2.87% senior fixed rate notes due August 28, 2018, in the principal amount of $60 million, in a private placement. The proceeds of the new notes were used to retire the 5.87% senior fixed rate notes and for general fund purposes. As a result of the refinancing, the Fund currently has $60 million in notes outstanding.

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.

8 | Annual Report

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. BNY Mellon Investment Servicing (US) Inc. (Plan Agent), P.O. Box 43006, Providence, RI 02940-3006, 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. Participants may contact the Plan Agent at the address above to obtain a copy of the Brochure.

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 BNY Mellon Investment Servicing (US) Inc. and sent to Investment Services, P.O. Box 43006, Providence, RI 02940-3006, Attn: Franklin Universal Trust.

Annual Report | 9

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.

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.

10 | Annual Report

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.

Annual Report | 11

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

Franklin Universal Trust

Statement of Investments, August 31, 2013

Annual Report | 13

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

14 | Annual Report

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

Annual Report | 15

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

16 | Annual Report

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

Annual Report | 17

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

20 | Annual Report

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

See Abbreviations on page 35.

Annual Report | 21

Franklin Universal Trust

Statement of Investments, August 31, 2013 (continued)

^*The principal amount is stated in U.S. dollars unless otherwise indicated.
^aNon-income producing.
^bSecurity has been deemed illiquid because it may not be able to be sold within seven days. At August 31, 2013, the value of this security was $-.
^cSecurity 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,
2013, the aggregate value of these securities was $64,937,958, representing 33.96% of net assets.
^dIncome may be received in additional securities and/or cash.
^eSee Note 9 regarding defaulted securities.
^fPerpetual security with no stated maturity date.
^gThe coupon rate shown represents the rate at period end.
^hAt August 31, 2013, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading this security for a limited or
extended period of time due to ownership limits and/or potential possession of material non-public information.
ⁱSee Note 1(c) regarding senior floating rate interests.
^jSee Note 8 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.
^kSee Note 1(b) regarding joint repurchase agreement.
^lThe security is traded on a discount basis with no stated coupon rate.

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

Annual Report | The accompanying notes are an integral part of these financial statements. | 23

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

Annual Report | The accompanying notes are an integral part of these financial statements. | 25

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

Franklin Universal Trust

Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Universal Trust (Fund) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as a closed-end investment company.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Senior fixed rate notes are carried at cost. Under procedures approved by the Fund’s Board of Trustees (the Board), the Fund’s administrator, investment manager and other affiliates have formed the Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an 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. Foreign equity 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. 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 security is determined. Over-the-counter (OTC) securities 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. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds are valued at the closing net asset value.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Repurchase agreements are valued at cost, which approximates market value.

Annual Report | 27

Franklin Universal Trust

Notes to Financial Statements (continued)

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary 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 that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

In addition, certain foreign markets may be open on days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based

28 | Annual Report

Franklin Universal Trust

Notes to Financial Statements (continued)

on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Statement of Investments, had been entered into on August 30, 2013.

c. Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity.

Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale.

d. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

Annual Report | 29

Franklin Universal Trust

Notes to Financial Statements (continued)