<DOCUMENT>
<TYPE>N-30D
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<TEXT>
Annual
Report


AUGUST 31, 2002


FRANKLIN UNIVERSAL TRUST


[PHOTO OMITTED]



[LOGO OMITTED]
FRANKLIN[R] TEMPLETON[R]
INVESTMENTS
<PAGE>

         THANK YOU FOR INVESTING WITH
     FRANKLIN TEMPLETON. WE ENCOURAGE
OUR INVESTORS TO MAINTAIN A LONG-TERM
    PERSPECTIVE AND REMEMBER THAT ALL
      SECURITIES MARKETS MOVE BOTH UP
   AND DOWN, AS DO FUND SHARE PRICES.
      WE APPRECIATE YOUR PAST SUPPORT
     AND LOOK FORWARD TO SERVING YOUR
 INVESTMENT NEEDS IN THE YEARS AHEAD.
<PAGE>
CONTENTS

Shareholder Letter .........  1

Performance Summary ........  7

Annual Shareholders'
Meeting ....................  9

Dividend Reinvestment and
Cash Purchase Plan ......... 10

Financial Highlights &
Statement of Investments ... 14

Financial Statements ....... 20

Notes to
Financial Statements ....... 24

Independent
Auditors' Report ........... 29

Tax Designation ............ 30

Board Members
and Officers ............... 31



SHAREHOLDER LETTER


--------------------------------------------------------------------------------
YOUR TRUST'S GOAL: FRANKLIN UNIVERSAL TRUST SEEKS TO PROVIDE HIGH, CURRENT
INCOME CONSISTENT WITH PRESERVATION OF CAPITAL.
--------------------------------------------------------------------------------


Dear Shareholder:

ECONOMIC OVERVIEW

This annual report for Franklin Universal Trust covers the fiscal year ended
August 31, 2002. During the 12 months under review, the Trust faced an extremely
difficult environment. At the beginning of the reporting period, the U.S.
economy was in the midst of its third consecutive quarter of contraction. The
recession had expanded from the technology sector to nearly all parts of the
economy and led to deteriorating earnings outlooks for most companies. Moreover,
the September 11 terrorist attacks prompted most investors to reassess their
risk tolerance, causing all higher risk asset classes to weaken. When it became
clear that our nation remained strong and capable of dealing with such
adversity, the markets staged a rebound in late September. However, the rally
was short-lived, as October brought about the discovery of fraud at Enron, the
first of several high-profile corporate accounting scandals to come to light
during the Trust's fiscal year. The reporting period was marked by the financial
markets' attempts to come to grips with this new, more volatile environment.





The dollar value, number of shares or principal amount, and complete legal
titles of all portfolio holdings are listed in the Trust's Statement of
Investments (SOI). The SOI begins on page 15.



<PAGE>
In response to the economic weakness and to help provide liquidity, the Federal
Reserve Board (the Fed) cut interest rates four times during the 12-month
period. As a result, the federal funds target rate declined from 3.50% at the
beginning of the period to 1.75% at period-end, its lowest level since the
1950s. Despite the Fed's actions, the heightened level of perceived market risk
caused most financial assets to perform poorly. For example, the Standard &
Poor's 500 Composite Index (S&P 500) declined 17.99%, while the technology-heavy
Nasdaq Composite Index declined 26.35%.(1)

Within this difficult environment, all of the Trust's major asset classes posted
negative returns. High yield bonds underperformed as concerns persisted
regarding high default rates and the timing and pace of a corporate earnings
recovery. The Credit Suisse First Boston (CSFB) High Yield Index, a good measure
of the risk premium investors demand for holding high yield bonds, increased its
yield from 8.31% at the beginning of the period to 9.68% on August 31, 2002.(2)
For bonds, as yields increase, prices decline. The Trust's exposure to utility
stocks also hurt performance as declining commodity prices and trading scandals
contributed to the S&P Utilities Index's 34.2% drop for the same period.(3) For
the 12 months ended August 31, 2002, Franklin Universal Trust's cumulative total
return was -21.75% based on the change in net asset value and -13.68%



1. Source: Standard & Poor's Micropal. The S&P 500 consists of 500 stocks chosen
for market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is one of
the most widely used benchmarks of U.S. equity performance. The Nasdaq Composite
Index measures all domestic and international common stocks listed on the Nasdaq
Stock Market. The index is market value-weighted and includes over 4,000
companies. The indexes are unmanaged and include reinvested dividends.

2. Source: Standard & Poor's Micropal. The unmanaged CSFB High Yield Index is a
trader-priced portfolio constructed to mirror the high yield debt market and
includes reinvested interest. Treasuries, if held to maturity, offer a fixed
rate of return and fixed principal value; their interest payments and principal
are guaranteed.

3. Source: Standard & Poor's Micropal. The S&P Utilities Index is a market
capitalization-weighted index that includes utility stocks in the S&P 500 Index.
The index is unmanaged and includes reinvested dividends.

One cannot invest directly in an index, nor is an index representative of the
Trust's portfolio.



PORTFOLIO BREAKDOWN
BASED ON TOTAL MARKET VALUE
8/31/02

CORPORATE BONDS             64.2%

UTILITIES STOCKS            19.3%

MISC. EQUITIES &
PREFERRED STOCKS             5.0%

FOREIGN GOVERNMENT U.S.
DOLLAR-DENOMINATED BONDS     3.8%

NATURAL RESOURCES EQUITIES
& PREFERRED STOCKS           0.5%

CONVERTIBLE BONDS            0.5%

FOREIGN GOVERNMENT AGENCIES  0.2%

CASH & EQUIVALENTS           6.5%




2
<PAGE>
based on the change in market price on the New York Stock Exchange, as shown in
the Performance Summary on page 7.


INDUSTRY DISCUSSIONS

WIRELESS

Despite the past year's recessionary economic environment, the wireless industry
continued to experience gains in revenues and number of subscribers. The
popularity and acceptance of wireless communication and introduction of more
flexible service offerings helped drive this growth. During the period under
review, we invested in wireless service providers with geographic diversity,
proven management teams and strong growth prospects. For example, we purchased
additional bonds of Triton PCS, an AT&T Wireless affiliate whose operations in
the southeast benefit from favorable demographics and an excellent operating
network.

GAMING

The gaming industry performed well during the Trust's fiscal year despite the
recession and fears that travel and consumer spending would suffer after
September 11. The industry's ability to generate solid cash flow and the
substantial value of its hotel and casino assets seemed to aid performance.
During the period, we focused on large, diversified companies that own and
operate the stronger properties in their respective markets. We sold our
position in Park Place Entertainment to purchase Venetian Casino shares, which
we expect should offer better total return potential.

HEALTH SERVICES

We increased our health services exposure during the 12 months under review
because we found the industry's defensive nature and stable revenue streams
attractive. Health care continued to benefit from increased Medicare spending
and higher reimbursement rates received from managed care and insurance
companies.



TOP 10 HOLDINGS
Based on Total Market Value
8/31/02 vs. 8/31/01

8/31/02
------------------------------
Riverwood International  2.8%

EchoStar Broadband Corp. 2.5%

FPL Group Inc.           2.5%

Anchor Glass             2.4%

DTE Energy Co.           2.3%
Sinclair Capital         2.3%

Station Casinos Inc.     2.3%

Host Marriot LP          2.2%

Nortek Inc.              2.2%

Southern Co.             2.2%

8/31/01
------------------------------
Republic of Brazil       2.5%

TXU Corp.                2.1%

Sovereign Bancorp. Inc.  2.1%

Charter Communications   2.0%

Station Casinos Inc.     1.9%

Nortek Inc.              1.9%

Intermedia
Communications Inc.      1.9%

Riverwood International  1.9%

Millicom International
Cellular SA              1.8%

EchoStar Broadband Corp. 1.8%



                                                                               3
<PAGE>
During the reporting period, we initiated new positions in Insight Health
Services and Ventas Realty. Insight, which provides diagnostic services such as
MRI and CAT scans, should benefit as doctors increase their usage of these
diagnostic tools. Ventas, a real estate investment trust that owns nursing homes
and hospitals, seemed attractive to us due to its strong asset value and stable
revenues.

PAY TELEVISION

In March, scandal rocked the pay television industry when fraud was discovered
at Adelphia Communications, one of the largest cable services providers. This
revelation led to worries about industry-wide accounting practices and curtailed
several companies' ability to fund large capital expenditure plans. In our
opinion, Adelphia's fraud was a company-specific event and does not characterize
the entire industry. Pay television fundamentals remained solid as demand for
cable services continued to grow and a stable revenue stream offered protection
from economic weakness. The industry continued to meet investor expectations for
subscriber growth and market penetration, driven largely by the introduction of
services such as telephony, digital television and high-speed Internet access.
Since we believe the industry's underlying assets remained strong and its
business fundamentals solid, we maintained our investment positions during the
period.

UTILITIES

Public utility stocks experienced substantial volatility during the 12-month
reporting period because of several extraordinary factors. Enron's collapse and
subsequent bankruptcy last December dealt the first major blow to an industry in
the middle stages of deregulation. Subsequently, regulatory and legal
investigations into the energy trading activities of several integrated utility
companies took place. In addition, commodity prices for



4
<PAGE>

electricity dropped as supply outpaced demand, which led to lower profits for
companies that own merchant power plants. Portfolio holdings Aquila, CMS Energy,
Duke Energy and Reliant Energy experienced significant share price declines in
this environment. Electric and natural gas utilities that chose not to pursue
unregulated investment opportunities over the past few years held up well during
the period as falling interest rates lowered borrowing costs, enabling such
companies to remain dedicated to their regulated utility franchises. We have
historically focused most of our utility investments among such companies, and
several of these holdings benefited the Trust, including TXU, Atmos Energy, DTE
Energy, Dominion Resources, FPL Group and Southern Co.


WHAT'S AHEAD

Continued equity market volatility makes it impossible to forecast near-term
results with any degree of accuracy. However, despite a difficult fiscal year,
we remain optimistic about the Trust's long-term total return prospects. To
better position the Trust to help it withstand any further market volatility, we
decided to decrease the Trust's leverage by repurchasing a portion of its debt.
Additionally, we believe the current environment of low interest rates and tame
inflation may sustain the nascent economic recovery, which should eventually
lead to higher corporate profitability.

In our opinion, the worst news on corporate defaults seems to be behind us and
credit quality should gradually improve going forward. The majority of new high
yield issuance over the past several years has come from higher-rated companies
with stronger balance sheets, improving the market's average credit profile.
Furthermore, the yield spread between Treasuries and high yield bonds stood at
9.68% on August 31, 2002, well above the 10-year average spread of 5.57%.(2)
This favorable situation




WHAT IS A MERCHANT POWER PLANT?

A MERCHANT POWER PLANT PRODUCES POWER AS A COMMODITY, SO ITS INCOME STREAM
DEPENDS ON THE MARKET PRICE. IN CONTRAST, TRADITIONAL POWER PLANTS RELY ON
PREDETERMINED RATES OF RETURN, USUALLY SET BY A REGULATORY BODY, TO GENERATE
INCOME.



                                                                               5
<PAGE>

compensates investors more than in the past for the risk of investing in
lower-rated securities.

We expect utilities to refocus on their regulated utility operations and strive
toward strengthening their balance sheets and increasing dividends. Relative
yields remain high versus historical levels, and as analysts expect the recent
gap between utility stocks and Treasuries to narrow, we think excellent total
return potential exists. In light of all the aforementioned positive trends, we
believe the Trust offers an attractive total return opportunity for investors
with a long-term horizon.

Sincerely,

/S/SIGNATURE
Christopher J. Molumphy
Senior Portfolio Manager



/S/SIGNATURE
Glenn I. Voyles
Portfolio Manager

Franklin Universal Trust


--------------------------------------------------------------------------------
This discussion reflects our views, opinions and portfolio holdings as of August
31, 2002, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Trust. Our strategies and the Trust's portfolio composition will change
depending on market and economic conditions. Although historical performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.
--------------------------------------------------------------------------------




6
<PAGE>
PERFORMANCE SUMMARY AS OF 8/31/02

DISTRIBUTIONS AND RETURNS WILL VARY BASED ON EARNINGS OF THE TRUST'S PORTFOLIO
AND ANY PROFITS REALIZED FROM THE SALE OF THE PORTFOLIO'S SECURITIES, AS WELL AS
THE LEVEL OF THE TRUST'S OPERATING EXPENSES. ALL TOTAL RETURNS INCLUDE
REINVESTED DISTRIBUTIONS ACCORDING TO THE TERMS SPECIFIED IN THE TRUST'S
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN. THE PERFORMANCE TABLE DOES NOT
REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON TRUST
DISTRIBUTIONS OR THE SALE OF TRUST SHARES.



PRICE AND DISTRIBUTION INFORMATION

                               CHANGE         8/31/02   8/31/01
---------------------------------------------------------------
Net Asset Value                -$2.19          $5.13     $7.32
Market Price (NYSE)            -$1.87          $6.37     $8.24

DISTRIBUTIONS (9/1/01-8/31/02)
Dividend Income                $0.788


PERFORMANCE
                                      1-YEAR   5-YEAR   10-YEAR
---------------------------------------------------------------
Cumulative Total Return(1)
 Based on change in net asset value   -21.75% -13.57%   +56.96%
 Based on change in market price      -13.68% +15.23%  +104.99%

Average Annual Total Return(1)
 Based on change in net asset value   -21.75%  -2.87%    +4.61%
 Based on change in market price      -13.68%  +2.88%    +7.44%

Distribution Rate(2)          11.11%


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

2. Distribution rate is based on an annualization of the Trust's 5.9 cent per
share August dividend and the NYSE closing price of $6.37 on 8/31/02.

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


For updated performance figures, please call Franklin Templeton Investments at
1-800/342-5236.

Past performance does not guarantee future results.

                                                                               7
<PAGE>
PORTFOLIO OPERATIONS


CHRISTOPHER MOLUMPHY
SENIOR PORTFOLIO MANAGER
FRANKLIN ADVISERS, INC.
--------------------------------------------------------------------------------

Christopher Molumphy earned his Bachelor of Arts degree in economics from
Stanford University and his master's degree in finance from the University of
Chicago. He has been with Franklin Advisers, Inc., since 1988. Mr. Molumphy is a
Chartered Financial Analyst and a member of several securities industry
associations. He has managed Franklin Universal Trust since 1991.

GLENN I. VOYLES
PORTFOLIO MANAGER
FRANKLIN ADVISERS, INC.
--------------------------------------------------------------------------------

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



8
<PAGE>
ANNUAL SHAREHOLDERS' MEETING
FEBRUARY 14, 2002



At an Annual Shareholders' Meeting of Franklin Universal Trust (the "Fund") held
on February 14, 2002, shareholders approved the following:

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

                                                         WITHHELD OR   BROKER
TRUSTEES                    SHARES FOR    SHARES AGAINST   ABSTAIN    NON VOTE
-------------------------------------------------------------------------------
Frank H. Abbott          23,441,528.3483   308,383.6579      -0-         -0-
Harris J. Ashton         23,517,488.0639   232,423.9423      -0-         -0-
Robert F. Carlson        23,464,640.0639   285,271.9423      -0-         -0-
S. Joseph Fortunato      23,513,454.0639   236,457.9423      -0-         -0-
Edward B. Jamieson       23,470,611.1350   279,300.8712      -0-         -0-
Charles B. Johnson       23,502,880.1350   247,031.8712      -0-         -0-
Rupert H. Johnson, Jr.   23,511,524.1350   238,387.8712      -0-         -0-
Frank W.T. LaHaye        23,501,021.1350   248,890.8712      -0-         -0-
Gordon S. Macklin        23,462,217.1350   287,694.8712      -0-         -0-



                                                                               9
<PAGE>
DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN


The Trust's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers you
a prompt and simple way to reinvest dividends and capital gain distributions in
shares of the Trust. The Plan also allows you to purchase additional shares of
the Trust by making voluntary cash payments. 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 Trust's Dividend Reinvestment and Cash
Purchase Plan Brochure. A copy of that Brochure may be obtained from the Trust
at the address on the back cover of this report.

You are automatically enrolled in the Plan unless you elect to receive dividends
or distributions in cash. If you own shares in your own name, you should notify
the Plan Agent, in writing, if you wish to receive dividends or distributions in
cash.

If the Trust declares a dividend or capital gain distribution payable either in
cash or in stock of the Trust and the market price of shares on the valuation
date equals or exceeds the net asset value, the Trust will issue new shares to
you at the higher of net asset value or 95% of the then current market price. If
the market price is lower than net asset value and if dividends or capital gain
distributions are payable only in cash, then you will receive shares purchased
on the New York Stock Exchange or otherwise on the open market. If the price
exceeds the net asset value before the Plan Agent has completed its purchases,
the average purchase price may exceed the net asset value,



10
<PAGE>

resulting in fewer shares being acquired than if the Trust had issued new
shares. All reinvestments are in full and fractional shares, carried to three
decimal places. The Trust will not issue shares under the Plan at a price below
net asset value.

The Plan permits you on a voluntary basis to submit in cash payments of not less
than $100 each up to a total of $5,000 per month to purchase additional shares
of the Trust. It is entirely up to you whether you wish to buy additional shares
with voluntary cash payments, and you do not have to send in the same amount
each time if you do. These payments should be made by check or money order
payable to 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 Trust which are
purchased in the open market.

The Plan Agent will invest cash payments on approximately the 5th of each month
in which no dividend or distribution is payable and, during each month in which
a dividend or distribution is payable, will invest cash payments beginning on
the dividend payment date. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON YOUR
FUNDS HELD BY THE PLAN AGENT. Accordingly, you should send any voluntary cash
payments which 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.



                                                                              11
<PAGE>
There is no direct charge to participants for reinvesting dividends and capital
gain distributions, since the Plan Agent's fees are paid by the Trust. However,
when shares are purchased in the open market, each participant will pay a pro
rata portion of any brokerage commissions incurred. The Plan Agent will deduct a
$5.00 service fee from each of your voluntary cash payments.

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

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

You will receive a monthly account statement from the Plan Agent showing total
dividends and capital gain distributions, date of investment, shares acquired
and price per share, and total shares of record held by you and by the Plan
Agent for you. You are entitled to vote all shares of record, including shares
purchased for you by the Plan Agent, and, if you vote by proxy, your proxy will
include all such shares.

As long as you participate in the Plan, the Plan Agent will hold the shares it
has acquired for you in safekeeping, in its name or in the name of its nominee.
This convenience provides added



12
<PAGE>

protection against loss, theft or inadvertent destruction of certificates.
However, you may request that a certificate representing your Plan shares be
issued to you.

You may withdraw from the Plan without penalty at any time by notifying the Plan
Agent, in writing, at the address above. If you withdraw, you will receive,
without charge, stock certificates issued in your name for all full shares. The
Plan Agent will convert any fractional shares you hold at the time of your
withdrawal to cash at current market price and send you a check for the
proceeds.

If you hold shares in your own name, please address all notices, correspondence,
questions, or other communications regarding the Plan to the Plan Agent at the
address noted above. If your shares are not held in your name, you should
contact your brokerage firm, bank, or other nominee for more information and to
determine if your nominee will participate in the Plan on your behalf.

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




                                                                              13
<PAGE>
FRANKLIN UNIVERSAL TRUST
Financial Highlights

<TABLE>
<CAPTION>
                                                                        YEAR ENDED AUGUST 31,
                                                             -----------------------------------------------
                                                              2002      2001       2000      1999      1998
                                                             -----------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
<S>                                                        <C>       <C>        <C>       <C>       <C>
Net asset value, beginning of year ......................    $ 7.32    $ 8.21     $ 8.91    $ 9.28    $10.20
                                                           --------------------------------------------------
Income from investment operations:
 Net investment incomea .................................       .65(c)    .73        .81       .82       .85
 Net realized and unrealized losses .....................     (2.05)(c)  (.82)      (.65)     (.35)     (.63)
                                                           --------------------------------------------------
Total from investment operations ........................     (1.40)     (.09)       .16       .47       .22
Less distributions from:
 Net investment income ..................................      (.79)     (.80)      (.80)     (.84)     (.80)
 Net realized gains .....................................        --        --       (.06)       --      (.34)
                                                           --------------------------------------------------
Total distributions .....................................      (.79)     (.80)      (.86)     (.84)    (1.14)
                                                           --------------------------------------------------
Net asset value, end of year ............................    $ 5.13    $ 7.32     $ 8.21    $ 8.91    $ 9.28
                                                           ==================================================
Market value, end of yearb ..............................    $6.370    $8.240     $7.688    $8.688    $9.250
                                                           ==================================================

Total return (based on market value per share) ..........  (13.68)%    19.01%     (.40)%     2.95%     9.40%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .........................  $141,619  $198,598   $220,742  $239,537  $248,419
Ratios to average net assets:
 Expenses ...............................................     4.05%     3.29%      3.15%     2.92%     2.63%
 Net investment income ..................................    10.04%c    9.38%      9.92%     8.86%     8.29%
Portfolio turnover rate .................................    17.38%    31.60%     29.59%    31.62%    36.66%
Total debt outstanding at end of year (000's) ...........  $ 60,000  $ 75,000   $ 75,000  $ 75,000  $ 75,000
Asset coverage per $1,000 of debt .......................  $  3,360  $  3,648   $  3,948  $  4,194  $  4,312
Average amount of notes per share during the year .......     $2.65     $2.76      $2.79     $2.79     $2.80


<FN>
a Based on average shares outstanding effective year ended August 31, 1999.
b Based on the last sale on the New York Stock Exchange.
c The AICPA Audit and Accounting Guide of Investment Companies, was implemented
  as described in Note 1(g) resulting in a decrease of $.012 to the net investment
  income and net realized and unrealized losses per share, and a decrease of .19%
  to the ratio of net investment income to average net assets for the year ended
  August 31, 2002.
</FN>
</TABLE>


                       See notes to financial statements.


14
<PAGE>
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 2002


<TABLE>
<CAPTION>
                                                                                   SHARES/
                                                                     COUNTRY      WARRANTS      VALUE
----------------------------------------------------------------------------------------------------------
<S>                                                                               <C>        <C>
 COMMON STOCKS AND WARRANTS 29.7%
 CONSUMER NON-DURABLES .7%
 R.J. Reynolds Tobacco Holdings Inc. ..........................   United States    18,000    $  1,059,120
                                                                                             -------------
 CONSUMER SERVICES .1%
 Marriott International Inc., A ...............................   United States     1,504          49,226
aPrandium Inc. ................................................   United States    96,659          72,494
                                                                                             -------------
                                                                                                  121,720
                                                                                             -------------
aELECTRONIC TECHNOLOGY .8%
 Anacomp Inc., A ..............................................   United States    40,300       1,088,100
 Loral Space & Communications Ltd., wts., 12/27/06 ............   United States    21,638           2,164
                                                                                             -------------
                                                                                                1,090,264
                                                                                             -------------
 ENERGY MINERALS .1%
 Devon Energy Corp. ...........................................   United States     3,285         154,395
aMcMoRan Exploration Co. ......................................   United States     1,800           7,380
                                                                                             -------------
                                                                                                  161,775
                                                                                             -------------
aINDUSTRIAL SERVICES .1%
 Transocean Inc., wts., 144A, 5/01/09 .........................   United States     1,250         124,844
                                                                                             -------------
 NON-ENERGY MINERALS .5%
 AngloGold Ltd., ADR ..........................................   South Africa     30,446         706,956
                                                                                             -------------
aPRODUCER MANUFACTURING .2%
 Harvard Industries Inc. ......................................   United States   109,618             932
 SHC Inc. .....................................................   United States    38,937             389
 VS Holdings ..................................................   United States   181,875         272,813
                                                                                             -------------
                                                                                                  274,134
                                                                                             -------------
aRETAIL TRADE
 Stage Stores, Inc. ...........................................   United States     1,100          23,826
                                                                                             -------------
 TELECOMMUNICATIONS 2.8%
 AT&T Corp. ...................................................   United States   162,000       1,979,640
aAT&T Wireless Services Inc. ..................................   United States    40,225         198,712
 BellSouth Corp. ..............................................   United States    76,000       1,772,320
aCall-Net Enterprises Inc., B .................................      Canada        41,958          11,119
aLoral Orion Network Systems Ltd., wts., 1/15/07 ..............   United States     5,000              50
aMcLeodUSA Inc., wts., 4/16/07 ................................   United States    22,526           2,027
aPoland Telecom Finance, wts., 144A, 12/01/07 .................      Poland         3,000               0
                                                                                             -------------
                                                                                                3,963,868
                                                                                             -------------
 UTILITIES 24.4%
 American Electric Power Co. Inc. .............................   United States    60,000       2,046,000
 Atmos Energy Corp. ...........................................   United States    85,000       1,822,400
 CMS Energy Corp. .............................................   United States   112,000       1,182,720
 Dominion Resources Inc. ......................................   United States    50,000       3,135,500
 DTE Energy Co. ...............................................   United States   100,000       4,291,000
 Duke Energy Corp. ............................................   United States   120,000       3,219,600
 Exelon Corp. .................................................   United States    80,000       3,745,600
 FPL Group Inc. ...............................................   United States    80,000       4,566,400
</TABLE>


                                                                              15
<PAGE>

FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.)
<TABLE>
<CAPTION>

                                                                                   SHARES/
                                                                     COUNTRY      WARRANTS       VALUE
---------------------------------------------------------------------------------------------------------
<S>                                                               <C>              <C>       <C>
 COMMON STOCKS AND WARRANTS (CONT.)
 UTILITIES (CONT.)
 Progress Energy Inc. .........................................   United States     20,000   $    930,400
 Questar Corp. ................................................   United States     65,000      1,621,100
 Reliant Energy Inc. ..........................................   United States     96,200      1,139,970
 Southern Co. .................................................   United States    140,000      4,054,400
 TXU Corp. ....................................................   United States     58,000      2,804,880
                                                                                             -------------
                                                                                               34,559,970
                                                                                             -------------
 TOTAL COMMON STOCKS AND WARRANTS (COST $45,454,241) ..........                                42,086,477
                                                                                             -------------
 PREFERRED STOCKS 3.0%
 CONSUMER SERVICES 2.9%
 Sinclair Capital, 11.625%, pfd. ..............................   United States     40,000      4,190,000
                                                                                             -------------
aPROCESS INDUSTRIES .1%
 Asia Pulp & Paper Co. Ltd., 12.00%, 2/15/04 ..................     Indonesia    4,000,000        130,000
                                                                                             -------------
 TOTAL PREFERRED STOCKS (COST $8,000,000) .....................                                 4,320,000
                                                                                             -------------
 CONVERTIBLE PREFERRED STOCKS 2.0%
 CONSUMER DURABLES .4%
 Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd. ............   United States     10,000        459,500
                                                                                             -------------
 CONSUMER SERVICES .1%
 MediaOne Group Inc. into Vodafone, 7.00%, cvt. pfd. ..........   United States     10,400        174,200
                                                                                             -------------
 REAL ESTATE INVESTMENT TRUSTS 1.1%
 Archstone-Smith Trust, cvt. pfd. .............................   United States     45,000      1,591,200
                                                                                             -------------
aTELECOMMUNICATIONS
 McLeodUSA Inc., 2.50%, cvt. pfd., ............................   United States     10,166         23,382
                                                                                             -------------
 UTILITIES .4%
 Aquila Inc., 9.75%, cvt. pfd. ................................   United States    111,000        581,640
                                                                                             -------------
 TOTAL CONVERTIBLE PREFERRED STOCKS (COST $6,918,585) .........                                 2,829,922
                                                                                             -------------

                                                                                PRINCIPAL
                                                                                AMOUNT(D)
                                                                              -------------
 BONDS 95.4%
 COMMERCIAL SERVICES .7%
 Key3Media Group Inc., senior sub. note, 11.25%, 6/15/11 ......   United States $5,000,000        975,000
                                                                                             -------------
 CONSUMER DURABLES .1%
 Spalding Inc., 144A, 9.50%, 5/01/08 ..........................   United States    875,000        183,750
                                                                                             -------------
 CONSUMER NON-DURABLES .9%
 Revlon Consumer Products Corp., senior sub. note,
  8.625%, 2/01/08 .............................................   United States  3,500,000      1,277,500
                                                                                             -------------
 CONSUMER SERVICES 31.9%
 Armkel Finance Inc., senior sub. note, 9.50%, 8/15/09 ........   United States  1,900,000      2,018,750
cAtherton Franchise Capital, LP, 13.073%, 12/01/08 ............   United States    765,361        589,328
 CanWest Media Inc., senior sub. note, 10.625%, 5/15/11 .......      Canada      2,100,000      2,215,500
bCentury Communications Corp., zero cpn., B, senior disc.
  note, 1/15/08 ...............................................   United States  5,000,000        800,000
 Chancellor Media Corp., senior note, 8.00%, 11/01/08 .........   United States  2,000,000      2,032,500
 Chancellor Media Corp., senior sub. note, B, 8.75%, 6/15/07 ..   United States  2,000,000      2,020,000




16
<PAGE>
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.)


                                                                                  PRINCIPAL
                                                                     COUNTRY      AMOUNT(D)      VALUE
----------------------------------------------------------------------------------------------------------
 BONDS (CONT.)
 CONSUMER SERVICES (CONT.)
 Charter Communications Holdings LLC, senior disc. note, zero cpn. to 1/15/05,
  11.75% thereafter, 1/15/10 ..................................   United States $ 1,750,000  $    743,750
 Charter Communications Holdings LLC, senior disc. note, zero cpn. to 4/01/04,
  9.92% thereafter, 4/01/11 ...................................   United States   5,750,000     2,788,750
 CSC Holdings Inc., 7.625%, 7/15/18 ...........................   United States   2,500,000     1,900,000
 Diamond Holdings PLC, senior note, 9.125%, 2/01/08 ...........  United Kingdom   3,000,000     2,445,000
 EchoStar Broadband Corp., senior note, 10.375%, 10/01/07 .....   United States   4,500,000     4,612,500
 Horseshoe Gaming Holding Corp., senior sub. note,
  8.625%, 5/15/09 .............................................   United States   3,000,000     3,127,500
 Host Marriot LP, 9.50%, 1/15/07 ..............................   United States   4,000,000     4,085,000
 Insight Midwest, senior note, 10.50%, 11/01/10 ...............   United States   3,500,000     3,167,500
 LIN Holdings Corp., senior disc. note, zero cpn. to 3/01/03,
  10.00% thereafter, 3/01/08 ..................................   United States   2,000,000     1,940,000
 Premier Parks Inc., senior disc. note, zero cpn. to 4/01/03, 10.00%
  thereafter, 4/01/08 .........................................   United States   3,000,000     2,617,500
 Station Casinos Inc., senior note, 8.375%, 2/15/08 ...........   United States   4,000,000     4,180,000
 Telewest Communications PLC, senior disc. note, zero cpn. to 4/15/04,
  9.25% thereafter, 4/15/09 ...................................   United Kingdom  1,500,000       217,500
 Telewest Communications PLC, senior disc. note, zero cpn to 2/01/05,
  11.375% thereafter, 2/01/10 .................................   United Kingdom  3,500,000       437,500
 Venetian Casino/LV Sands, 144A, 11.00%, 6/15/10 ..............   United States   3,300,000     3,328,875
                                                                                             -------------
                                                                                               45,267,453
                                                                                             -------------
bDISTRIBUTION SERVICES
 Ameriserve Food Distribution Inc., 8.875%, 10/15/06 ..........   United States   1,000,000             0
 Ameriserve Food Distribution Inc., 10.125%, 7/15/07 ..........   United States   2,700,000           270
                                                                                             -------------
                                                                                                      270
                                                                                             -------------
 ELECTRONIC TECHNOLOGY 1.0%
 Solectron Corp., senior note, 9.625%, 2/15/09 ................   United States   1,500,000     1,402,500
                                                                                             -------------
 GOVERNMENT BONDS 5.6%
 ESCOM, E168, utility deb., 11.00%, 6/01/08 ...................   South Africa    4,350,000 ZAR   396,452
 Republic of Bulgaria, FRN, 2.688%, 7/28/11 ...................     Bulgaria      3,880,000     3,472,600
 Russia Federation, 3.00%, 5/14/06 ............................      Russia         700,000       560,875
 United Mexican States, 11.375%, 9/15/16 ......................      Mexico       2,750,000     3,480,125
                                                                                             -------------
                                                                                                7,910,052
                                                                                             -------------
 HEALTH SERVICES 2.6%
 Insight Health Services Corp., B, 9.875%, 11/01/11 ...........   United States   2,500,000     2,456,250
 Magellan Health Services Inc., senior sub. note, 9.00%, 2/15/08  United States   4,000,000     1,180,000
                                                                                             -------------
                                                                                                3,636,250
                                                                                             -------------
 INDUSTRIAL SERVICES 6.4%
 Allied Waste North America Inc., senior sub. note, B,
  10.00%, 8/01/09 .............................................   United States   2,000,000     1,980,000
 Universal Compression Inc., senior disc. note, zero cpn. to 2/15/03,
  9.875% thereafter, 2/15/08 ..................................   United States   3,550,000     3,394,686
 URS Corp., senior sub. note, 12.25%, 5/01/09 .................   United States   4,000,000     3,700,000
                                                                                             -------------
                                                                                                9,074,686
                                                                                             -------------



                                                                                                       17
<PAGE>
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.)


                                                                                  PRINCIPAL
                                                                     COUNTRY      AMOUNT(D)      VALUE
----------------------------------------------------------------------------------------------------------
 BONDS (CONT.)
 NON-ENERGY MINERALS 5.4%
 Compass Minerals Group, senior sub. note, 10.00%, 8/15/11 ....   United States $ 2,800,000  $  2,926,000
 Louisiana Pacific Corp., senior sub. note, 10.875%, 11/15/08 .   United States     700,000       739,375
 Ormet Corp., senior secured note, 144A, 11.00%, 8/15/08 ......   United States   4,000,000     2,420,000
 Steel Dynamics Inc., senior note, 144A, 9.50%, 3/15/09 .......   United States   1,500,000     1,545,000
                                                                                             -------------
                                                                                                7,630,375
                                                                                             -------------
 PROCESS INDUSTRIES 17.4%
 Anchor Glass, first mortgage, 11.25%, 4/01/05 ................   United States   4,200,000     4,452,000
 Applied Extrusion Technologies Inc., senior note,
  10.75%, 7/01/11 .............................................   United States   1,000,000       830,000
 Avecia Group PLC, senior note, 11.00%, 7/01/09 ...............  United Kingdom   3,000,000     2,940,000
 Consolidated Container Co. LLC, senior disc. note,
  10.125%, 7/15/09 ............................................   United States   4,500,000     3,532,500
 Equistar Chemical, senior note, 10.125%, 9/01/08 .............   United States     700,000       675,500
 FiberMark Inc., senior note, 10.75%, 4/15/11 .................   United States   4,000,000     3,940,000
 Huntsman ICI Chemicals, zero cpn., senior disc. note, 12/31/09   United States   7,500,000     1,762,500
 OM Group Inc., senior sub. note, 9.25%, 12/15/11 .............   United States     700,000       703,500
bPindo Deli Finance Mauritius Ltd, 11.75%, 10/01/17 ...........    Indonesia      3,000,000       667,500
 Riverwood International, senior sub. note, 10.875%, 4/01/08 ..   United States   5,000,000     5,100,000
                                                                                             -------------
                                                                                               24,603,500
                                                                                             -------------
 PRODUCER MANUFACTURING 7.6%
 The Manitowoc Co. Inc., senior sub. note, 144A, 10.50%, 8/01/12  United States   1,800,000     1,881,000
 NMHG Holding Co., senior note, 144A, 10.00%, 5/15/09 .........   United States   1,600,000     1,624,000
 Nortek Inc., senior note, B, 9.125%, 9/01/07 .................   United States   4,000,000     4,070,000
 Tenneco Automotive Inc., senior sub. note, 11.625%, 10/15/09 .   United States   1,800,000     1,413,000
 Terex Corp., senior sub. note, 8.875%, 4/01/08 ...............   United States   1,150,000     1,132,750
 Terex Corp., senior sub. note, D, 8.875%, 4/01/08 ............   United States     700,000       689,500
                                                                                             -------------
                                                                                               10,810,250
                                                                                             -------------
 REAL ESTATE INVESTMENT TRUSTS 1.2%
 Ventas Realty LP/Cap Crp, 9.00%, 5/01/12 .....................   United States   1,700,000     1,734,000
                                                                                             -------------
bTECHNOLOGY SERVICES .3%
 PSINet Inc., senior note, 10.50%, 12/01/06 ...................   United States     700,000        71,750
 PSINet Inc., senior note, 11.00%, 8/01/09 ....................   United States   3,250,000       333,125
                                                                                             -------------
                                                                                                  404,875
                                                                                             -------------
 TELECOMMUNICATIONS 13.0%
 American Cellular Corp., senior sub. note, 9.50%, 10/15/09 ...   United States   3,600,000       504,000
 Call-Net Enterprises Inc., 10.625%, 12/31/08 .................      Canada         873,066       161,517
 Crown Castle International Corp., senior disc. note, zero cpn. to 8/01/04,
  11.25% thereafter, 8/01/11 ..................................   United States   6,000,000     2,520,000
 Dobson/Sygnet Communications Co., senior note, 12.25%, 12/15/08  United States   4,000,000     2,340,000
 Loral CyberStar Inc., 10.00%, 7/15/06 ........................   United States   2,194,000       822,750
bMetrocall Inc., senior sub. note, 9.75%, 11/01/07 ............   United States   4,000,000        50,000
 Millicom International Cellular SA, senior note, 13.50%, 6/01/06   Luxembourg    6,000,000     1,890,000
 Nextel Communications Inc., senior disc. note, zero cpn. to 2/15/03,
  9.95% thereafter, 2/15/08 ...................................   United States   5,000,000     3,675,000
 Nextel Partners Inc., senior note, 11.00%, 3/15/10 ...........   United States   1,500,000       892,500
bPoland Telecom Finance B, 14.00%, 12/01/07 ...................      Poland       3,000,000            30



18
<PAGE>
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.)


                                                                                  PRINCIPAL
                                                                     COUNTRY      AMOUNT(D)      VALUE
----------------------------------------------------------------------------------------------------------
 BONDS (CONT.)
 TELECOMMUNICATIONS (CONT.)
 Triton PCS Inc., senior sub. note, 9.375%, 2/01/11 ...........   United State  $ 2,300,000  $  1,828,500
 Triton PCS Inc., senior sub. note, 8.75%, 11/15/11 ...........   United States   2,000,000     1,540,000
 VoiceStream Wireless Corp., senior disc. note, zero cpn. to 11/15/04,
  11.875% thereafter, 11/15/09 ................................   United States   2,289,000     1,842,645
bWilliams Communications Group Inc., senior note, 10.875%,
  10/01/09 ....................................................   United States   1,600,000       196,000
bXO Communications Inc., senior note, 9.625%, 10/01/07 ........   United States   2,000,000        40,000
bXO Communications Inc., senior note, 9.00%, 3/15/08 ..........   United States   2,000,000        40,000
                                                                                             -------------
                                                                                               18,342,942
                                                                                             -------------
 TRANSPORTATION 1.3%
 Great Lakes Dredge & Dock Corp., senior sub. note,
  11.25%, 8/15/08 .............................................   United States   1,800,000     1,863,000
                                                                                             -------------
 TOTAL BONDS (COST $194,844,380) ..............................                               135,116,403
                                                                                             -------------
 CONVERTIBLE BONDS .7%
 Trizec Hahn Corp., cvt., senior deb., 3.00%, 1/29/21
  (COST $1,029,447) ...........................................      Canada       1,500,000       926,250
                                                                                             -------------
 TOTAL LONG TERM INVESTMENTS (COST $256,246,653)                                              185,279,052
                                                                                             -------------
eREPURCHASE AGREEMENTS 8.9%
 Joint Repurchase Agreement, 1.814%, 9/03/02, (Maturity Value $12,589,522)
 (COST $12,586,985) ...........................................                  12,586,985    12,586,985
   ABN AMRO Inc. (Maturity Value $1,140,379)
   Banc of America Securities LLC (Maturity Value $1,140,379)
   Bear, Stearns & Co., Inc (Maturity Value $1,140,379)
   BNP Paribas Securities Corp. (Maturity Value $1,140,379)
   CIBC World Markets Corp. (Maturity Value $1,140,379)
   Deutsche Bank Securities Inc. (Maturity Value $1,140,379)
   Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $1,140,379)
   Greenwich Capital Markets Inc. (Maturity Value $1,140,379)
   Lehman Brothers Inc. (Maturity Value $1,185,735)
   Morgan Stanley & Co. Inc. (Maturity Value $1,140,379)
   UBS Warburg LLC (Maturity Value $1,140,379)
    Collateralized by U.S. Treasury Bills, Notes and Bonds, and U.S. Government Agency
     Securities
                                                                                             -------------
 TOTAL INVESTMENTS (COST $268,833,638) 139.7% .................                               197,866,037
 OTHER ASSETS, LESS LIABILITIES (39.7)% .......................                               (56,246,589)
                                                                                             -------------
 NET ASSETS 100.0% ............................................                              $141,619,448
                                                                                             =============

 CURRENCY ABBREVIATION
 ZAR - South African Rand



<FN>
a Non-income producing.
b See Note 7 regarding defaulted securities.
c See Note 8 regarding restricted securities.
d The principal amount is stated in U.S. dollars unless otherwise indicated.
e See note 1(c) regarding joint repurchase agreement.
</FN>
</TABLE>


                       See notes to financial statements.

                                                                              19
<PAGE>
FRANKLIN UNIVERSAL TRUST
Financial Statements

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2002


<S>                                                                         <C>
Assets:
 Investments in securities, at value (cost $268,833,638) ................   $197,866,037
 Cash ...................................................................        252,336
 Receivables:
  Dividends and interest ................................................      3,642,145
 Note issuance costs (Note 3) ...........................................         39,915
                                                                            -------------
      Total assets ......................................................    201,800,433
                                                                            -------------
Liabilities:
 Payables:
  Affiliates ............................................................        133,484
  Note (Note 3) .........................................................     60,000,000
 Other liabilities ......................................................         47,501
                                                                            -------------
      Total liabilities .................................................     60,180,985
                                                                            -------------
       Net assets, at value .............................................   $141,619,448
                                                                            =============
Net assets consist of:
 Undistributed net investment income ....................................   $   (709,967)
 Net unrealized depreciation ............................................    (70,967,887)
 Accumulated net realized loss ..........................................    (39,950,985)
 Capital shares .........................................................    253,248,287
                                                                            -------------
       Net assets, at value .............................................   $141,619,448
                                                                            =============
Net asset value per share ($141,619,448 / 27,614,608 shares outstanding)           $5.13
                                                                            =============
</TABLE>


                       See notes to financial statements.


20
<PAGE>
FRANKLIN UNIVERSAL TRUST
Financial Statements (CONTINUED)

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2002

<S>                                                                                <C>
Investment income:
 Dividends .....................................................................   $  3,089,017
 Interest ......................................................................     21,866,092
                                                                                   -------------
      Total investment income ..................................................     24,955,109
                                                                                   -------------
Expenses:
 Management fees (Note 4) ......................................................      1,888,859
 Transfer agent fees ...........................................................        115,154
 Custodian fees ................................................................         10,035
 Reports to shareholders .......................................................         39,504
 Professional fees .............................................................         31,106
 Trustees' fees and expenses ...................................................         18,968
 Amortization of note issuance costs (Note 3) ..................................         39,694
 Note prepayment fee (Note 3) ..................................................        631,976
 Other .........................................................................         47,999
                                                                                   -------------
      Expenses before interest expense .........................................      2,823,295
      Interest expense (Note 3) ................................................      4,346,100
                                                                                   -------------
       Net expenses ............................................................      7,169,395
                                                                                   -------------
        Net investment income ..................................................     17,785,714
                                                                                   -------------
Realized and unrealized losses:
 Net realized loss from:
  Investments ..................................................................    (30,693,158)
  Foreign currency transactions ................................................         (1,765)
                                                                                   -------------
      Net realized loss ........................................................    (30,694,923)
 Net unrealized appreciation (depreciation) on:
  Investments ..................................................................    (25,828,202)
  Translation of assets and liabilities denominated in foreign currencies ......            152
                                                                                   -------------
      Net unrealized depreciation ..............................................    (25,828,050)
                                                                                   -------------
Net realized and unrealized loss ...............................................    (56,522,973)
                                                                                   -------------
Net decrease in net assets resulting from operations ...........................   $(38,737,259)
                                                                                   =============
</TABLE>


                       See notes to financial statements.

                                                                              21
<PAGE>
FRANKLIN UNIVERSAL TRUST
Financial Statements (CONTINUED)

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001

                                                                                    2002          2001
                                                                               ---------------------------
<S>                                                                            <C>           <C>
Increase (decrease) in net assets:
 Operations:
  Net investment income .....................................................  $ 17,785,714  $ 19,691,811
  Net realized gain (loss) from investments and foreign currency transactions   (30,694,923)       34,384
  Net unrealized depreciation on investments and translation of assets and
   liabilities denominated in foreign currencies ............................   (25,828,050)  (22,157,569)
                                                                               ---------------------------
      Net decrease in net assets resulting from operations ..................   (38,737,259)   (2,431,374)
 Distributions to shareholders from net investment income ...................   (21,551,095)  (21,677,601)
 Capital share transactions: (Note 2) .......................................     3,309,340     1,965,694
                                                                               ---------------------------
      Net decrease in net assets ............................................   (56,979,014)  (22,143,281)
Net assets:
 Beginning of year ..........................................................   198,598,462   220,741,743
                                                                               ---------------------------
 End of year ................................................................  $141,619,448  $198,598,462
                                                                               ===========================
Undistributed net investment income included in net assets:
 End of year ................................................................  $   (709,967) $  3,028,062
                                                                               ===========================
</TABLE>


                       See notes to financial statements.

22
<PAGE>
FRANKLIN UNIVERSAL TRUST
Financial Statements (CONTINUED)

<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31, 2002

<S>                                                                                 <C>
Cash flow from operating activities:
 Dividends and interest received .................................................  $   21,510,674
 Operating expenses paid .........................................................      (2,197,473)
 Interest expense paid ...........................................................      (4,346,100)
                                                                                    ---------------
      Cash provided - operations .................................................      14,967,101
                                                                                    ===============
Cash flow from investing activities:
 Investment purchases ............................................................  (1,190,808,748)
 Investment sales and maturities .................................................   1,208,944,031
                                                                                    ---------------
      Cash provided - investments ................................................      18,135,283
                                                                                    ===============
Cash flow from financing activities:
 Prepayment of Note ..............................................................     (15,631,976)
 Distributions to shareholders ...................................................     (18,241,755)
                                                                                    ---------------
      Cash used - financing ......................................................     (33,873,731)
                                                                                    ===============
Net change in cash ...............................................................        (771,347)
Cash at beginning of year ........................................................       1,023,683
                                                                                    ---------------
Cash at end of year ..............................................................  $      252,336
                                                                                    ===============
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2002

Net investment income ............................................................  $   17,785,714
 Amortization income .............................................................      (4,796,548)
 Amortization of note issuance costs .............................................          39,694
 Decrease in dividends and interest receivable ...................................       1,352,113
 Decrease in liabilities .........................................................         (45,848)
 Note prepayment fee .............................................................         631,976
                                                                                    ---------------
Cash provided - operations .......................................................  $   14,967,101
                                                                                    ===============
</TABLE>


                       See notes to financial statements.

                                                                              23
<PAGE>
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Universal Trust (the Fund) is registered under the Investment Company
Act of 1940 as a diversified, closed-end investment company. The Fund has two
classes of securities: senior fixed-rate notes (the Notes) and shares of
beneficial interest (the Shares). The Fund seeks high current income consistent
with preservation of capital. The following summarizes the Fund's significant
accounting policies.

A. SECURITY VALUATION:

Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Restricted securities and securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.

B. FOREIGN CURRENCY TRANSLATION:

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.

The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.

Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollars
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. JOINT REPURCHASE AGREEMENT:

The Fund may enter into a joint repurchase agreement whereby its uninvested cash
balance is deposited into a joint cash account to be used to invest in one or
more repurchase agreements. The value and face amount of the joint repurchase
agreement is allocated to the Fund based on its pro-rata interest. A repurchase
agreement is accounted for as a loan by the Fund to the seller, collateralized
by securities which are delivered to the Fund's custodian. The market value,
including accrued interest, of the initial collateralization is required to be
at least 102% of the dollar amount invested by the Funds, with the value of the
underlying securities marked to market daily to maintain coverage of at least
100%. At August 31, 2002, all repurchase agreements had been entered into on
August 30, 2002.

D. INCOME TAXES:

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


24
<PAGE>
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (CONTINUED)


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)

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. Discount on securities
purchased are amortized over the lives of the respective securities. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.

F. ACCOUNTING ESTIMATES:

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.

G. AUDIT GUIDE:

In November 2000, a revised AICPA Audit and Accounting Guide, Audits of
Investment Companies, was issued, and is effective for fiscal years beginning
after December 15, 2000. The revised Guide requires the Fund to amortize all
premium and discount on fixed-income securities. Such amortization is included
in net investment income but did not impact the net assets or the distributions
of the Fund. Prior to September 1, 2001, premiums and de minimis market
discounts on fixed-income securities were included in realized gains and losses.
The cumulative effect of this accounting change resulted in a increase of
$43,224 in the recorded cost of investments and a corresponding increase in net
unrealized depreciation.

The effect of this change for the year ended August 31, 2002 was to decrease net
investment income by $337,315, decrease unrealized losses by $349,699, and
increase realized losses by $12,384. The statement of changes in net assets and
the financial highlights for prior periods have not been restated to reflect
this change in accounting policy.


2. SHARES OF BENEFICIAL INTEREST

At August 31, 2002, there were unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:

<TABLE>
<CAPTION>
                                                                  AUGUST 31, 2002         AUGUST 31, 2001
                                                               -------------------------------------------
                                                                 SHARES    AMOUNT        SHARES    AMOUNT
                                                               -------------------------------------------
<S>                                                             <C>     <C>             <C>     <C>
Shares issued in reinvestment of distributions ............     465,453 $3,309,340      251,794 $1,965,694
</TABLE>


3. SENIOR FIXED-RATE NOTE

On August 24, 1998, the Fund issued $75 million principal amount of a new class
of five-year senior notes (the Note). The Note is general unsecured obligations
of the Fund and rank senior to Trust shares and all existing or future unsecured
indebtedness of the Fund.



                                                                              25
<PAGE>
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (CONTINUED)


3. SENIOR FIXED-RATE NOTE (CONT.)

The Note bears interest, payable semi-annually, at the rate of 5.94% per year,
to maturity on August 31, 2003. The Note was issued in a private placement, and
are not available for resale; therefore, no market value can be obtained for the
Note. 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 Note of at least 300%. The Fund has met these requirements during the year
ended August 31, 2002.

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

During the year ended August 31, 2002, the Fund retired $15,000,000 of principal
amount of its Notes for $15,631,976. The Fund paid a Note prepayment fee of
$631,976 as required by the Note agreement. The Note prepayment fee is disclosed
in the accompanied Statement of Operations.


4. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers or directors of
Franklin Advisers, Inc. (Advisers) and Franklin Templeton Services, LLC. (FT
Services), the Fund's investment manager and administrative manager,
respectively.

The Fund pays an investment management fee to Advisers of .75% per year of the
average weekly net assets of the Fund excluding the principal amount of the
Notes.

Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.


5. INCOME TAXES

At August 31, 2002, the cost of investments, net unrealized depreciation,
undistributed ordinary income and undistributed long term capital gains for
income purposes were as follows:

        Cost of investments ...................   $269,140,113
                                                  =============
        Unrealized appreciation ...............     15,334,700
        Unrealized depreciation ...............    (86,608,776)
                                                  -------------
        Net unrealized depreciation ...........   $(71,274,076)
                                                  =============

        Undistributed ordinary income .........   $    911,744
        Undistributed long term capital gains..             --
                                                  -------------
        Distributable earnings ................   $    911,744
                                                  =============



26
<PAGE>
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (CONTINUED)


5. INCOME TAXES (CONT.)

At August 31, 2002, the fund has tax basis capital losses of $13,082,536 which
may be carried over to offset future capital gains. Such losses expire as
follows:

        Capital loss carryovers expiring in:
         2008 ........................... $ 5,088,195
         2009 ...........................   1,167,255
         2010 ...........................   6,827,086
                                          -----------
                                          $13,082,536
                                          ===========

At August 31, 2002, the Fund has deferred capital losses and deferred currency
losses occurring subsequent to October 31, 2001 of $26,866,684 and $1,765
respectively. For tax purposes, such losses will be reflected in the year ending
August 31, 2003.

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

Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of foreign currency transactions, and bond
discounts and premiums.

The tax character of distributions paid during the year ended August 31, 2002,
was the same for financial statement and tax purposes.


6. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 2002 aggregated $42,151,906 and $72,878,736, respectively.


7. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 67.2% 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. At August 31, 2002, the
Fund held defaulted securities with a value aggregating $2,198,675 representing
1.6% of the Fund's net assets. For information as to specific securities, see
the accompanying Statement of Investments.

The Fund discontinues accruing income on defaulted bonds and those bonds for
which the income is deemed uncollectible and, provides an estimate for losses on
interest receivable.



                                                                              27
<PAGE>
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (CONTINUED)


8. RESTRICTED SECURITIES

The Fund may purchase securities through a private offering that generally
cannot be resold to the public without prior registration under the Securities
Act of 1933. The costs of registering such securities are paid by the issuer. At
August 31, 2002, the fund held one restricted security representing .42% of the
Fund's net assets.

<TABLE>
<CAPTION>
PRINCIPAL                                                                    ACQUISITION
 AMOUNT   ISSUER                                                                DATE       COST     VALUE
----------------------------------------------------------------------------------------------------------
<S>                                                                          <C>         <C>      <C>
$765,361  Atherton Franchise Capital, LP, 13.073%, 12/01/08 ..............   04/28/1994  $765,361 $589,328
</TABLE>


9. OTHER CONSIDERATIONS

Advisers, as the Fund's investment manager, may serve as a member of various
bondholders' steering committees, on credit committees or may represent the Fund
in certain corporate restructuring negotiations. Currently the manager serves in
one or more of these capacities for Century Communications and Metrocall Inc. As
a result of this involvement, Advisers may be in possession of certain material
non-public information. If the Fund's Manager, while in possession of such
information, seeks to sell any of its holdings in these securities it will
comply with all applicable federal securities laws.


10. SUBSEQUENT EVENTS

On September 6, 2002, the Fund retired an additional $8,000,000 of principal
amount of its Note for $8,313,467. The Fund paid a Note prepayment fee of
$313,467 as required by the Note agreement.




28
<PAGE>
FRANKLIN UNIVERSAL TRUST
Independent Auditors' Report


TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
FRANKLIN UNIVERSAL TRUST

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations, of
changes in net assets, and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of Franklin Universal
Trust (the "Fund") at August 31, 2002, the results of its operations and its
cash flows for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 2002 by correspondence with the custodian provide a reasonable basis for our
opinion expressed above.

PricewaterhouseCoopers LLP

San Francisco, California
October 3, 2002






                                                                              29
<PAGE>
FRANKLIN UNIVERSAL TRUST
Tax Designation (unaudited)

Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
10.80% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended August 31, 2002.



30
<PAGE>

BOARD MEMBERS AND OFFICERS

The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.


<TABLE>
<CAPTION>
INDEPENDENT BOARD MEMBERS                               NUMBER OF
                                                   PORTFOLIOS IN FUND
                                        LENGTH OF   COMPLEX OVERSEEN
NAME, AGE AND ADDRESS      POSITION     TIME SERVED BY BOARD MEMBER*    OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------
<S>                        <C>          <C>               <C>           <C>
FRANK H. ABBOTT, III (81)  Trustee      Since 1988        105           None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company); and FORMERLY, Director, MotherLode Gold Mines
Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food processing) (until 1996).
------------------------------------------------------------------------------------------------------------------------

HARRIS J. ASHTON (70)      Trustee      Since 1988        132           Director, Bar-S Foods (meat packing company).
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and
President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
------------------------------------------------------------------------------------------------------------------------

ROBERT F. CARLSON (74)     Trustee      Since 2000         41           None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS);
and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of
California; and Chief Counsel, California Department of Transportation.
------------------------------------------------------------------------------------------------------------------------

S. JOSEPH FORTUNATO (70)   Trustee      Since 1989        133           None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Member of the law firm of Pitney, Hardin, Kipp & Szuch.
------------------------------------------------------------------------------------------------------------------------

FRANK W.T. LAHAYE (73)     Trustee      Since 1988        105           Director, The California Center for Land
One Franklin Parkway                                                    Recycling (redevelopment).
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture
capital).
------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                                                              31
<PAGE>
<TABLE>
<CAPTION>
                                                        NUMBER OF
                                                   PORTFOLIOS IN FUND
                                        LENGTH OF   COMPLEX OVERSEEN
NAME, AGE AND ADDRESS      POSITION     TIME SERVED BY BOARD MEMBER*    OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------
<S>                        <C>          <C>               <C>           <C>

GORDON S. MACKLIN (74)     Trustee      Since 1993        132           Director, White Mountains Insurance
One Franklin Parkway                                                    Group, Ltd. (holding company); Martek
San Mateo, CA 94403-1906                                                Biosciences Corporation; WorldCom, Inc.
                                                                        (communications services); MedImmune,
                                                                        Inc. (biotechnology); Overstock.com
                                                                        (Internet services); and Spacehab, Inc.
                                                                        (aerospace services).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River
Corporation (financial services) (until 1998) and Hambrecht & Quist Group (investment banking) (until 1992); and
President, National Association of Securities Dealers, Inc. (until 1987).
------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
INTERESTED BOARD MEMBERS AND OFFICERS                          NUMBER OF
                                                          PORTFOLIOS IN FUND
                                              LENGTH OF    COMPLEX OVERSEEN
NAME, AGE AND ADDRESS         POSITION        TIME SERVED  BY BOARD MEMBER*   OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------
<S>                           <C>             <C>               <C>           <C>
**EDWARD B. JAMIESON (54)     Trustee and     Trustee and         8           None
One Franklin Parkway          President       President
San Mateo, CA 94403-1906                      since 1993

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and Portfolio Manager, Franklin Advisers, Inc.; and officer of other subsidiaries of Franklin
Resources, Inc. and of 5 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------

**CHARLES B. JOHNSON (69)     Trustee         Trustee           132           None
One Franklin Parkway          and Chairman    since 1988
San Mateo, CA 94403-1906      of the Board    and Chairman
                                              of the Board
                                              since 1993

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman and Director, Franklin Resources, Inc.;
Vice President, Franklin Templeton Distributors, Inc.; Director, Fiduciary Trust Company International; officer and/or
director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc.; and officer of
47 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------

**RUPERT H. JOHNSON, JR. (62) Trustee         Trustee           116           None
One Franklin Parkway          and Senior      and Senior
San Mateo, CA 94403-1906      Vice President  Vice President
                                              since 1988

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director,
Franklin Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services,
Inc.; Senior Vice President, Franklin Advisory Services, LLC; officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc.; and officer of 50 of the investment companies in Franklin
Templeton Investments.
------------------------------------------------------------------------------------------------------------------------
</TABLE>



32
<PAGE>
<TABLE>
<CAPTION>
                                                                      NUMBER OF
                                                                 PORTFOLIOS IN FUND
                                                 LENGTH OF        COMPLEX OVERSEEN
NAME, AGE AND ADDRESS         POSITION           TIME SERVED      BY BOARD MEMBER*    OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                <C>               <C>                <C>
HARMON E. BURNS (57)          Vice President     Since 1988        Not Applicable     None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director,
Franklin Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment
Advisory Services, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 50 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------

MARTIN L. FLANAGAN (42)       Vice President     Vice President    Not Applicable     None
One Franklin Parkway          and Chief          and Chief
San Mateo, CA 94403-1906      Financial Officer  Financial Officer
                                                 since 1995

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Member - Office of the President, Chief Financial Officer and Chief Operating Officer, Franklin Resources,
Inc.; Senior Vice President and Chief Financial Officer, Franklin Mutual Advisers, LLC; Executive Vice President, Chief
Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice President and Chief Operating Officer,
Templeton Investment Counsel, LLC; Executive Vice President and Director, Franklin Advisers, Inc.; Executive Vice
President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial
Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director of
some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton
Investments.
------------------------------------------------------------------------------------------------------------------------

DAVID P. GOSS (55)            Vice President     Since 2000        Not Applicable     None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; President, Chief Executive Officer and Director, Property
Resources, Inc. and Franklin Properties, Inc.; officer and/or director of some of the other subsidiaries of Franklin
Resources, Inc.; officer of 52 of the investment companies in Franklin Templeton Investments; and FORMERLY, President,
Chief Executive Officer and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust
(until 2000).
------------------------------------------------------------------------------------------------------------------------

BARBARA J. GREEN (54)         Vice President     Since 2000        Not Applicable     None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and Deputy General Counsel, Franklin Resources, Inc.; and Senior Vice President, Templeton Worldwide,
Inc. and officer of one of the other subsidiaries of Franklin Resources, Inc., and of 52 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant
and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, Securities and
Exchange Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court
(District of Massachusetts) (until 1979).
------------------------------------------------------------------------------------------------------------------------

KIMBERLEY MONASTERIO (38)     Treasurer          Since 2000        Not Applicable     None
One Franklin Parkway          and Principal
San Mateo, CA 94403-1906      Accounting
                              Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 34 of the investment companies in Franklin
Templeton Investments.
------------------------------------------------------------------------------------------------------------------------



                                                                                                                      33
<PAGE>
                                                                      NUMBER OF
                                                                 PORTFOLIOS IN FUND
                                                 LENGTH OF        COMPLEX OVERSEEN
NAME, AGE AND ADDRESS         POSITION           TIME SERVED      BY BOARD MEMBER*    OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------

MURRAY L. SIMPSON (65)        Vice President     Since 2000        Not Applicable     None
One Franklin Parkway          and Secretary
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director of some of the
subsidiaries of Franklin Resources, Inc.; officer of 52 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited
(until 2000); and Director, Templeton Asset Management Ltd. (until 1999).
------------------------------------------------------------------------------------------------------------------------

<FN>
*We base the number of portfolios on each separate series of the registered investment companies comprising the Franklin Templeton
Investments fund complex. These portfolios have a common investment adviser or affiliated investment advisers.

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

Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
</FN>
</TABLE>


34
<PAGE>

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<PAGE>

                       This page intentionally left blank.

<PAGE>
LITERATURE REQUEST
For a brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. 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 determined by the presence of a regular beeping
tone.

FRANKLIN TEMPLETON INVESTMENTS

GLOBAL GROWTH
Franklin Global Aggressive
 Growth Fund
Franklin Global Growth Fund
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
 Companies Fund
Templeton Global Opportunities Trust
Templeton Global Smaller
 Companies Fund
Templeton Growth Fund
Templeton International
 (Ex EM) Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH & INCOME
Franklin Global
 Communications Fund
Mutual European Fund
Templeton Global Bond Fund
GLOBAL INCOME
Franklin Templeton Hard
 Currency Fund

GROWTH
Franklin Aggressive Growth Fund
Franklin Biotechnology
 Discovery Fund
Franklin Blue Chip Fund
Franklin Capital Growth Fund(1)
Franklin DynaTech Fund
Franklin Flex Cap Growth Fund(2)
Franklin Gold and Precious
 Metals Fund
Franklin Growth Fund
Franklin Large Cap Growth Fund
Franklin Small-Mid Cap
 Growth Fund
Franklin Technology Fund

GROWTH & INCOME
Franklin Convertible
 Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin Large Cap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate
 Securities Fund
Franklin Rising Dividends Fund
Franklin Small Cap Value Fund
Franklin Utilities Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund

FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth
 Target Fund
Franklin Templeton Moderate
 Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund(3)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily
 Access Fund
Franklin Floating Rate Trust(4)
Franklin Short-Intermediate
 U.S. Government Securities Fund(3)
Franklin Strategic Income Fund
Franklin Total Return Fund
Franklin U.S. Government
 Securities Fund(3)
Franklin Federal Money Fund(3,5)
Franklin Money Fund(3,5)

TAX-FREE INCOME(6)
Double Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free
 Income Fund
Insured Tax-Free Income Fund(7)
Tax-Exempt Money Fund(3,5)

STATE-SPECIFIC
TAX-FREE INCOME(6)
Alabama
Arizona
California(8)
Colorado
Connecticut
Florida(8)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(8)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(9)




1. Formerly Franklin Growth and Income Fund. Effective 5/1/02, the fund's name
changed; investment goal and strategy remained the same.
2. Formerly Franklin California Growth Fund. Effective 9/1/02, the fund's name
changed and its investment criteria was modified to invest a majority of its net
assets in California companies, as opposed to at least 80% of net assets.
3. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
4. 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.
5. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
6. For investors subject to the alternative minimum tax, a small portion of
these dividends may be taxable. Distributions of capital gains are generally
taxable.
7. Portfolio of insured municipal securities.
8. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
intermediate-term and money market portfolios (CA and NY).
9. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally only available as investment options in variable annuity or variable
life insurance contracts.

                                                                           09/02

<PAGE>
   [LOGO OMITTED]
FRANKLIN[R] TEMPLETON[R]
     INVESTMENTS

One Franklin Parkway
San Mateo, CA  94403-1906



ANNUAL REPORT
FRANKLIN UNIVERSAL TRUST

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

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

INDENTURE TRUSTEE
Shawmut Bank, N.A.
One Federal Street
Boston, MA 02110
1-617/292-2000


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 A2002 10/02
[LOGO OMITTED] PRINTED ON RECYCLED PAPER



</TEXT>
</DOCUMENT>
