Edgar Filing: FRANKLIN UNIVERSAL TRUST

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

FORM N-CSRS

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: 2/28/06
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ITEM 1. REPORTS TO STOCKHOLDERS.

[GRAPHIC OMITTED]

FEBRUARY 28, 2006
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SEMIANNUAL 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 semiannual report

Contents

Important Notice to Shareholders .......................................... 1

SEMIANNUAL REPORT

Franklin Universal Trust .................................................. 3

Performance Summary ....................................................... 7

Annual Shareholders' Meeting .............................................. 8

Dividend Reinvestment and
Cash Purchase Plan ........................................................ 9

Financial Highlights and

Statement of Investments .................................................. 12

Financial Statements ...................................................... 19

Notes to Financial Statements ............................................. 23

Shareholder Information ................................................... 31
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Important Notice to Shareholders

REPURCHASE PROGRAM

An important action was recently taken by the Board of Trustees of Franklin
Universal Trust (the "Fund"). At a meeting held on January 18, 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 10% of the Fund's common shares
in open-market transactions, at the discretion of management.

As you may know, shares of the Fund have traded on the New York Stock Exchange
at a discount to net asset value. The share repurchase program is intended to
benefit shareholders by enabling the Fund to acquire its own shares at a
discount to net asset value, thereby increasing the proportionate interest of
each remaining shareholder in the Fund. Also, it is hoped that the share
repurchase program will help bring the market price of the Fund's shares closer
to their true net asset value, although the success of such a program cannot be
predicted.

The timing and amount of repurchases (subject to the 10% maximum) will be at the
discretion of the Fund's management, taking into account various factors,
including market conditions, cash on hand and the availability of other
attractive investments. Any repurchases made under this program would be made on
a national securities exchange at the prevailing market price. It is important
to note that the ability of the Investment Manager to effect repurchases is
limited by exchange requirements and detailed rules under the federal securities
laws that restrict, among other things, the timing of the trades, the volume of
shares permitted to be repurchased on any single day and the price at which
shares may be repurchased. A copy of the press release announcing the Fund's
share repurchase program is on the next page.

Not part of the semiannual report | 1

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FRANKLIN UNIVERSAL TRUST ANNOUNCES OPEN-MARKET SHARE REPURCHASE PROGRAM AND
DIVIDEND INCREASE

San Mateo, CA, January 19, 2006 -- Franklin Universal Trust (the "Fund")
(NYSE:FT), a closed-end investment company, announced today that the Board of
Directors of the Fund has authorized management to implement an open-market
share repurchase program pursuant to which the Fund may purchase, from time to
time, up to 10% of the Fund's common stock, in open-market transactions, at the
discretion of management.

The Board's recent action gives management flexibility to engage in a
share repurchase program in an effort to address the Fund's discount to net
asset value. The amount and timing of the repurchases will be at the discretion
of the Fund's management and will take into account various factors, including
market conditions, cash on hand and the availability of other attractive
investments. Any repurchases made under this program would be made on a national
securities exchange at the prevailing market price, subject to exchange
requirements and volume, timing and other limitations under Federal securities
laws.

In addition, the Fund announced today an increase in the monthly dividend
from 3.5 cents to 3.8 cents per share, payable February 15, 2006, to
shareholders of record on January 31, 2006. This represents an increase of 8.6%
for shareholders.

The Fund is designed for investors seeking to provide high, current income
consistent with preservation of capital. Its secondary objective is growth of
income through dividend increases and capital appreciation. The Fund's
investment manager is Franklin Advisers, Inc., and Christopher Molumphy and
Glenn Voyles are the Fund's portfolio managers. The Fund had total net assets in
excess of $192 million as of November 30, 2005.

Franklin Advisers, Inc. is a wholly owned subsidiary of Franklin
Resources, Inc. [NYSE:BEN], a global investment management organization
operating as Franklin Templeton Investments. Franklin Templeton Investments
provides global and domestic investment management solutions managed by its
Franklin, Templeton, Mutual Series and Fiduciary Trust investment teams. The San
Mateo, CA-based company has more than 50 years of investment experience and over
$464 billion in assets under management as of December 31, 2005. For more
information, please call 1-800/DIAL BEN(R) or visit franklintempleton.com.

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2 | Not part of the semiannual report

Semiannual 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*
2/28/06

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Corporate Bonds 68.8%
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Utilities Common & Preferred Stocks 26.5%
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Foreign Government U.S.
Dollar-Denominated Bonds 2.1%
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Natural Resources Common Stocks 1.0%
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Foreign Government Agencies 0.3%
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Miscellaneous Common &
Preferred Stocks 0.0%**
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Cash & Other Net Assets 1.2%
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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 0.05% of total investments.

Dear Shareholder:

We are pleased to bring you Franklin Universal Trust's semiannual report for the
period ended February 28, 2006.

PERFORMANCE OVERVIEW

For the six months under review, the Fund's cumulative total returns were +2.28%
based on change in net asset value and +4.22% based on change in market price on
the New York Stock Exchange, as shown in the Performance Summary on page 7. For
comparison, the Credit Suisse (CS) High Yield Index returned +1.89%, and
utilities stocks, as measured by the Standard & Poor's (S&P) 500 Utilities
Index, returned +1.83% for the period ended February 28, 2006. 1

ECONOMIC AND MARKET OVERVIEW

The U.S. economy continued to grow during the six months under review; however,
gross domestic product growth decelerated from 4.1% annualized in third quarter
2005 to an estimated 1.7% annualized in the fourth quarter -- the slowest pace
in nearly three years. 2 However, many analysts expected first quarter 2006
growth to rebound from fourth quarter 2005's tepid level. Over the reporting
period, nonfarm payroll data, as well as other indexes, showed growing
employment. Consumer spending increased 2.8% (not adjusted for inflation) in
February 2006 compared with six months earlier, which supported the nation's
economic progress. 2

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.

2. Source: Bureau of Economic Analysis.

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.

Semiannual Report | 3

Business spending also rose during the reporting period, contributing to
economic growth. Historically low interest rates allowed many companies easy
access to capital, and ample cash also helped some companies to support their
spending plans. On the other hand, labor costs accelerated and business
productivity fell unexpectedly during fourth quarter 2005, the first decline in
nearly five years.

Oil prices remained high during the period amid concerns about potential
long-term supply limitations in the face of expected strong growth in global
demand, especially from China and India, and the potential for supply
disruptions stemming from geopolitical turmoil in several major oil-producing
countries. Despite high commodity prices, inflation remained relatively
contained for the 12 months ended February 28, 2006, as measured by the 2.1%
rise for the core Consumer Price Index (CPI), which was slightly below the core
CPI's 10-year average of 2.2%. 3 During the six-month period, the Federal
Reserve Board (Fed) raised the federal funds target rate to 4.50% from 3.50%. In
January, the Fed acknowledged the economy's strength as well as potential
inflationary pressure from high energy prices, and suggested "some further
policy firming may be needed."

The 10-year Treasury note fluctuated considerably over the past six months, but
overall its yield rose from 4.34% at the beginning of the period to 4.55% on
February 28, 2006. The yield on the 30-year Treasury fell from 4.57% to 4.51%
during the same time. Throughout much of the reporting period, rising short-term
rates and relatively stable longer-term rates resulted in a flattening of the
yield curve (the spread between the yield of short-term and long-term bonds).

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 six-month period, the Fund benefited from modest positive returns in
its primary asset classes. High yield bonds enjoyed a favorable fundamental
environment resulting from continuing economic growth and a below-average

3. Source: Bureau of Labor Statistics. Core CPI excludes food and energy costs.

4 | Semiannual Report

default rate. However, returns were tempered by rising interest rates,
inflationary concerns, and high profile "fallen angels" Ford and General Motors
(GM). Utility stocks declined sharply in October 2005 because of rising interest
rates but recovered largely due to higher energy prices during the rest of the
period. Fundamentals for utility companies remained strong, and dividend growth
continued to be a focus for many of these companies.

HIGH YIELD CORPORATE BONDS

The Fund's overweighted positions in the wireless telecommunications and major
telecommunications industries relative to the CS High Yield Index positively
impacted returns. 4 Wireless telecommunications benefited from strong industry
fundamentals as many companies managed to increase their customer bases while
keeping average revenue per user levels relatively stable. Telecommunications
performed well as investors seemed to gain comfort that mergers and acquisitions
activity would not hurt credit quality. In addition, investors seemed attracted
to the stable business models of satellite communications providers such as Fund
holdings Intelsat and Inmarsat. The Fund also gained from its underweighted
position in the automotive industry, which was the index's worst performing
industry. 5 Autos suffered as concerns about the long-term competitiveness of
major domestic producers led to credit downgrades for Ford and GM bonds during
the period.

Our overweighted positions in the cable and satellite TV and homebuilding
industries detracted from relative performance as these sectors generated lower
returns than that of the overall index. 6 Cable bonds weakened as equity
valuations generally fell during the period. Lower stock prices across the
industry also increased worries about shareholder-friendly activity that could
be detrimental to bondholders. The housing industry underperformed as higher
Treasury yields boosted mortgage rates, leading to fears that the strong housing
cycle might be nearing an end. Recent statistics on home sales and new home
orders have further confirmed the belief that the cycle may be over. Despite
this uncertainty, based on our research we remained comfortable with the strong
balance sheets and adequate liquidity of homebuilders the Fund holds.

4. Wireless telecommunications and major telecommunications holdings are in the
communications sector in the SOI.

5. Automotive holdings are in the consumer durables sector in the SOI.

6. Cable and satellite TV holdings are in the consumer services sector in the
SOI. Homebuilding holdings are in the
consumer durables sector in the SOI.

TOP 10 HOLDINGS
Based on Total Investments*
2/28/06 vs. 8/31/05

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2/28/06
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Exelon Corp. 2.4%
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FPL Group Inc. 2.3%
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Southern Co. 2.3%
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Dominion Resources Inc. 2.1%
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TXU Corp. 1.7%
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Government of Mexico 1.6%
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FirstEnergy Corp. 1.5%
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Entergy Corp. 1.5%
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Midwest Generation LLC 1.3%
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Public Service Enterprise Group Inc. 1.3%
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8/31/05
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FPL Group Inc. 2.4%
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Southern Co. 2.3%
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Exelon Corp. 2.2%
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Dominion Resources Inc. 2.1%
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Government of Mexico 1.6%
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TXU Corp. 1.5%
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FirstEnergy Corp. 1.5%
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Georgia-Pacific Corp. 1.4%
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Pinnacle West Capital Corp. 1.4%
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Midwest Generation LLC 1.3%
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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.

Semiannual Report | 5

UTILITY STOCKS

During the reporting period, the Fund's utility exposure remained fairly
constant at levels slightly above the middle of the targeted 20%-30% range
outlined in the Fund's prospectus. As of February 28, 2006, our utility exposure
was 26.5% of total investments. Because high yield bonds and utility stocks
generated similar returns, this positioning did not impact Fund performance.
Although many utility stocks were driven by energy prices during the period, the
Fund was more conservative in its stock selection, focusing on what we
considered to be stable, yield-oriented names. Utility sector fundamentals
remained strong, and many companies still focused on dividend growth, including
those in which the Fund invests.

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 FEBRUARY 28, 2006, 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.

6 | Semiannual Report

Performance Summary as of 2/28/06

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 2/28/06 8/31/05
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Net Asset Value (NAV) -$0.06 $ 7.06 $ 7.12
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Market Price (NYSE) +$0.04 $ 6.26 $ 6.22
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DISTRIBUTIONS (9/1/05-2/28/06)
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Dividend Income $0.2160
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PERFORMANCE

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6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1
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Based on change in NAV 2 +2.28% +7.07% +31.85% +78.40%
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Based on change in market price 3 +4.22% +9.20% +19.04% +72.67%
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Average Annual Total Return 1
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Based on change in NAV 2 +2.28% +7.07% +5.69% +5.96%
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Based on change in market price 3 +4.22% +9.20% +3.55% +5.61%
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Distribution Rate 4 7.28%
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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. Six-month return has not
been annualized.

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 February dividend and the NYSE closing price of $6.26 on 2/28/06.

Semiannual Report | 7

Annual Shareholders' Meeting

FEBRUARY 16, 2006

At an Annual Shareholders' Meeting of Franklin Universal Trust (the "Fund") held
on February 16, 2006, shareholders approved the following:

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

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% OF % OF
SHARES OUTSTANDING % OF WITHHELD OR OUTSTANDING % OF
TRUSTEES FOR SHARES VOTED ABSTAIN SHARES VOTED
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Harris J. Ashton 23,325,788.663 83.532% 92.996% 1,756,781.018 6.291% 7.004%
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Robert F. Carlson 23,329,172.082 83.544% 93.009% 1,753,397.599 6.279% 6.991%
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S. Joseph Fortunato 23,347,677.399 83.611% 93.083% 1,734,892.282 6.213% 6.917%
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Edith E. Holiday 23,343,483.686 83.596% 93.067% 1,739,085.995 6.228% 6.933%
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Edward B. Jamieson 23,350,950.686 83.622% 93.096% 1,731,618.995 6.201% 6.904%
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Charles B. Johnson 23,341,330.040 83.588% 93.058% 1,741,239.641 6.236% 6.942%
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Rupert H. Johnson, Jr. 23,349,210.686 83.616% 93.089% 1,733,358.995 6.207% 6.911%
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Frank W. T. LaHaye 23,351,577.405 83.625% 93.099% 1,730,992.276 6.199% 6.901%
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Gordon S. Macklin 22,543,934.040 80.732% 89.879% 2,538,635.641 9.091% 10.121%
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Frank A. Olson 23,324,216.040 83.527% 92.990% 1,758,353.641 6.297% 7.010%
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8 | Semiannual Report

Dividend Reinvestment and Cash Purchase Plan

The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers you
a prompt and simple way to reinvest dividends and capital gain distributions in
shares of the Fund. The Plan also allows you to purchase additional shares of
the Fund by making voluntary cash payments. PFPC Inc. (the "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.

Semiannual Report | 9

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 | Semiannual 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.

Semiannual Report | 11

Franklin Universal Trust

FINANCIAL HIGHLIGHTS

--------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
(UNAUDITED) 2005 2004 2003 2002 2001
--------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .............. $ 7.12 $ 6.48 $ 5.67 $ 5.13 $ 7.32 $ 8.21
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income a .......................... 0.22 0.45 0.43 0.45 0.65 f 0.73

Net realized and unrealized gains (losses) ....... (0.06) 0.59 0.74 0.59 (2.05) f (0.82)
--------------------------------------------------------------------------------
Total from investment operations .................. 0.16 1.04 1.17 1.04 (1.40) (0.09)
--------------------------------------------------------------------------------
Less distributions from net investment income ..... (0.22) (0.40) (0.36) (0.50) (0.79) (0.80)
-------------------------------------------------------------------------------
Net asset value, end of period .................... $ 7.06 $ 7.12 $ 6.48 $ 5.67 $ 5.13 $ 7.32
-------------------------------------------------------------------------------
Market value, end of period b ..................... $ 6.26 $ 6.22 $ 5.65 $ 5.20 $ 6.37 $ 8.24
===============================================================================

Total return (based on market value per share) c .. 4.22% 17.49% 15.79% (10.13)% (13.68)% 19.01%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................. $197,107 $198,861 $180,850 $158,364 $141,619 $198,598

Ratios to average net assets:

Expenses ......................................... 2.28% e 2.32% e 2.47% e 3.59% 4.05% 3.29%

Net investment income ............................ 6.28% d 6.49% 6.85% 8.68% 10.04% f 9.38%

Portfolio turnover rate ........................... 15.65% 34.60% 46.35% 65.15% 17.38% 31.60%

Total debt outstanding at end of period (000's) ... $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 60,000 $ 75,000

Asset coverage per $1,000 of debt ................. $ 4,584 $ 4,616 $ 4,288 $ 3,879 $ 3,360 $ 3,648

Average amount of senior fixed rate notes per share
during the period ................................ $ 1.97 $ 1.97 $ 1.97 $ 1.87 $ 2.65 $ 2.76

a Based on average daily shares outstanding.

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

c Total return is not annualized for periods less than one year.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

f Effective September 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing all
premium and discount on fixed-income securities, as required. The effect of this
change was as follows:

Net investment income per share ............................. $ (0.012)
Net realized and unrealized gains (losses) per share ........ 0.012
Ratio of net investment income to average net assets ........ (0.19)%

Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.

12 | See notes to financial statements. | Semiannual Report

Franklin Universal Trust

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED)

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

LONG TERM INVESTMENTS 126.4%
COMMON STOCKS 34.2%
NON-ENERGY MINERALS 1.3%
AngloGold Ashanti Ltd., ADR .................................................. South Africa 30,446 $ 1,550,310
Barrick Gold Corp. ........................................................... Canada 35,800 979,846
-----------
2,530,156
-----------
PRODUCER MANUFACTURING 0.0% a
b Harvard Industries Inc. ..................................................... United States 109,618 1,096
b,c VS Holdings Inc. ............................................................ United States 181,875 --
-----------
1,096
-----------
RETAIL TRADE 0.0% a
Stage Stores Inc. ............................................................ United States 83 2,420
-----------
UTILITIES 32.9%
Alliant Energy Corp. ......................................................... United States 95,000 3,144,500
Ameren Corp. ................................................................. United States 40,000 2,026,800
American Electric Power Co. Inc. ............................................. United States 30,000 1,095,000
Atmos Energy Corp. ........................................................... United States 85,000 2,244,000
CenterPoint Energy Inc. ...................................................... United States 139,200 1,805,424
Cinergy Corp. ................................................................ United States 55,000 2,424,400
Dominion Resources Inc. ...................................................... United States 70,000 5,257,000
DTE Energy Co. ............................................................... United States 45,000 1,948,500
Edison International ......................................................... United States 65,000 2,883,400
Energy East Corp. ............................................................ United States 42,000 1,052,520
Entergy Corp. ................................................................ United States 50,500 3,661,755
Exelon Corp. ................................................................. United States 104,000 5,939,440
FirstEnergy Corp. ............................................................ United States 75,000 3,831,000
FPL Group Inc. ............................................................... United States 140,000 5,870,200
NiSource Inc. ................................................................ United States 80,000 1,642,400
ONEOK Inc. ................................................................... United States 22,600 691,334
Pinnacle West Capital Corp. .................................................. United States 76,000 3,119,800
Progress Energy Inc. ......................................................... United States 70,000 3,106,600
Public Service Enterprise Group Inc. ......................................... United States 47,250 3,278,678
Southern Co. ................................................................. United States 170,000 5,785,100
TXU Corp. .................................................................... United States 79,200 4,149,288
-----------
64,957,139
-----------
TOTAL COMMON STOCKS (COST $45,554,835) ....................................... 67,490,811
-----------
PREFERRED STOCKS 1.0%
PROCESS INDUSTRIES 0.0% a
c,d,e Asia Pulp & Paper Co. Ltd., 12.00%, pfd., Perpetual .......................... Indonesia 4,000,000 43,600
-----------
UTILITIES 1.0%
Heco Capital Trust III, 6.50%, pfd ........................................... United States 75,000 1,918,125
-----------
TOTAL PREFERRED STOCKS (COST $5,875,000) ..................................... 1,961,725
-----------

Semiannual Report | 13

Franklin Universal Trust

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
COUNTRY AMOUNT g VALUE
------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS 88.1%
COMMERCIAL SERVICES 5.0%
Corrections Corp. of America, senior note, 7.50%, 5/01/11 .................... United States 2,300,000 $ 2,389,125
Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 ........................ United States 2,342,000 2,605,475
Johnsondiversey Inc., senior sub. note, B, 9.625%, 5/15/12 ................... United States 3,000,000 3,090,000
f Quebecor Media Inc., senior note, 144A, 7.75%, 3/15/16 ....................... Canada 1,000,000 1,030,000
f R.H. Donnelley Corp., senior note, 144A, 8.875%, 1/15/16 ..................... United States 700,000 734,125
-----------
9,848,725
-----------
COMMUNICATIONS 10.5%
Dobson Cellular Systems Inc., senior secured note, 9.875%,
11/01/12 ................................................................... United States 1,900,000 2,085,250
Inmarsat Finance PLC, senior note,
7.625%, 6/30/12 ........................................................... United Kingdom 645,000 668,381
zero cpn. to 11/15/08, 10.375% thereafter, 11/15/12 ....................... United Kingdom 2,700,000 2,288,250
f Intelsat Bermuda Ltd., senior note, 144A, 8.50%, 1/15/13 ..................... Bermuda 2,900,000 2,979,750
Millicom International Cellular SA, senior note, 10.00%, 12/01/13 ............ Luxembourg 2,300,000 2,544,375
Qwest Communications International Inc., senior note, 7.50%,
2/15/14 .................................................................... United States 2,000,000 2,065,000
Rogers Wireless Inc., senior secured note, 7.25%, 12/15/12 ................... Canada 2,300,000 2,452,375
Time Warner Telecom Holdings Inc., senior note, 9.25%, 2/15/14 ............... United States 2,500,000 2,709,375
f Wind Acquisition Finance SA, senior note, 144A, 10.75%,
12/01/15 ................................................................... Italy 2,700,000 2,902,500
-----------
20,695,256
-----------
CONSUMER DURABLES 6.8%
D.R. Horton Inc., senior note, 8.50%, 4/15/12 ................................ United States 3,000,000 3,201,492
Ford Motor Credit Co., 5.625%, 10/01/08 ...................................... United States 1,100,000 999,571
General Motors Acceptance Corp., 6.875%, 8/28/12 ............................. United States 2,700,000 2,408,716
General Motors Corp., senior deb., 8.25%, 7/15/23 ............................ United States 1,000,000 692,500
Jostens IH Corp., senior sub. note, 7.625%, 10/01/12 ......................... United States 1,400,000 1,428,000
Simmons Bedding Co., senior sub. note, 7.875%, 1/15/14 ....................... United States 2,100,000 2,026,500
William Lyon Homes Inc., senior note, 7.625%, 12/15/12 ....................... United States 3,000,000 2,625,000
-----------
13,381,779
-----------
CONSUMER NON-DURABLES 2.9%
Smithfield Foods Inc., senior note,
7.00%, 8/01/11 ............................................................ United States 2,000,000 2,035,000
7.75%, 5/15/13 ............................................................ United States 1,000,000 1,051,250
Spectrum Brands Inc., senior sub. note, 7.375%, 2/01/15 ...................... United States 3,000,000 2,602,500
-----------
5,688,750
-----------
CONSUMER SERVICES 14.4%
AMC Entertainment Inc., senior note, B, 8.625%, 8/15/12 ...................... United States 1,900,000 1,990,250
c,d Atherton Franchise Capital, 13.073%, 12/01/08 ................................ United States 731,658 14,633
Cablevision Systems Corp., senior note, B, 8.00%, 4/15/12 .................... United States 2,900,000 2,863,750
d Century Communications Corp., senior disc. note, B, zero cpn.,
1/15/08 .................................................................... United States 3,000,000 1,635,000
CCH II LLC, senior note, 10.25%, 9/15/10 ..................................... United States 2,500,000 2,506,250
DIRECTV Holdings LLC, senior note, 8.375%, 3/15/13 ........................... United States 1,283,000 1,382,433

14 | Semiannual Report

Franklin Universal Trust

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
CONSUMER SERVICES (CONTINUED)
f EchoStar DBS Corp., senior note, 144A, 7.125%, 2/01/16 ......................... United States 2,500,000 $ 2,487,500
Emmis Operating Co., senior sub. note, 6.875%, 5/15/12 ......................... United States 1,500,000 1,477,500
f Hertz Corp., senior note, 144A, 8.875%, 1/01/14 ................................ United States 2,000,000 2,100,000
Liberty Media Corp., senior note, 5.70%, 5/15/13 ............................... United States 3,000,000 2,824,839
LIN Television Corp., senior sub. note, 6.50%, 5/15/13 ......................... United States 1,500,000 1,430,625
Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 ................. United States 800,000 860,000
Radio One Inc., senior sub. note, 6.375%, 2/15/13 .............................. United States 1,700,000 1,640,500
Royal Caribbean Cruises Ltd., senior note,
8.00%, 5/15/10 ............................................................. United States 1,200,000 1,303,885
6.875%, 12/01/13 ........................................................... United States 800,000 848,427
Station Casinos Inc.,
senior note, 6.00%, 4/01/12 ................................................ United States 500,000 502,500
senior sub. note, 6.50%, 2/01/14 ........................................... United States 300,000 301,500
senior sub. note, 6.875%, 3/01/16 .......................................... United States 2,200,000 2,249,500
-----------
28,419,092
-----------
ELECTRONIC TECHNOLOGY 4.1%
DRS Technologies Inc., senior sub. note, 7.625%, 2/01/18 ....................... United States 1,800,000 1,858,500
L-3 Communications Corp., senior sub. note, 6.375%, 10/15/15 ................... United States 2,800,000 2,807,000
Sanmina-SCI Corp.,
8.125%, 3/01/16 ............................................................ United States 400,000 411,000
senior sub. note, 6.75%, 3/01/13 ........................................... United States 2,000,000 1,940,000
f Solectron Corp., senior sub. note, 144A, 8.00%, 3/15/16 ........................ United States 1,000,000 1,020,000
-----------
8,036,500
-----------
ENERGY MINERALS 4.3%
Chesapeake Energy Corp., senior note, 6.25%, 1/15/18 ........................... United States 3,000,000 3,011,250
f Massey Energy Co., senior note, 144A, 6.875%, 12/15/13 ......................... United States 1,600,000 1,604,000
Plains Exploration & Production Co., senior note, 7.125%, 6/15/14 .............. United States 1,700,000 1,780,750
Pogo Producing Co., senior sub. note, 6.875%, 10/01/17 ......................... United States 2,000,000 2,025,000
-----------
8,421,000
-----------
HEALTH SERVICES 5.7%
DaVita Inc., senior sub. note, 7.25%, 3/15/15 .................................. United States 3,000,000 3,075,000
HCA Inc., 6.50%, 2/15/16 ....................................................... United States 2,300,000 2,303,579
Tenet Healthcare Corp., senior note, 7.375%, 2/01/13 ........................... United States 3,000,000 2,767,500
Vanguard Health Holding Co. II LLC, senior sub. note, 9.00%,
10/01/14 ..................................................................... United States 3,000,000 3,142,500
-----------
11,288,579
-----------
INDUSTRIAL SERVICES 4.8%
Allied Waste North America Inc., senior secured note,
6.50%, 11/15/10 ............................................................ United States 1,600,000 1,600,000
B, 5.75%, 2/15/11 .......................................................... United States 900,000 866,250
f Copano Energy LLC, senior note, 144A, 8.125%, 3/01/16 .......................... United States 1,100,000 1,149,500
f Grant Prideco Inc., senior note, 144A, 6.125%, 8/15/15 ......................... United States 800,000 810,000

Semiannual Report | 15

Franklin Universal Trust

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
INDUSTRIAL SERVICES (CONTINUED)
Hanover Equipment Trust 01, senior secured note, B, 8.75%,
9/01/11 ................................................................... United States 3,000,000 $ 3,180,000
f Markwest Energy Partners LP, senior note, 144A, 6.875%,
11/01/14 .................................................................. United States 2,000,000 1,890,000
-----------
9,495,750
-----------
NON-ENERGY MINERALS 1.9%
Ispat Inland ULC, senior secured note, 9.75%, 4/01/14 ....................... United States 1,863,000 2,117,858
f Novelis Inc., senior note, 144A, 7.25%, 2/15/15 ............................. Canada 1,700,000 1,657,500
-----------
3,775,358
-----------
PROCESS INDUSTRIES 9.6%
Abitibi-Consolidated Co. of Canada, senior note, 8.375%, 4/01/15 ............ Canada 3,000,000 2,850,000
f Basell AF SCA, senior note, 144A, 8.375%, 8/15/15 ........................... Germany 1,200,000 1,212,000
BCP Crystal Holdings Corp., senior sub. note, 9.625%, 6/15/14 ............... United States 1,785,000 2,005,894
f Crown Americas Inc., senior note, 144A, 7.75%, 11/15/15 ..................... United States 3,000,000 3,142,500
JSG Funding PLC, senior sub. note, 7.75%, 4/01/15 ........................... Ireland 3,000,000 2,745,000
Nalco Co., senior sub. note, 8.875%, 11/15/13 ............................... United States 2,000,000 2,105,000
Owens-Brockway Glass Container Inc., senior note, 6.75%,
12/01/14 .................................................................. United States 2,000,000 1,970,000
b,c,e Pindo Deli Finance Mauritius Ltd., 144A,
h FRN, 5.664%, 4/29/15 .................................................... Indonesia 339,219 76,460
h FRN, 5.664%, 4/29/18 .................................................... Indonesia 882,036 198,811
zero cpn., 4/29/25 ...................................................... Indonesia 1,822,397 410,768
Rhodia SA, senior note, 10.25%, 6/01/10 ..................................... France 1,931,000 2,182,030
-----------
18,898,463
-----------
PRODUCER MANUFACTURING 4.3%
Case New Holland Inc., senior note, 9.25%, 8/01/11 .......................... United States 3,000,000 3,232,500
f Invensys PLC, senior note, 144A, 9.875%, 3/15/11 ............................ United Kingdom 1,800,000 1,872,000
Milacron Escrow Corp., senior secured note, 11.50%, 5/15/11 ................. United States 800,000 720,000
Nortek Inc., senior sub. note, 8.50%, 9/01/14 ............................... United States 800,000 802,000
TRW Automotive Inc., senior note, 9.375%, 2/15/13 ........................... United States 1,701,000 1,854,090
-----------
8,480,590
-----------
REAL ESTATE INVESTMENT TRUSTS 1.6%
Host Marriott LP, senior note,
M, 7.00%, 8/15/12 ....................................................... United States 2,500,000 2,562,500
O, 6.375%, 3/15/15 ...................................................... United States 500,000 501,250
-----------
3,063,750
-----------
RETAIL TRADE 2.8%
f GSC Holdings Corp., senior note, 144A, 8.00%, 10/01/12 ...................... United States 2,600,000 2,606,500
f Rite Aid Corp., senior note, 144A, 6.125%, 12/15/08 ......................... United States 3,000,000 2,902,500
-----------
5,509,000
-----------

16 | Semiannual Report

Franklin Universal Trust

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
COUNTRY AMOUNT g VALUE
---------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
TECHNOLOGY SERVICES 2.9%
d PSINet Inc.,
10.50%, 12/01/06 ......................................................... United States 700,000 $ 875
senior note, 11.00%, 8/01/09 ............................................. United States 3,250,000 4,063
f SunGard Data Systems Inc.,
senior note, 144A, 9.125%, 8/15/13 ....................................... United States 900,000 961,875
senior sub. note, 144A, 10.25%, 8/15/15 .................................. United States 1,900,000 2,002,125
UGS Corp., senior sub. note, 10.00%, 6/01/12 ................................ United States 2,500,000 2,753,125
-----------
5,722,063
-----------
TRANSPORTATION 0.6%
Great Lakes Dredge & Dock Co., senior sub. note, 7.75%, 12/15/13 ............ United States 1,200,000 1,122,000
-----------
UTILITIES 5.9%
Aquila Inc., senior note, 14.875%, 7/01/12 .................................. United States 2,000,000 2,725,000
d,e,f Calpine Corp., senior secured note, 144A, 8.75%, 7/15/13 .................... United States 1,000,000 935,000
Dynegy Holdings Inc., senior note, 8.75%, 2/15/12 ........................... United States 2,600,000 2,886,000
Midwest Generation LLC, senior secured note, 8.75%, 5/01/34 ................. United States 3,000,000 3,292,500
NRG Energy Inc., senior note, 7.375%, 2/01/16 ............................... United States 1,800,000 1,858,500
-----------
11,697,000
-----------
TOTAL CORPORATE BONDS (COST $172,502,748) ................................... 173,543,655
-----------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 3.1%
Eskom, E168, 11.00%, 6/01/08 ................................................ South Africa 4,350,000 ZAR 758,143
Government of Mexico, 11.375%, 9/15/16 ...................................... Mexico 2,750,000 4,044,562
Government of Russia, 3.00%, 5/14/06 ........................................ Russia 1,300,000 1,295,125
-----------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES
(COST $5,323,848) ......................................................... 6,097,830
-----------
TOTAL LONG TERM INVESTMENTS (COST $229,256,431) ............................. 249,094,021
-----------

Semiannual Report | 17

Franklin Universal Trust

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

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

SHORT TERM INVESTMENT (COST $2,988,268) 1.5%
MONEY MARKET FUND 1.5%
i Franklin Institutional Fiduciary Trust Money Market
Portfolio ...................................................................... United States 2,988,268 $ 2,988,268
------------
TOTAL INVESTMENTS (COST $232,244,699) 127.9% ................................... 252,082,289
NOTES PAYABLE (27.9)% .......................................................... (55,000,000)
OTHER ASSETS, LESS LIABILITIES 0.0% a .......................................... 24,735
------------
NET ASSETS 100.0% .............................................................. $197,107,024
============

CURRENCY ABBREVIATIONS

ZAR - South African Rand

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt

FRN - Floating Rate Note

a Rounds to less than 0.1% of net assets.

b Non-income producing.

c See Note 10 regarding restricted and illiquid securities.

d See Note 9 regarding defaulted securities.

e See Note 11 regarding other considerations.

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 February 28, 2006, the aggregate value of these
securities was $35,999,375, representing 18.26% of net assets.

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

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.

18 | See notes to financial statements. | Semiannual Report

Franklin Universal Trust

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2006 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................. $ 229,256,431
Cost - Sweep Money Fund (Note 8) ........................ 2,988,268
-------------
Total cost of investments ............................... $ 232,244,699
=============
Value - Unaffiliated issuers ............................ $ 249,094,021
Value - Sweep Money Fund (Note 8) ....................... 2,988,268
-------------
Total value of investments .............................. 252,082,289
Receivables:
Dividends and interest .................................. 3,628,219
Note issuance costs (Note 3) ............................. 105,217
-------------
Total assets ...................................... 255,815,725
-------------
Liabilities:
Payables:
Investment securities purchased ......................... 746,281
Affiliates .............................................. 156,202
Distributions to shareholders ........................... 1,061,123
Funds advanced by custodian .............................. 1,138,500
Senior fixed rate notes (Note 3) ......................... 55,000,000
Deferred sale proceeds (Note 11) ......................... 507,163
Accrued expenses and other liabilities ................... 99,432
-------------
Total liabilities ................................. 58,708,701
-------------
Net assets, at value ............................ $ 197,107,024
=============
Net assets consist of:
Paid-in capital .......................................... $ 254,815,425
Undistributed net investment income ...................... 2,104,657
Net unrealized appreciation (depreciation) ............... 19,837,618
Accumulated net realized gain (loss) ..................... (79,650,676)
-------------
Net assets, at value ............................ $ 197,107,024
=============
Shares outstanding ........................................ 27,924,294
=============
Net asset value per share ................................. $ 7.06
=============

Semiannual Report | See notes to financial statements. | 19

Franklin Universal Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2006 (unaudited)

Investment income:
Dividends:
Unaffiliated issuers .................................................. $ 1,219,056
Sweep Money Fund (Note 8) ............................................. 43,604
Interest ............................................................... 7,010,062
-----------
Total investment income ......................................... 8,272,722
-----------
Expenses:
Management fees (Note 4a) .............................................. 932,813
Interest expense (Note 3) .............................................. 1,138,500
Transfer agent fees .................................................... 29,891
Custodian fees (Note 5) ................................................ 2,503
Reports to shareholders ................................................ 24,114
Professional fees ...................................................... 34,616
Trustees' fees and expenses ............................................ 5,786
Amortization of note issuance costs (Note 3) ........................... 19,757
Other .................................................................. 19,391
-----------
Total expenses .................................................. 2,207,371
Expense reductions (Note 5) ..................................... (1,104)
-----------
Net expenses .................................................. 2,206,267
-----------
Net investment income ........................................ 6,066,455
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................... 692,606
Foreign currency transactions ......................................... 481
-----------
Net realized gain (loss) ..................................... 693,087
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................... (2,481,423)
Translation of assets and liabilities denominated in foreign currencies (207)
-----------
Net change in unrealized appreciation (depreciation) ......... (2,481,630)
-----------
Net realized and unrealized gain (loss) ................................. (1,788,543)
-----------
Net increase (decrease) in net assets resulting from operations ......... $ 4,277,912
===========

20 | See notes to financial statements. | Semiannual Report

Franklin Universal Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

S-------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED
(UNAUDITED) AUGUST 31, 2005
-------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ................................................................ $ 6,066,455 $ 12,446,427
Net realized gain (loss) from investments and foreign currency transactions .......... 693,087 (10,744,784)
Net change in unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies ........................... (2,481,630) 27,478,435
---------------------------------------
Net increase (decrease) in net assets resulting from operations .............. 4,277,912 29,180,078
Distributions to shareholders from net investment income .............................. (6,031,647) (11,169,717)
---------------------------------------
Net increase (decrease) in net assets ........................................ (1,753,735) 18,010,361
Net assets:
Beginning of period ................................................................... 198,860,759 180,850,398
---------------------------------------
End of period ......................................................................... $ 197,107,024 $ 198,860,759
=======================================
Undistributed net investment income included in net assets:
End of period ......................................................................... $ 2,104,657 $ 2,069,849
=======================================

Semiannual Report | See notes to financial statements. | 21

Franklin Universal Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF CASH FLOWS
for the six months ended February 28, 2006 (unaudited)

Cash flow from operating activities:
Dividends and interest received .................................. $ 7,872,822
Operating expenses paid .......................................... (1,033,133)
Interest expense paid ............................................ (1,138,500)
Purchases of long-term investments ............................... (38,571,414)
Sales and maturities of long-term investments .................... 38,937,773
Net purchases of short-term investments .......................... (1,260,924)
------------
Cash provided - operating activities ............................ 4,806,624
============
Cash flow from financing activities - distributions to shareholders (5,947,874)
============
Net increase (decrease) in cash ................................... (1,141,250)
Cash at beginning of period ....................................... 2,750
------------
Cash at end of period ............................................. $ (1,138,500)
============

RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATING
ACTIVITIES TO NET CASH PROVIDED BY OPERATING ACTIVITIES
FOR THE SIX MONTHS ENDED FEBRUARY 28, 2006 (UNAUDITED)

Net increase (decrease) in net assets resulting from operating activities ................................ $ 4,277,912
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 .................................................................. 19,757
Amortization income .................................................................................. (214,495)
Reinvested dividends from Sweep Money Fund ........................................................... (43,604)
Interest income on bond restructurings and other investment transactions ............................. 215,959
Increase in dividends and interest receivable ........................................................ (142,075)
Increase in other liabilities ........................................................................ 14,867
Increase in payables for investments purchased ....................................................... 746,281
Decrease in cost of investments ...................................................................... (2,549,401)
Decrease in unrealized appreciation on investments ................................................... 2,481,423
-----------
Net cash provided by operating activities ................................................................ $ 4,806,624
===========

22 | See notes to financial statements. | Semiannual Report

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Universal Trust (the Fund) is registered under the Investment Company
Act of 1940 as a diversified, closed-end investment company. The Fund has two
classes of securities: senior fixed-rate notes (the Notes) and shares of
beneficial interest (the Shares).

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, government securities and asset-backed 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. 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.

Semiannual Report | 23

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 on a specified 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.

D. INCOME TAXES

No provision has been made for U.S. income taxes because the Fund's policy is to
continue 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

24 | Semiannual Report

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)

included in interest income. Dividend income is recorded on the ex-dividend date
except that certain dividends from foreign securities are recognized as soon as
the Fund is notified of 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. 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 Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. However, based on experience, the
Fund expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At February 28, 2006, there were an unlimited number of shares authorized ($0.01
par value). During the period ended February 28, 2006, there were no share
transactions; all reinvested distributions were satisfied with previously issued
shares purchased in the open market.

3. SENIOR FIXED RATE NOTES

On August 29, 2003, the Fund issued $55 million principal amount of a new class
of five-year senior fixed rate 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.

Semiannual Report | 25

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. SENIOR FIXED RATE NOTES (CONTINUED)

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 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 by Standard & Poor's
Corporation, and is required to maintain asset coverage for the Notes of at
least 300%. The Fund has met these requirements during the period ended February
28, 2006.

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 or directors of the following
subsidiaries:

--------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
--------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Admistrative manager

A. MANAGEMENT FEES

The Fund pays an investment management fee to Advisers of 0.75% per year of the
average weekly net assets plus 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 period ended February 28, 2006, the
custodian fees were reduced as noted in the Statement of Operations.

26 | Semiannual Report

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. INCOME TAXES

At August 31, 2005, the Fund had tax basis capital losses which may be carried
over to offset future capital gains, if any. At August 31, 2005, the capital
loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2008 ...................................... $ 5,088,195
2009 ...................................... 1,167,255
2010 ...................................... 6,827,086
2011 ...................................... 34,372,527
2012 ...................................... 18,676,213
2013 ...................................... 3,246,257
-----------
$69,377,533
===========

For tax purposes, realized capital 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, 2005, the Fund deferred realized capital losses of
$10,937,370.

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

At February 28, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ......................... $232,463,140
===========
S
Unrealized appreciation ..................... $34,370,519
Unrealized depreciation ..................... (14,751,370)
-----------
Net unrealized appreciation (depreciation) .. $19,619,149
===========

7. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2006, aggregated $39,317,695 and $38,721,814,
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.

Semiannual Report | 27

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 67.17% 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.

The Fund held defaulted securities and/or other securities for which the income
has been deemed uncollectible. At February 28, 2006, the aggregate value of
these securities was $2,633,171, representing 1.04% 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 AND ILLIQUID SECURITIES

At February 28, 2006, investments in securities included issues that are
restricted and illiquid. Restricted securities are often purchased in private
placement transactions, and cannot be sold without prior registration under the
Securities Act of 1933, unless the sale is pursuant to an exemption under the
1933 Act. The Fund has registration rights for certain restricted securities
held at period end. The issuer generally incurs all registration costs.

A security may be considered illiquid if it lacks a readily available market or
if its valuation has not changed for a certain period of time. At February 28,
2006, the Fund held investments in restricted and illiquid securities, 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
-----------------------------------------------------------------------------------------------------------------------

4,000,000 Asia Pulp & Paper Co Ltd., 12.00%, pfd.,
Perpetual ...................................... 2/14/97 $4,000,000 $ 43,600
731,658 Atherton Franchise Capital, 13.073%,
12/01/08 ....................................... 4/28/94 731,658 14,633
339,219 Pindo Deli Finance Mauritius Ltd., 144A, FRN,
5.664%, 4/29/15 ................................ 4/29/05 78,821 76,460
882,036 Pindo Deli Finance Mauritius Ltd., 144A, FRN,
5.664%, 4/29/18 ................................ 4/29/05 204,950 198,811
1,822,397 Pindo Deli Finance Mauritius Ltd., 144A,
zero cpn., 4/29/25 ............................. 4/29/05 423,452 410,768
181,875 VS Holdings Inc. ................................ 12/06/01 181,875 --
--------
TOTAL RESTRICTED AND ILLIQUID SECURITIES (0.38% of Net Assets) ................... $744,272
========

28 | Semiannual Report

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

11. OTHER CONSIDERATIONS

Subject to certain terms and conditions, the Fund has agreed to sell its
holdings in Asia Pulp & Paper Co. Ltd. and Pindo Deli Finance Mauritius Ltd. in
November 2006. Until completion of the sale, the transaction is being accounted
for as a secured borrowing with a pledge of collateral and any preliminary sales
proceeds or other interest and cash distributions received are deferred until
the completion of the transaction and are recorded as part of the net sales
proceeds.

Directors or employees of Advisers, as the Fund's Investment Manager, may serve
as members of various bondholders' steering committees, on credit committees, or
may represent the Fund in certain corporate restructuring negotiations. At
February 28, 2006, such individuals serve in one of more of the capacities for
Calpine Corp. As a result of this involvement, such individuals may be in
possession of certain material non-public information. If the Fund's Investment
Manager, while in possession of such information, seeks to sell any of its
holdings in this security it will comply with all applicable federal securities
laws.

12. REGULATORY MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, 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, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.

Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds in March, 2005. The
SEC has not yet approved the distribution plan pertaining to the December 13,
2004 SEC Order. When approved, disbursements of settlement monies will be made
promptly to the relevant funds, in accordance with the terms and conditions of
that order. The IDC has also prepared and submitted to the SEC for its approval
a plan of distribution under the August 2, 2004 SEC Order that resolved the
SEC's market timing investigation.

Semiannual Report | 29

Franklin Universal Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

12. REGULATORY MATTERS (CONTINUED)

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
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.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.

The Company and fund management strongly 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 Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.

30 | Semiannual Report

Franklin Universal Trust

SHAREHOLDER INFORMATION

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT

At a meeting held February 28, 2006, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for Franklin Universal Trust ("Fund"). In
reaching this decision, the Board took into account information furnished
throughout the year at regular Board meetings, as well as information prepared
specifically in connection with the annual renewal review process. Information
furnished and discussed throughout the year included investment performance
reports on the Fund, information on its share price discount to net asset value,
and other related financial information, as well as periodic reports on legal,
compliance, pricing, brokerage commissions and execution and other services
provided by the Investment Manager ("Manager") and its affiliates. Information
furnished specifically in connection with the renewal process included a report
prepared by Lipper, Inc. ("Lipper"), an independent organization, as well as a
Fund profitability analysis report prepared by management. The Lipper report
compared the Fund's investment performance and expenses with those of other
funds deemed comparable to the Fund as selected by Lipper. The Fund
profitability analysis report discussed the profitability to Franklin Templeton
Investments from its overall U.S. fund operations, as well as on an individual
fund-by-fund basis. Included with such profitability analysis report was
information on a fund-by-fund basis listing portfolio managers and other
accounts they manage, as well as information on management fees charged by the
Manager and its affiliates including management's explanation of differences
where relevant, and a three-year expense analysis with an explanation for any
increase in expense ratios. Additional information accompanying such report was
a memorandum prepared by management describing enhancements to the services
provided to the Fund by the Franklin Templeton Investments organization, as well
as a memorandum relating to economies of scale.

In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.

NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
the Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the Board, and the accuracy of net asset value
calculations. Favorable consideration was given to management's

Semiannual Report | 31

Franklin Universal Trust

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

efforts and expenditures in establishing back-up systems and recovery procedures
to function in the event of a natural disaster, it being noted by the Board that
such systems and procedures had functioned smoothly during the hurricanes and
blackout experienced last year in Florida. Among other factors taken into
account by the Board were the Manager's best-execution trading policies,
including a favorable report by an independent portfolio trading analytical
firm. Consideration was also given to the experience of the Fund's portfolio
management team, the number of accounts managed and general method of
compensation. In this latter respect, the Board noted that a primary factor in
management's determination of the level of a portfolio manager's bonus
compensation was the relative investment performance of the funds he or she
managed so as to be aligned with the interests of Fund shareholders.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. Consideration
was given to performance reports and discussions with portfolio managers at
Board meetings during the year, as well as the Lipper report furnished for the
agreement renewals. The Lipper report prepared for the Fund showed its
investment performance in comparison with a performance universe consisting of
the Fund and all closed-end debt leveraged high yield funds as selected by
Lipper during 2005, as well as the previous ten years ended December 31, 2005.
Such report considered both income return and total return on a net asset value
basis without regard to market discounts or premiums to accurately reflect
investment performance. The Lipper report showed the Fund's income return to be
in the lowest quintile of such performance universe for the one-year period and
on an annualized basis for each of the previous three-, five- and ten-year
periods, but the Fund's total return to be in the highest quintile of such
universe during 2005 and on an annualized basis was in the middle quintile for
the previous three-year period, the second-lowest quintile for the previous
five-year period, and the second-highest quintile for the previous ten-year
period. In discussing such performance, management pointed out the Fund's
mandate to invest between 20 percent and 30 percent of its assets in utilities
stocks differed from the Lipper performance universe, which consisted of pure
high yield funds, and that its relative performance within such universe
reflected such difference. Management further pointed out that the Fund's
investment performance was comparable to a blend of the Credit Suisse High Yield
Index and the Standard & Poor's 500 Utilities Index, which it believed was a
more meaningful measure of performance. The Board believed the Fund's investment
performance was satisfactory in view of such explanation.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with a Lipper
expense group consisting of the Fund and eight other closed-end debt leveraged
high current yield funds as selected by Lipper. Prior to making such comparison,
the Board relied upon a survey showing that the scope of services covered under
the Fund's investment management agreement was similar to those provided by fund
managers to other fund groups that would be used as a basis of comparison in the

32 | Semiannual Report

Franklin Universal Trust

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

Lipper report. In reviewing comparative costs, emphasis was given to the Fund's
management fee in comparison with the effective management fee rate that would
have been charged by other funds within its Lipper expense group assuming they
were the same size as the Fund, as well as the actual total expenses of the Fund
in comparison with those of its Lipper expense group. The Lipper effective
management fee analysis considers administrative fees to be part of management
fees and showed the Fund's effective management fee rate was the sixth-highest
in the Lipper expense group, being five basis points above the median for such
group. The report showed the Fund's actual total expenses computed on a basis of
both including and excluding investment-related expenses and taxes which,
according to Lipper primarily relates to leveraging, were below the median of
its expense group. The Board found such expenses to be acceptable.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the individual Funds. The Board also considered the extent to which the
Manager and its affiliates might derive ancillary benefits from fund operations,
as well as potential benefits resulting from allocation of fund brokerage and
the use of "soft" commission dollars to pay for research. Specific attention was
given to the methodology followed in allocating costs to each Fund, it being
recognized that allocation methodologies are inherently subjective and various
allocation methodologies may each be reasonable while producing different
results. In this respect, the Board noted that the cost allocation methodology
was consistent with that followed in profitability report presentations made in
prior years and that the Fund's independent registered public accounting firm
had been engaged by the Manager to perform certain procedures on a biennial
basis, specified and approved by the Manager and the Fund's Board solely for
their purposes and use in reference to the profitability analysis. Included in
the analysis were the revenue and related costs involved in providing services
to the Fund, as well as the Fund's relative contribution to the profitability of
the Manager's parent. In reviewing and discussing such analysis, management
discussed with the Board its belief that costs incurred in establishing the
infrastructure necessary to the type of fund operations conducted by the Manager
and its affiliates may not be fully reflected in the expenses allocated to each
Fund in determining its profitability, as well as the fact that the level of
profits, to a certain extent, reflected operational cost savings and
efficiencies initiated by management. In addition, the Board considered a
third-party study comparing the profitability of the Manager's parent on an
overall basis as compared to other publicly held managers broken down to show
profitability from management operations exclusive of distribution expenses, as
well as profitability including distribution expenses. Based upon its
consideration of all these factors, the Board determined that the level of
profits realized by the Manager and its affiliates from providing services to
the Fund was not excessive in view of the nature, quality and extent of services
provided.

Semiannual Report | 33

Franklin Universal Trust

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

ECONOMIES OF SCALE. The Board also considered whether the Manager realizes
economies of scale as the Fund grows larger and the extent to which any such
benefit is shared with the Fund and its shareholders. The Board believed that a
manager's ability to realize economies of scale and the sharing of such benefit
is a more relevant consideration in the case of an open-end fund whose size
increases as a result of the continuous sale of its shares. A closed-end
investment company such as the Fund does not continuously offer shares, and
growth following its initial public offering will primarily result from market
appreciation, which benefits its shareholders. While believing economies of
scale to be less of a factor in the context of a closed-end fund, the Board
believes at some point an increase in size may lead to economies of scale that
should be shared with the Fund and its shareholders and intends to monitor
future growth of the Fund accordingly.

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 1-954/847-2268 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.

34 | Semiannual Report

Franklin Universal Trust

SHAREHOLDER INFORMATION (CONTINUED)

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-CSR for
the year ended August 31, 2005. Additionally, the Fund expects to file, on or
about April 30, 2006, such certifications with its Form N-CSRS for the six
months ended February 28, 2006.

Semiannual Report | 35

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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 INVESTMENTS

INTERNATIONAL

Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL

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

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1

VALUE

Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND

Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care 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
Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund

TARGET FUNDS

Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME

Franklin Adjustable U.S. Government
Securities Fund 4
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
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 5

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 6

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 7
Colorado
Connecticut
Florida 7
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 6
Michigan 6
Minnesota 6
Missouri
New Jersey
New York 7
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products
Trust 8

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

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

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

6. Portfolio of insured municipal securities.

7. 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).

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

09/05
Not part of the semiannual report

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

SEMIANNUAL 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 S2006 04/06

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 Frank W.T. LaHaye, and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. THE MEMBERS OF
THE AUDIT COMMITTEE ARE: ROBERT F. CARLSON, S. JOSEPH FORTUNATO,
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 Trust 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 Institutional
Shareholder Services (ISS), 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 ISS' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from ISS, 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. All conflicts are resolved
in the interests of the manager's clients. In situations where the manager
perceives a material conflict of interest, the manager may: disclose the
conflict to the Fund's board of trustees; defer to the voting recommendation of
the Fund's board of trustees, ISS, Glass Lewis or those of another independent
third party provider of proxy services; or take such other action in good faith
(in consultation with counsel) which would protect the interests of the Fund and
its shareholders.
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
evaluates plans on a case-by-case basis by considering several factors to
determine whether the plan is fair and reasonable, including the ISS
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 proxies. 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. 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 1-954/847-2268 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 and reflect the twelve-month period beginning
July 1, 2005, and ending June 30, 2006.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES. N/A

ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A

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 April 24, 2006

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 April 24, 2006

By /s/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date April 24, 2006