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

                               AMENDED FORM N-CSR

  CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-05569
                                   ---------

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

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

       MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
       -----------------------------------------------------------------
                    (Name and address of agent for service)

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

Date of fiscal year end:  08/31
                          -----

Date of reporting period: 08/31/04
                          --------

      ITEM 1. REPORTS TO STOCKHOLDERS.


                                [GRAPHIC OMITTED]

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                                                             AUGUST 31, 2004
--------------------------------------------------------------------------------

                 ANNUAL REPORT                                    INCOME
--------------------------------------------------------------------------------

          FRANKLIN UNIVERSAL TRUST

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                                     [LOGO]
                            FRANKLIN(R) TEMPLETON(R)
                                   INVESTMENTS

                      Franklin o Templeton o Mutual Series



                            FRANKLIN TEMPLETON INVESTMENTS

                            GAIN FROM OUR PERSPECTIVE

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

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

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

                            TEMPLETON. Founded in 1940, Templeton pioneered
                            international investing and, in 1954, launched what
                            has become the industry's oldest global fund. Today,
                            with research offices in over 25 countries, they
                            offer investors the broadest global reach in the
                            industry.

                            MUTUAL SERIES. Founded in 1949, Mutual Series is
                            dedicated to a unique style of value investing,
                            searching aggressively for opportunity among
                            undervalued stocks, arbitrage situations and
                            distressed companies.

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

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

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

Not part of the annual report



                                    CONTENTS
ANNUAL REPORT

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

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

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

Dividend Reinvestment and Cash Purchase Plan ..............................    7

Financial Highlights and Statement of Investments .........................   10

Financial Statements ......................................................   17

Notes to Financial Statements .............................................   21

Report of Independent Registered Public Accounting Firm ...................   29

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

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

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

--------------------------------------------------------------------------------

ANNUAL REPORT

FRANKLIN UNIVERSAL TRUST

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

Dear Shareholder:

We are pleased to bring you Franklin Universal Trust's annual report for the
fiscal year ended August 31, 2004.

PERFORMANCE OVERVIEW

For the year under review, the Fund's cumulative total returns were +21.71%
based on change in net asset value and +15.79% based on change in market price
on the New York Stock Exchange. For comparison, the Credit Suisse First Boston
(CSFB) High Yield Index returned 14.67%, and utilities stocks, as measured by
the Standard & Poor's (S&P) Utilities Index, returned 23.85% for the fiscal year
ended August 31, 2004.(1) You can find the Fund's long-term performance data in
the Performance Summary on page 5.

(1)   Source: Standard & Poor's Micropal. The CSFB High Yield Index is a
      trader-priced portfolio constructed to mirror the high yield debt market
      and includes reinvested interest. The S&P Utilities Index is a market
      capitalization-weighted index that includes utility stocks in the Standard
      & Poor's 500 Composite Index. The index includes reinvested dividends. The
      indexes are unmanaged. One cannot invest directly in an index, nor is an
      index representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 11.


                                                             Annual Report   | 1


PORTFOLIO BREAKDOWN
Based on Gross Assets*
8/31/04

 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]

Corporate Bonds                                                        67.6%
Utilities Common Stocks                                                22.2%
Foreign Government U.S. Dollar-Denominated Bonds                        3.8%
Misc. Common & Preferred Stocks                                         3.1%
Natural Resources Common Stocks                                         0.9%
Convertible Bonds                                                       0.9%
Foreign Government Agencies                                             0.3%
Cash & Other Net Assets                                                 1.2%

*     The calculation of percentages is based on total net assets plus the
      senior note issued by the Fund.

ECONOMIC AND MARKET OVERVIEW

Over the 12-month reporting period, an improving employment picture helped the
economy gain a strong foothold, as businesses added more than 1.5 million jobs
since September 2003.(2) This important factor was one of many that supported an
interest rate rise during the period. Although higher interest rates led to
increasing mortgage rates and declining housing affordability, the housing
market remained historically robust. Rising home prices and strong new and
existing home sales contributed to greater consumer spending.

Increases in business spending also contributed to economic growth. Growing
consumer demand helped many companies improve their profits. At the same time,
many businesses took advantage of the past 12 months' historically low interest
rates to refinance old debt at more attractive levels, which improved their
balance sheets. Productivity also continued to rise, which helped businesses
generate more goods and services without substantially raising inflation.

Many market participants consider the core Consumer Price Index, which excludes
food and energy, as a proxy for overall inflation. This index rose 1.7% for the
12 months ended August 31, 2004. Although inflation increased during some
months, it returned to historically low levels by period-end. In fact, when the
Federal Reserve Board (Fed) raised the federal funds target rate to 1.25% on
June 30, they noted that, "Although incoming inflation data are somewhat
elevated, a portion of the increase in recent months appears to have been due to
transitory factors."(3)

Largely in anticipation of the Fed's move in June, longer-maturity Treasury
yields shifted upward. Although the Fed made a second rate hike in August,
slower economic growth tended to boost Treasury bond prices near fiscal
year-end, which brought yields down again. Overall, the benchmark 10-year
Treasury yield fell from 4.45% at the beginning of the reporting period to 4.13%
on August 31, 2004. The market expected the federal funds target rate to reach
just below 2.0% by the end of 2004, according to the Fed Funds Futures Contract
Table. Despite the removal of some of the stimulus provided by lower interest
rates, many sources of economic stimuli remained, including an improved jobs
picture and higher corporate profits.

The continuation of the fundamental improvement that began in the previous
fiscal year drove high yield bond returns. Credit quality improved as earnings
grew in the stronger economic environment. With the pains of recession still
fresh in most minds, and with the duration of the recovery uncertain, many
companies retained a focus on debt reduction. Improved credit quality helped the
default rate decline

(2)   Source: Bureau of Labor Statistics.

(3)   Source: Federal Reserve Press Release, 6/30/04.


2 |   Annual Report


further during the period. In addition, continued cash flows into the high yield
asset class increased demand and provided support to the high yield bond market.
Utility stocks benefited from continued low interest rates, as the 10-year
Treasury note yield declined over the course of the Fund's fiscal year. Many
utility companies also generated improved earnings, which they used as an
opportunity to increase dividend payments or repurchase shares.

INVESTMENT STRATEGY

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

MANAGER'S DISCUSSION

During the year under review, the Fund benefited from double-digit returns in
each of its primary asset classes.

HIGH YIELD CORPORATE BONDS

The Fund benefited from its overweighted positions in the producer manufacturing
and transportation sectors relative to the CSFB High Yield Index. The producer
manufacturing sector rebounded from depressed levels reached during the
recession and early stages of recovery, when results were weak and some
companies were forced to borrow to meet their cash needs. The rebound was
largely attributable to the overall economic recovery, and in particular an
improvement in industrial production that enabled companies to take advantage of
their operating leverage and generate improved results. Likewise, the
transportation sector was another beneficiary of the economic recovery. In
particular, the securities of automobile manufacturers generally rose as auto
sales were boosted by dealer incentives and continued low interest rates.

The Fund's relative performance in the high yield sector was impeded by our lack
of holdings in the finance sector and an overweighted position in the wireless
telecommunications industry. The finance sector was one of the top performing in
the CSFB High Yield Index, but the Fund did not benefit from this. The Fund
historically has had little to no exposure to financials, due to what we have
found to be a lack of asset protection and attractive investment opportunities.
Wireless telecommunication bonds generated returns below those of the index, as
competitive industry dynamics surfaced and subscriber growth was disappointing
for certain companies.

TOP 10 HOLDINGS
Based on Gross Assets*
8/31/04 vs. 8/31/03

--------------------------------------------------------------------------------
8/31/04
--------------------------------------------------------------------------------
Southern Co.                                                                2.2%
--------------------------------------------------------------------------------
FPL Group Inc.                                                              2.1%
--------------------------------------------------------------------------------
Dominion Resources Inc.                                                     1.9%
--------------------------------------------------------------------------------
United Mexican States                                                       1.7%
--------------------------------------------------------------------------------
Exelon Corp.                                                                1.6%
--------------------------------------------------------------------------------
Republic of Bulgaria                                                        1.5%
--------------------------------------------------------------------------------
Nicor Inc.                                                                  1.5%
--------------------------------------------------------------------------------
Fimep SA                                                                    1.5%
--------------------------------------------------------------------------------
Laidlaw International Inc.                                                  1.5%
--------------------------------------------------------------------------------
D.R. Horton Inc.                                                            1.5%
--------------------------------------------------------------------------------
8/31/03
--------------------------------------------------------------------------------
Southern Co.                                                                2.3%
--------------------------------------------------------------------------------
FPL Group Inc.                                                              2.1%
--------------------------------------------------------------------------------
Dominion Resources Inc.                                                     2.0%
--------------------------------------------------------------------------------
United Mexican States                                                       1.8%
--------------------------------------------------------------------------------
Republic of Bulgaria                                                        1.7%
--------------------------------------------------------------------------------
Gulfterra Energy Partners                                                   1.7%
--------------------------------------------------------------------------------
Hollywood Park                                                              1.6%
--------------------------------------------------------------------------------
Nicor Inc.                                                                  1.6%
--------------------------------------------------------------------------------
Legrand SA (Fimep SA)                                                       1.6%
--------------------------------------------------------------------------------
D.R. Horton Inc.                                                            1.5%
--------------------------------------------------------------------------------

*     The calculation of percentages is based on total net assets plus the
      senior note issued by the Fund.


                                                             Annual Report   | 3



UTILITY STOCKS

We held the portfolio's utility exposure fairly constant over the course of the
fiscal year, averaging approximately 23% of the Fund's gross assets in utility
stocks. This positioning, which was below the mid-point of our targeted range,
impeded performance, as utility stocks generated a return greater than that of
the Fund's other primary asset class. In addition to the boost provided by
declining interest rates, utilities also generally benefited from better
earnings. Because many utility companies improved their balance sheets versus
prior years, many of them took the opportunity to reward shareholders through
higher dividends or share repurchasing programs.

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

                  Sincerely,

  [PHOTO]         /s/ Christopher J. Molumphy

                  Christopher J. Molumphy, CFA
                  Senior Portfolio Manager


  [PHOTO]         /s/ Glenn I. Voyles

                  Glenn I. Voyles, CFA
                  Portfolio Manager

Franklin Universal Trust

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF AUGUST 31, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.


4 |   Annual Report


PERFORMANCE SUMMARY AS OF 8/31/04

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. Total return reflects the Fund's dividend income, capital gain
distributions, if any, and any unrealized gains or losses. All total returns
include reinvested distributions according to the terms specified in the Fund's
dividend reinvestment and cash purchase plan and do not reflect any sales
charges paid at inception or brokerage commissions paid on secondary market
purchases.

PRICE AND DISTRIBUTION INFORMATION

--------------------------------------------------------------------------------
                                                  CHANGE     8/31/04    8/31/03
--------------------------------------------------------------------------------
Net Asset Value (NAV)                             +$0.81      $6.48      $5.67
--------------------------------------------------------------------------------
Market Price (NYSE)                               +$0.45      $5.65      $5.20
--------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-8/31/04)
--------------------------------------------------------------------------------
Dividend Income                       $0.36
--------------------------------------------------------------------------------

PERFORMANCE

--------------------------------------------------------------------------------
                                                  1-YEAR       5-YEAR    10-YEAR
--------------------------------------------------------------------------------
Cumulative Total Return(1)
--------------------------------------------------------------------------------
  Based on change in NAV                          +21.71%     +19.12%    +98.74%
--------------------------------------------------------------------------------
  Based on change in market price                 +15.79%      +6.56%    +85.77%
--------------------------------------------------------------------------------
Average Annual Total Return(1)
--------------------------------------------------------------------------------
  Based on change in NAV                          +21.71%      +3.56%     +7.11%
--------------------------------------------------------------------------------
  Based on change in market price                 +15.79%      +1.28%     +6.39%
--------------------------------------------------------------------------------
Distribution Rate(2)                   6.37%
--------------------------------------------------------------------------------

PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.

FOR MORE CURRENT PERFORMANCE, CALL FRANKLIN TEMPLETON INVESTMENTS AT
1-800/342-5236.

ENDNOTES

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

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

(2)   Distribution rate is based on an annualization of the Fund's 3 cent per
      share August dividend and the NYSE closing price of $5.65 on 8/31/04.


                                                             Annual Report   | 5


ANNUAL SHAREHOLDERS' MEETING

FEBRUARY 24, 2004

At an Annual Shareholders' Meeting of Franklin Universal Trust (the "Fund") held
on February 24, 2004, shareholders approved the following:

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

--------------------------------------------------------------------------------
TRUSTEES                             SHARES FOR              WITHHELD OR ABSTAIN
--------------------------------------------------------------------------------
Harris J. Ashton                   24,184,212.961                251,521.002
--------------------------------------------------------------------------------
Robert F. Carlson                  24,175,334.814                260,399.149
--------------------------------------------------------------------------------
S. Joseph Fortunato                24,210,089.757                225,644.206
--------------------------------------------------------------------------------
Edith E. Holiday                   24,187,618.961                248,115.002
--------------------------------------------------------------------------------
Edward B. Jamieson                 24,196,282.709                239,451.255
--------------------------------------------------------------------------------
Charles B. Johnson                 24,188,589.814                247,144.149
--------------------------------------------------------------------------------
Rupert H. Johnson, Jr.             24,196,960.709                238,773.255
--------------------------------------------------------------------------------
Frank W.T. LaHaye                  24,175,151.814                260,582.149
--------------------------------------------------------------------------------
Gordon S. Macklin                  24,171,142.814                264,591.149
--------------------------------------------------------------------------------


6 |   Annual Report


DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers you
a prompt and simple way to reinvest dividends and capital gain distributions in
shares of the Fund. The Plan also allows you to purchase additional shares of
the Fund by making voluntary cash payments. PFPC Inc. (the "Plan Agent"), P.O.
Box 9223, Chelsea, MA 02150-9223, acts as your Plan Agent in administering the
Plan. The complete Terms and Conditions of the Dividend Reinvestment and Cash
Purchase Plan are contained in the Fund's Dividend Reinvestment and Cash
Purchase Plan Brochure. A copy of that Brochure may be obtained from the Fund at
the address on the back cover of this report.

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

If the Fund declares a dividend or capital gain distribution payable either in
cash or in stock of the Fund and the market price of shares on the valuation
date equals or exceeds the net asset value, the Fund will issue new shares to
you at the higher of net asset value or 95% of the then current market price.
Whenever the Fund declares a distribution from capital gains or an income
dividend payable in either cash or shares, if the net asset value per share of
the Fund's common stock exceeds the market price per share on the valuation
date, the Plan Agent shall apply the amount of such dividend or distribution
payable to participants, to the purchase of shares (less their pro rata share of
brokerage commissions incurred with respect to open market purchases in
connection with the reinvestment of such dividend or distribution). If the price
exceeds the net asset value before the Plan Agent has completed its purchases,
the average purchase price may exceed the net asset value, resulting in fewer
shares being acquired than if the Fund had issued new shares. All reinvestments
are in full and fractional shares, carried to three decimal places. The Fund
will not issue shares under the Plan at a price below net asset value.

The Plan permits you on a voluntary basis to submit in cash payments of not less
than $100 each up to a total of $5,000 per month to purchase additional shares
of the Fund. It is entirely up to you whether you wish to buy additional shares
with voluntary cash payments, and you do not have to send in the same amount
each time if you do. These payments should be made by check or money order
payable to PFPC Inc. and sent to PFPC Inc., Attn: Franklin Universal Trust, P.O.
Box 9223, Chelsea, MA 02150-9223.

Your cash payment will be aggregated with the payments of other participants and
invested on your behalf by the Plan Agent in shares of the Fund which are
purchased in the open market.

                                                             Annual Report   | 7



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.

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

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

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

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

As long as you participate in the Plan, the Plan Agent will hold the shares it
has acquired for you in safekeeping, in its name or in the name of its nominee.
This convenience provides added protection against loss, theft or inadvertent
destruction of certificates. However, you may request that a certificate
representing your Plan shares be issued to you.


8 |   Annual Report


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

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

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

                                                             Annual Report   | 9



FRANKLIN UNIVERSAL TRUST

FINANCIAL HIGHLIGHTS



                                                              ---------------------------------------------------------------------
                                                                                        Year Ended August 31,
                                                                 2004           2003           2002          2001         2000
                                                              ---------------------------------------------------------------------
                                                                                                          
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)

Net asset value, beginning of year ......................     $    5.67       $   5.13       $   7.32       $   8.21     $   8.91
                                                              ---------------------------------------------------------------------
Income from investment operations:

  Net investment income(a) ..............................           .43            .45           .65(c)          .73          .81

  Net realized and unrealized gains (losses) ............           .74            .59          (2.05)(c)       (.82)        (.65)
                                                              ---------------------------------------------------------------------

Total from investment operations ........................          1.17           1.04          (1.40)          (.09)         .16
                                                              ---------------------------------------------------------------------

Less distributions from:

  Net investment income .................................          (.36)          (.50)          (.79)          (.80)        (.80)

  Net realized gains ....................................            --             --             --             --         (.06)
                                                              ---------------------------------------------------------------------

Total distributions .....................................          (.36)          (.50)          (.79)          (.80)        (.86)
                                                              ---------------------------------------------------------------------

Net asset value, end of year ............................     $    6.48       $   5.67       $   5.13       $   7.32     $   8.21
                                                              =====================================================================

Market value, end of year(b) ............................     $    5.65       $   5.20       $   6.37       $   8.24     $  7.688
                                                              =====================================================================

Total return (based on market value per share) ..........         15.79%        (10.13)%       (13.68)%        19.01%        (.40)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year (000's) .........................     $ 180,850       $158,364       $141,619       $198,598     $220,742

Ratios to average net assets:

  Expenses ..............................................          2.47%          3.59%          4.05%          3.29%        3.15%

  Net investment income .................................          6.85%          8.68%         10.04%(c)       9.38%        9.92%

Portfolio turnover rate .................................         46.35%         65.15%         17.38%         31.60%       29.59%

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

Asset coverage per $1,000 of debt .......................     $   4,288       $  3,879       $  3,360       $  3,648     $  3,948

Average amount of Note per share during the year ........     $    1.97       $   1.87       $   2.65       $   2.76     $   2.79


(a)   Based on average daily shares outstanding.

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

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

      Net investment income per share .............................    $(.012)
      Net realized and unrealized gains (losses) per share ........      .012
      Ratio of net investment income to average net assets ........      (.19)%

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


10 | See notes to financial statements. | Annual Report


FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2004



----------------------------------------------------------------------------------------------------------------------------------
                                                                           COUNTRY            SHARES/WARRANTS            VALUE
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                            
       COMMON STOCKS AND WARRANTS 31.8%
       COMMUNICATIONS 1.7%
    (a)Call-Net Enterprises Inc., B .............................          Canada                   41,958           $      88,112
    (a)Metrocall Holdings Inc. ..................................       United States               17,540               1,133,610
    (a)Millicom International Cellular SA .......................        Luxembourg                      1                      15
(a),(b)Poland Telecom Finance, wts., 144A, 12/01/07 .............          Poland                    3,000                      --
    (a)Telewest Global Inc. .....................................      United Kingdom              160,567               1,854,549
    (a)XO Communications Inc., wts., A, 1/16/10 .................       United States                5,100                   4,335
                                                                                                                     -------------
                                                                                                                         3,080,621
                                                                                                                     -------------
       ELECTRONIC TECHNOLOGY
    (a)Loral Space & Communications Ltd., wts., 12/27/06 ........       United States               21,638                     379
    (a)Loral Space & Communications Ltd., wts., 1/15/07 .........       United States                5,000                      87
                                                                                                                     -------------
                                                                                                                               466
                                                                                                                     -------------
       ENERGY MINERALS .1%
       Devon Energy Corp. .......................................       United States                3,285                 212,901
    (a)McMoRan Exploration Co. ..................................       United States                1,800                  25,182
                                                                                                                     -------------
                                                                                                                           238,083
                                                                                                                     -------------
       NON-ENERGY MINERALS 1.0%
       AngloGold Ashanti Ltd., ADR ..............................       South Africa                30,446               1,080,833
       Barrick Gold Corp. .......................................          Canada                   35,800                 716,000
                                                                                                                     -------------
                                                                                                                         1,796,833
                                                                                                                     -------------
       Producer Manufacturing
    (a)Harvard Industries Inc. ..................................       United States              109,618                     548
    (a)VS Holdings ..............................................       United States              181,875                     182
                                                                                                                     -------------
                                                                                                                               730
                                                                                                                     -------------
       TRANSPORTATION
    (a)Continental Airlines Inc., B .............................       United States                2,500                  24,125
                                                                                                                     -------------
       UTILITIES 29.0%
       Alliant Energy Corp. .....................................       United States               95,000               2,469,050
       Ameren Corp ..............................................       United States               40,000               1,871,600
       American Electric Power Co. Inc. .........................       United States               30,000                 981,900
       Atmos Energy Corp. .......................................       United States               85,000               2,149,650
       Cinergy Corp. ............................................       United States               55,000               2,226,400
       Dominion Resources Inc. ..................................       United States               70,000               4,542,300
       DTE Energy Co. ...........................................       United States               45,000               1,859,400
       Edison International .....................................       United States               65,000               1,747,200
       Energy East Corp .........................................       United States               42,000               1,023,540
       Entergy Corp. ............................................       United States               28,000               1,688,400
       Exelon Corp. .............................................       United States              104,000               3,832,400
       FirstEnergy Corp. ........................................       United States               75,000               3,018,000
       FPL Group Inc. ...........................................       United States               70,000               4,844,000
       Nicor Inc. ...............................................       United States               98,000               3,513,300
       NiSource Inc. ............................................       United States               80,000               1,664,000



                                                            Annual Report   | 11


FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)



-----------------------------------------------------------------------------------------------------------------------------------
                                                                              COUNTRY            SHARES/WARRANTS           VALUE
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                               
     COMMON STOCKS AND WARRANTS (CONT.)
     UTILITIES (CONT.)
     ONEOK Inc. ........................................................    United States                22,600         $   532,456
     Pepco Holdings Inc. ...............................................    United States                68,000           1,403,520
     Pinnacle West Capital Corp. .......................................    United States                76,000           3,207,960
     Progress Energy Inc. ..............................................    United States                70,000           3,072,300
     Southern Co. ......................................................    United States               170,000           5,159,500
     TXU Corp. .........................................................    United States                39,600           1,648,548
                                                                                                                        -----------
                                                                                                                         52,455,424
                                                                                                                        -----------
     TOTAL COMMON STOCKS AND WARRANTS (COST $49,545,738)                                                                 57,596,282
                                                                                                                        -----------
     PREFERRED STOCKS 1.1%
     PROCESS INDUSTRIES
  (a)Asia Pulp & Paper Co. Ltd., 12.00%, pfd. ..........................      Indonesia               4,000,000              60,000
                                                                                                                        -----------
     UTILITIES 1.1%
     Heco Capital Trust III, 6.50%, pfd. ...............................    United States                75,000           1,911,000
                                                                                                                        -----------
     TOTAL PREFERRED STOCKS (COST $5,875,000)                                                                             1,971,000
                                                                                                                        -----------
     CONVERTIBLE PREFERRED STOCK (COST $1,700,803) 1.2%
     CONSUMER DURABLES
     Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd. .................    United States                40,800           2,159,136
                                                                                                                        -----------


                                                                                                 -------------------
                                                                                                 PRINCIPAL AMOUNT(e)
                                                                                                 -------------------
                                                                                                               
     BONDS 93.6%
     COMMERCIAL SERVICES
  (c)Key3Media Group Inc., senior sub. note, 11.25%, 6/15/11 ...........    United States            $5,000,000              75,000
                                                                                                                        -----------
     COMMUNICATIONS 10.9%
     Centennial Communications Corp., senior note, 144A, 8.125%,
       2/01/14 .........................................................    United States             1,500,000           1,398,750
     Dobson Communications Corp., senior note, 8.875%, 10/01/13 ........    United States             1,900,000           1,311,000
     Inmarsat Finance PLC, senior note, 144A, 7.625%, 6/30/12 ..........   United Kingdom             2,000,000           1,970,000
     Millicom International Cellular SA, senior note, 144A, 10.00%,
       12/01/13 ........................................................     Luxembourg               2,300,000           2,288,500
     Nextel Communications Inc., senior note, 7.375%, 8/01/15 ..........    United States             3,000,000           3,150,000
     NTL Cable PLC, senior note, 144A, 8.75%, 4/15/14 ..................   United Kingdom               900,000             940,500
     PanAmSat Corp., senior note, 144A, 9.00%, 8/15/14 .................    United States             2,100,000           2,199,750
  (c)Poland Telecom Finance, B, 14.00%, 12/01/07 .......................       Poland                 3,000,000                 300
     Qwest Corp., 6.875%, 9/15/33 ......................................    United States             2,800,000           2,310,000
     Time Warner Telecom Inc., senior note, 10.125%, 2/01/11 ...........    United States             1,700,000           1,606,500
     Time Warner Telecom Inc., senior note, 9.25%, 2/15/14 .............    United States             1,300,000           1,274,000
     Triton PCS Inc., senior note, 8.50%, 6/01/13 ......................    United States             1,300,000           1,186,250
                                                                                                                        -----------
                                                                                                                         19,635,550
                                                                                                                        -----------
     CONSUMER DURABLES 4.5%
     D.R. Horton Inc., senior note, 8.50%, 4/15/12 .....................    United States             3,000,000           3,420,000
     General Motors, senior deb., 8.25%, 7/15/23 .......................    United States             1,800,000           1,902,015



12 |   Annual Report


FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)



------------------------------------------------------------------------------------------------------------------------------------
                                                                                     COUNTRY       PRINCIPAL AMOUNT(e)       VALUE
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                
       BONDS (CONT.)
       CONSUMER DURABLES (CONT.)
       Simmons Co., senior sub. note, 144A, 7.875%, 1/15/14 ..................    United States          $1,900,000      $ 1,966,500
       True Temper Sports Inc., senior sub. note, 8.375%, 9/15/11 ............    United States             900,000          841,500
                                                                                                                         -----------
                                                                                                                           8,130,015
                                                                                                                         -----------

       CONSUMER NON-DURABLES 1.7%
       Smithfield Foods Inc., senior note, 7.75%, 5/15/13 ....................    United States           1,000,000        1,070,000
       Smithfield Foods Inc., senior note, 144A, 7.00%, 8/01/11 ..............    United States           2,000,000        2,080,000
                                                                                                                         -----------
                                                                                                                           3,150,000
                                                                                                                         -----------
       CONSUMER SERVICES 21.1%
(b),(c)Atherton Franchise Capital, LP, 13.073%, 12/01/08 .....................    United States             765,361          114,804
       Cablevision Systems Corp., senior note, 144A, 8.00%, 4/15/12 ..........    United States           2,900,000        2,987,000
    (c)Century Communications Corp., senior disc. note, B, zero cpn.,
         1/15/08 .............................................................    United States           5,000,000        3,175,000
       Charter Communications Holdings II, senior note, 10.25%, 9/15/10 ......    United States           2,500,000        2,587,500
       Corrections Corp. of America, senior note, 7.50%, 5/01/11 .............    United States           2,300,000        2,432,250
       Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 .................    United States           2,342,000        2,705,010
       DIRECTV Holdings/Finance, senior note, 8.375%, 3/15/13 ................    United States           2,000,000        2,285,000
       Emmis Operating Co., senior sub. note, 6.875%, 5/15/12 ................    United States           2,700,000        2,721,195
       Marquee Inc., senior note, 144A, 8.625%, 8/15/12 ......................    United States           1,900,000        1,995,000
       Nexstar Finance Inc., senior sub. note, 7.00%, 1/15/14 ................    United States           3,000,000        2,932,500
       Park Place Entertainment Corp., senior sub. note, 7.875%, 3/15/10 .....    United States           2,400,000        2,676,000
       Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 ........    United States             800,000          828,000
       Pinnacle Entertainment Inc., senior sub. note, B, 9.25%, 2/15/07 ......    United States             165,000          170,569
       Royal Caribbean Cruises Ltd., senior note, 8.00%, 5/15/10 .............    United States           1,200,000        1,339,500
       Royal Caribbean Cruises Ltd., senior note, 6.875%, 12/01/13 ...........    United States           1,800,000        1,876,500
       Six Flags Inc., senior note, 9.50%, 2/01/09 ...........................    United States           3,000,000        2,925,000
       Station Casinos Inc., senior note, 6.00%, 4/01/12 .....................    United States             500,000          503,750
       Station Casinos Inc., senior sub. note, 6.50%, 2/01/14 ................    United States             300,000          301,500
       Station Casinos Inc., senior sub. note, 6.875%, 3/01/16 ...............    United States           2,200,000        2,208,250
       Young Broadcasting Inc., senior sub. note, 8.75%, 1/15/14 .............    United States           1,500,000        1,445,625
                                                                                                                         -----------
                                                                                                                          38,209,953
                                                                                                                         -----------

       DISTRIBUTION SERVICES
    (c)AmeriServe Food Distribution Inc., senior note, 8.875%, 10/15/06 ......    United States           1,000,000               --
    (c)AmeriServe Food Distribution Inc., senior sub. note, 10.125%,
         7/15/07 .............................................................    United States           2,700,000               --
                                                                                                                         -----------
                                                                                                                                  --
                                                                                                                         -----------

       ELECTRONIC TECHNOLOGY 5.3%
       Argo-Tech Corp., senior note, 144A, 9.25%, 6/01/11 ....................    United States           1,400,000        1,484,000
       Communications & Power Industries, senior sub. note, 8.00%,
         2/01/12 .............................................................    United States           2,700,000        2,733,750
       Flextronics International Ltd., senior sub. note, 6.50%, 5/15/13 ......      Singapore             1,100,000        1,105,500
       Solectron Corp., senior note, 9.625%, 2/15/09 .........................    United States           1,400,000        1,547,000
       Xerox Corp., senior note, 7.125%, 6/15/10 .............................    United States           2,500,000        2,662,500
                                                                                                                         -----------
                                                                                                                           9,532,750
                                                                                                                         -----------



                                                            Annual Report   | 13


FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)



-----------------------------------------------------------------------------------------------------------------------------------
                                                                                 COUNTRY      PRINCIPAL AMOUNT(e)           VALUE
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                              
   BONDS (CONT.)
   ENERGY MINERALS 3.4%
   Foundation PA, senior note, 144A, 7.25%, 8/01/14 ........................  United States      $ 1,700,000           $  1,797,750
   Plains Exploration & Production Co., senior note, 144A, 7.125%,
     6/15/14 ...............................................................  United States        1,200,000              1,278,000
   Vintage Petroleum, senior sub. note, 7.875%, 5/15/11 ....................  United States        3,000,000              3,150,000
                                                                                                                       ------------
                                                                                                                          6,225,750
                                                                                                                       ------------
   GOVERNMENT BONDS 5.3%
   Eskom, 11.00%, 6/01/08 ..................................................  South Africa         4,350,000  ZAR           696,000
   Federation of Russia, 3.00%, 5/14/06 ....................................     Russia            1,300,000              1,265,875
   Republic of Bulgaria, FRN, 2.75%, 7/28/11 ...............................    Bulgaria           3,640,000              3,634,322
   United Mexican States, 11.375%, 9/15/16 .................................     Mexico            2,750,000              4,032,187
                                                                                                                       ------------
                                                                                                                          9,628,384
                                                                                                                       ------------
   HEALTH SERVICES 2.7%
   Medcath Holdings Corp., senior note, 144A, 9.875%, 7/15/12 ..............  United States        2,000,000              2,100,000
   Tenet Healthcare Corp., senior note, 7.375%, 2/01/13 ....................  United States        3,000,000              2,790,000
                                                                                                                       ------------
                                                                                                                          4,890,000
                                                                                                                       ------------
   INDUSTRIAL SERVICES 4.3%
   Allied Waste North America Inc., senior secured note, 6.50%,
     11/15/10 ..............................................................  United States        3,000,000              3,015,000
   Grant Prideco Escrow, senior note, 9.00%, 12/15/09 ......................  United States        1,000,000              1,115,000
   Hanover Equipment Trust 01, senior secured note, B, 8.75%,
     9/01/11 ...............................................................  United States        3,000,000              3,255,000
   URS Corp., senior sub. note, 12.25%, 5/01/09 ............................  United States          307,000                330,025
                                                                                                                       ------------
                                                                                                                          7,715,025
                                                                                                                       ------------

   NON-ENERGY MINERALS 1.7%
   Ispat Inland ULC, senior secured note, 144A, 9.75%, 4/01/14 .............  United States        2,900,000              3,110,250
                                                                                                                       ------------
   PROCESS INDUSTRIES 9.3%
   BCP Caylux Holding Lux SCA, senior sub. note, 144A, 9.625%,
     6/15/14 ...............................................................  United States        2,700,000              2,912,625
(c)FiberMark Inc., senior note, 10.75%, 4/15/11 ............................  United States        3,000,000              1,905,000
   Georgia-Pacific Corp., senior note, 8.00%, 1/15/24 ......................  United States        3,000,000              3,247,500
   Huntsman ICI Holdings LLC, senior disc. note, zero cpn., 12/31/09 .......  United States        6,000,000              3,090,000
   Nalco Co., senior sub. note, 144A, 8.875%, 11/15/13 .....................  United States        1,500,000              1,625,625
(c)Pindo Deli Finance Mauritius Ltd., senior note, 11.75%, 10/01/17 ........    Singapore          3,000,000                870,000
   Rhodia SA, senior note, 10.25%, 6/01/10 .................................     France            3,000,000              3,075,000
                                                                                                                       ------------
                                                                                                                         16,725,750
                                                                                                                       ------------



14 |   Annual Report


FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)



----------------------------------------------------------------------------------------------------------------------------------
                                                                                  COUNTRY      PRINCIPAL AMOUNT(e)        VALUE
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
   BONDS (CONT.)
   PRODUCER MANUFACTURING 9.0%
   Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11 ...............     United States       $3,000,000        $  3,330,000
   Fimep SA, senior note, 10.50%, 2/15/13 .................................        France            3,000,000           3,480,000
   Invensys PLC, senior note, 144A, 9.875%, 3/15/11 .......................    United Kingdom        1,800,000           1,836,000
   Milacron Escrow Corp., senior secured note, 144A, 11.50%, 5/15/11 ......     United States        2,000,000           2,140,000
   THL Buildco Inc., senior sub. note, 144A, 8.50%, 9/01/14 ...............     United States        1,900,000           1,990,250
   TRW Automotive Inc., senior note, 9.375%, 2/15/13 ......................     United States        1,701,000           1,968,908
   TRW Automotive Inc., senior sub. note, 11.00%, 2/15/13 .................     United States          196,000             238,140
   Westinghouse Air Brake, senior note, 6.875%, 7/31/13 ...................     United States        1,300,000           1,319,500
                                                                                                                      ------------
                                                                                                                        16,302,798
                                                                                                                      ------------
   REAL ESTATE INVESTMENT TRUSTS 2.5%
   Host Marriott LP, senior note, 144A, 7.00%, 8/15/12 ....................     United States        2,500,000           2,556,250
   Ventas Realty LP/Capital Corp., senior note, 9.00%, 5/01/12 ............     United States        1,700,000           1,904,000
                                                                                                                      ------------
                                                                                                                         4,460,250
                                                                                                                      ------------
   RETAIL TRADE 1.6%
   Rite Aid Corp., senior note, 144A, 6.125%, 12/15/08 ....................     United States        3,000,000           2,910,000
                                                                                                                      ------------
   TECHNOLOGY SERVICES 2.0%
(c)PSINet Inc., 10.50%, 12/01/06 ..........................................     United States          700,000              47,250
(c)PSINet Inc., senior note, 11.00%, 8/01/09 ..............................     United States        3,250,000             219,375
   UGS Corp., senior sub. note, 144A, 10.00%, 6/01/12 .....................     United States        3,000,000           3,285,000
                                                                                                                      ------------
                                                                                                                         3,551,625
                                                                                                                      ------------

   TRANSPORTATION 2.5%
   Great Lakes Dredge & Dock Corp., senior sub. note, 7.75%,
     12/15/13 .............................................................     United States        1,200,000           1,000,500
   Laidlaw International Inc., senior note, 10.75%, 6/15/11 ...............     United States        3,000,000           3,435,000
                                                                                                                      ------------
                                                                                                                         4,435,500
                                                                                                                      ------------

   UTILITIES 5.8%
   Aquila Inc., senior note, 14.875%, 7/01/12 .............................     United States        2,000,000           2,715,000
   Calpine Corp., senior secured note, 144A, 8.75%, 7/15/13 ...............     United States        2,500,000           1,962,500
   Dynegy Holdings Inc., senior note, 8.75%, 2/15/12 ......................     United States        2,600,000           2,619,500
   Midwest Generation LLC, senior secured note, 8.75%, 5/01/34 ............     United States        3,000,000           3,202,500
                                                                                                                      ------------
                                                                                                                        10,499,500
                                                                                                                      ------------
   TOTAL BONDS (COST $179,303,322)                                                                                     169,188,100
                                                                                                                      ------------

   CONVERTIBLE BOND (COST $1,682,265) 1.1%
   TELECOMMUNICATION EQUIPMENT
   Nortel Networks Corp., cvt., senior note, 4.25%, 9/01/08 ...............        Canada            2,100,000           2,034,374
                                                                                                                      ------------
   TOTAL LONG TERM INVESTMENTS (COST $238,107,128)                                                                     232,948,892
                                                                                                                      ------------



                                                            Annual Report   | 15


FRANKLIN UNIVERSAL TRUST

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)



---------------------------------------------------------------------------------------------------------------------------------
                                                                                    COUNTRY         SHARES              VALUE
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                           
   SHORT TERM INVESTMENT (COST $3,246)
   MONEY FUND
(d)Franklin Institutional Fiduciary Trust Money Market Portfolio .............   United States       3,246          $      3,246
                                                                                                                    ============
   TOTAL INVESTMENTS (COST $238,110,374) 128.8% ..............................                                       232,952,138
   OTHER ASSETS, LESS LIABILITIES (28.8)% ....................................                                       (52,101,740)
                                                                                                                    ------------
   NET ASSETS 100.0% .........................................................                                      $180,850,398
                                                                                                                    ============
CURRENCY ABBREVIATIONS | ZAR - South African Rand


(a)   Non-income producing.

(b)   See Note 10 regarding restricted securities.

(c)   Defaulted securities. See Note 9.

(d)   See Note 8 regarding investments in Franklin Institutional Fiduciary Trust
      Money Market Portfolio.

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


16 | See notes to financial statements. | Annual Report


FRANKLIN UNIVERSAL TRUST

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
August 31, 2004


                                                                                       
Assets:
 Investments in securities:
  Cost - Unaffiliated issuers ......................................................      $ 238,107,128
  Cost - Sweep money fund (Note 8) .................................................              3,246
                                                                                          =============
  Value - Unaffiliated issuers .....................................................        232,948,892
  Value - Sweep money fund (Note 8) ................................................              3,246
 Cash ..............................................................................            485,551
 Receivables:
  Dividends and interest ...........................................................          3,284,572
 Note issuance costs (Note 3) ......................................................            163,271
                                                                                          -------------
      Total assets .................................................................        236,885,532
                                                                                          -------------
Liabilities:
 Payables:
  Affiliates .......................................................................            144,676
  Note (Note 3) ....................................................................         55,000,000
 Distributions to shareholders .....................................................            837,729
 Other liabilities .................................................................             52,729
                                                                                          -------------
      Total liabilities ............................................................         56,035,134
                                                                                          -------------
       Net assets, at value ........................................................      $ 180,850,398
                                                                                          =============
Net assets consist of:
 Undistributed net investment income ...............................................      $     299,620
 Net unrealized appreciation (depreciation) ........................................         (5,159,187)
 Accumulated net realized gain (loss) ..............................................        (69,105,460)
 Capital shares ....................................................................        254,815,425
                                                                                          -------------
       Net assets, at value ........................................................      $ 180,850,398
                                                                                          =============
Net asset value per share ($180,850,398 / 27,924,294 shares outstanding) ...........      $        6.48
                                                                                          =============



                         Annual Report | See notes to financial statements. | 17


FRANKLIN UNIVERSAL TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended August 31, 2004


                                                                                                
Investment income:
 Dividends:
  Unaffiliated issuers .................................................................           $  2,364,609
  Sweep Money Fund (Note 8) ............................................................                 24,699
 Interest ..............................................................................             13,871,021
                                                                                                   ------------
      Total investment income ..........................................................             16,260,329
                                                                                                   ------------
Expenses:
 Management fees (Note 4) ..............................................................              1,710,425
 Transfer agent fees ...................................................................                112,388
 Custodian fees (Note 5) ...............................................................                  9,462
 Reports to shareholders ...............................................................                 34,088
 Professional fees .....................................................................                 71,417
 Trustees' fees and expenses ...........................................................                 17,071
 Amortization of note issuance costs (Note 3) ..........................................                 36,729
 Other .................................................................................                 44,119
                                                                                                   ------------
      Expenses before interest expense .................................................              2,035,699
      Interest expense (Note 3) ........................................................              2,277,000
                                                                                                   ------------
       Total expenses ..................................................................              4,312,699
       Expense reductions (Note 5) .....................................................                   (223)
                                                                                                   ------------
        Net expenses ...................................................................              4,312,476
                                                                                                   ------------
         Net investment income .........................................................             11,947,853
                                                                                                   ------------
Realized and unrealized gains (losses):
 Net realized gain (loss) from:
  Investments ..........................................................................             (7,225,651)
  Foreign currency transactions ........................................................                  5,271
                                                                                                   ------------
        Net realized gain (loss) .......................................................             (7,220,380)
 Net unrealized appreciation (depreciation) on:
  Investments ..........................................................................             27,813,349
  Translation of assets and liabilities denominated in foreign currencies ..............                 (1,510)
                                                                                                   ------------
        Net unrealized appreciation (depreciation) .....................................             27,811,839
                                                                                                   ------------
Net realized and unrealized gain (loss) ................................................             20,591,459
                                                                                                   ------------
Net increase (decrease) in net assets resulting from operations ........................           $ 32,539,312
                                                                                                   ============



18 | See notes to financial statements. | Annual Report


FRANKLIN UNIVERSAL TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 2004 and 2003



                                                                                                   --------------------------------
                                                                                                        2004               2003
                                                                                                   --------------------------------
                                                                                                                
Increase (decrease) in net assets:
 Operations:
  Net investment income .....................................................................      $  11,947,853      $  12,490,828
  Net realized gain (loss) from investments and foreign currency transactions ...............         (7,220,380)       (21,440,868)
  Net unrealized appreciation (depreciation) on investments and translation of assets and
    liabilities denominated in foreign currencies ...........................................         27,811,839         37,996,861
                                                                                                   --------------------------------
      Net increase (decrease) in net assets resulting from operations .......................         32,539,312         29,046,821
 Distributions to shareholders from net investment income ...................................        (10,052,746)       (13,869,575)
 Capital share transactions (Note 2) ........................................................                 --          1,567,138
                                                                                                   --------------------------------
      Net increase (decrease) in net assets .................................................         22,486,566         16,744,384
Net assets:
 Beginning of year ..........................................................................        158,363,832        141,619,448
                                                                                                   --------------------------------
 End of year ................................................................................      $ 180,850,398      $ 158,363,832
                                                                                                   ================================
Undistributed net investment income/distributions in excess of net investment income included
 in net assets:
  End of year ...............................................................................      $     299,620      $  (1,669,032)
                                                                                                   ================================



                         Annual Report | See notes to financial statements. | 19


FRANKLIN UNIVERSAL TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF CASH FLOWS
for the year ended August 31, 2004


                                                                                                         
Cash flow from operating activities:
 Dividends and interest received ....................................................................       $  14,863,913
 Operating expenses paid ............................................................................          (1,972,188)
 Interest expense paid ..............................................................................          (2,277,000)
                                                                                                            -------------
  Cash provided - operations ........................................................................          10,614,725
                                                                                                            -------------
Cash flow from investing activities:
 Purchase of investment securities ..................................................................        (107,303,536)
 Proceeds from disposition of investment securities .................................................         103,950,288
 Sale of short term investment securities, net ......................................................           4,391,492
                                                                                                            -------------
  Cash provided - investments .......................................................................           1,038,244
                                                                                                            -------------
Cash flow from financing activities:
 Payment of note issuance costs .....................................................................             (27,271)
 Distributions to shareholders ......................................................................          (9,857,276)
                                                                                                            -------------
  Cash used - financing .............................................................................          (9,884,547)
                                                                                                            -------------
Net increase (decrease) in cash .....................................................................           1,768,422
Cash at beginning of year ...........................................................................          (1,282,871)
                                                                                                            -------------
Cash at end of year .................................................................................       $     485,551
                                                                                                            =============
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
FOR THE YEAR ENDED AUGUST 31, 2004

Net investment income ...............................................................................       $  11,947,853
 Adjustments to reconcile net investment income to net cash provided by operating activities:
  Amortization income ...............................................................................            (896,645)
  Amortization of note issuance costs ...............................................................              36,729
  Reinvested dividends from Sweep Money Fund ........................................................             (24,699)
  Interest income on bond restructuring and other investment transactions ...........................            (223,760)
  Increase in dividends and interest receivable .....................................................            (251,312)
  Increase in liabilities ...........................................................................              26,559
                                                                                                            -------------
Net cash provided by operating activities ...........................................................       $  10,614,725
                                                                                                            =============



20 | See notes to financial statements. | Annual Report


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 note (the Note) 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 are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing price. Debt securities, other 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 by independent pricing services or
recognized dealers in such securities. Foreign securities are valued at the
close of trading of the foreign exchange or the NYSE, whichever is earlier. If
events occur that materially affect the values of securities after the prices or
foreign exchange rates are determined, but prior to 4:00 p.m. Eastern time or
the close of trading on the NYSE, whichever is earlier, or if market quotations
are deemed not readily available or reliable, the securities (including
restricted securities) will be valued at fair value. Investments in open-end
mutual funds are valued at the closing net asset value. All security valuation
procedures are approved 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, income and expense 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. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.


                                                            Annual Report   | 21


FRANKLIN UNIVERSAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. FOREIGN CURRENCY CONTRACTS

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

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.

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. Fund distributions to
shareholders are determined on a tax basis and may differ from net investment
income and realized gains for financial reporting purposes.

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. Discounts and premiums
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 accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.

G. GUARANTEES AND INDEMNIFICATIONS

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


22 |   Annual Report


FRANKLIN UNIVERSAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST

At August 31, 2004, there were an unlimited number of shares authorized ($.01
par value). During the year ended August 31, 2004, there were no share
transactions; all reinvested distributions were satisfied with previously issued
shares purchased in the open market. During the year ended August 31, 2003,
309,686 shares were issued for $1,567,138 from reinvested distributions.

3. SENIOR FIXED-RATE NOTE

On August 29, 2003, the Fund issued $55 million principal amount of a new class
of a five-year senior note (the Note). The Note is a general unsecured
obligation of the Fund and ranks senior to Trust shares and all existing or
future unsecured indebtedness of the Fund.

The Note bears interest, payable semi-annually, at the rate of 4.14% per year,
to maturity on August 29, 2008. The Fund may prepay the Note, in whole or in
part, at any time subject to a prepayment premium. The Note was issued in a
private placement, and is not available for resale. The fair value of the Note
approximates the principal amount as the Fund may repay the Note at any time
prior to maturity. 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, 2004.

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

4. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers or directors of the
following entities:

--------------------------------------------------------------------------------
ENTITY                                                  AFFILIATION
--------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers)                       Investment manager
Franklin Templeton Services, LLC (FT Services)          Administrative manager

A. MANAGEMENT FEE

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

B. ADMINISTRATIVE FEES

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


                                                            Annual Report   | 23


FRANKLIN UNIVERSAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended August 31, 2004, the
custodian fees were reduced as noted in the Statement of Operations.

6. INCOME TAXES

At August 31, 2004, the Fund had tax basis capital losses of $66,131,276 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
   2011 ....................................    34,372,527
   2012 ....................................    18,676,213
                                               -----------
                                               $66,131,276
                                               ===========

At August 31, 2004, the Fund had deferred capital losses occurring subsequent to
October 31, 2003 of $3,019,069. For tax purposes, such losses will be reflected
in the year ending August 31, 2005.

The tax character of distributions paid during the years ended August 31, 2004
and 2003, was as follows:

                                                  --------------------------
                                                     2004            2003
                                                  --------------------------
Distributions paid from ordinary income ......    $10,052,746    $13,869,575
                                                  ==========================

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

At August 31, 2004, the cost of investments, net unrealized appreciation
(depreciation) and undistributed ordinary income for income tax purposes were as
follows:

Cost of investments ......................................        $ 238,199,768
                                                                  =============
Unrealized appreciation ..................................           53,717,340
Unrealized depreciation ..................................          (58,964,970)
                                                                  -------------
Net unrealized appreciation (depreciation) ...............        $  (5,247,630)
                                                                  =============

Distributable earnings-undistributed ordinary income .....        $   1,982,194
                                                                  =============

7. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
year ended August 31, 2004 aggregated $107,303,536 and $103,928,552,
respectively.


24 |   Annual Report


FRANKLIN UNIVERSAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. INVESTMENT IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

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

9. CREDIT RISK AND DEFAULTED SECURITIES

The Fund has 70% of its portfolio invested in below investment grade and
comparable quality unrated high yield securities, which tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer.

The Fund held defaulted securities and/or other securities for which the income
has been deemed uncollectible. At August 31, 2004, the value of these securities
was $6,406,729, representing 2.8% of the Fund's portfolio. The Fund discontinues
accruing income on securities for which income has been deemed uncollectible and
provides an estimate for losses on interest receivable. For information as to
specific securities, see the accompanying Statement of Investments.

10. RESTRICTED SECURITIES

At August 31, 2004, investments in securities included issues that are
restricted and illiquid. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. At August 31, 2004, the Fund held
investments in restricted and illiquid securities that were valued under
approved methods by the Trustees, as follows:



-------------------------------------------------------------------------------------------------------------------------------
   PRINCIPAL                                                                      ACQUISITION
AMOUNT/WARRANTS     ISSUER                                                            DATE               COST            VALUE
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                           
   $765,361         Atherton Franchise Capital, LP, 13.073%,
                        12/01/08 ..............................................      4/28/94           $765,361        $114,804
      3,000         Poland Telecom Finance, wts., 144A,
                        12/01/07 ..............................................     11/24/97             18,000              --
                                                                                                                       --------
                    TOTAL RESTRICTED SECURITIES (.06% OF NET ASSETS) ................................................  $114,804
                                                                                                                       ========



                                                            Annual Report   | 25


FRANKLIN UNIVERSAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. REGULATORY MATTERS

MASSACHUSETTS ADMINISTRATIVE PROCEEDING

On September 20, 2004, Franklin Resources, Inc. (Franklin Resources, Inc. and
its subsidiaries are referred to collectively as the "Company") announced that
an agreement has been reached by two of its subsidiaries, Franklin Advisers,
Inc. ("Franklin Advisers") and Franklin Templeton Alternative Strategies, Inc.
("FTAS"), with the Securities Division of the Office of the Secretary of the
Commonwealth of Massachusetts (the "State of Massachusetts") related to an
administrative complaint filed on February 4, 2004. The administrative complaint
addressed one instance of market timing that was also a subject of the August 2,
2004 settlement that Franklin Advisers reached with the SEC, as described below.

Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers and FTAS have consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts. The consent order has multiple sections, including
"Statements of Fact" and "Violations of Massachusetts Securities Laws." The
Company admitted the "Statements of Fact." The Company did not admit or deny the
"Violations of the Massachusetts Securities Laws." While Franklin Advisers and
FTAS did not admit or deny engaging in any wrongdoing, the Company believes that
it is in its best interest and the interests of its funds' shareholders to
settle this issue now and move forward.

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT

On August 2, 2004, the Company announced that an agreement has been reached by
Franklin Advisers with the SEC that resolves the issues resulting from the SEC's
investigation of market timing activity and the SEC issued an "Order instituting
administrative and cease-and-desist proceedings pursuant to sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and sections 9(b) and 9(f) of the
Investment Company Act of 1940, making findings and imposing remedial sanctions
and a cease-and-desist order" (the "Order"). The SEC's Order concerns the
activities of a limited number of third parties that ended in 2000 and those
that are the subject of the Massachusetts administrative complaint described
above.

Under the terms of the SEC's Order, pursuant to which Franklin Advisers neither
admits nor denies any wrongdoing, Franklin Advisers has agreed to pay $50
million, of which $20 million is a civil penalty, to be distributed to
shareholders of certain funds in accordance with a plan to be developed by an
Independent Distribution Consultant. At this time, it is unclear which funds
will receive distributions or which shareholders of any particular fund will
receive distributions. The SEC Order also requires Franklin Advisers to, among
other things, enhance and periodically review compliance policies and
procedures.


26 |   Annual Report


FRANKLIN UNIVERSAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. REGULATORY MATTERS (CONTINUED)

OTHER GOVERNMENTAL INVESTIGATIONS

As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees have been providing documents and information in response
to these requests and subpoenas. In addition, the Company has responded to
requests for similar kinds of information from regulatory authorities in some of
the foreign countries where the Company conducts its global asset management
business.

The staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against Franklin Advisers and Franklin
Templeton Distributors, Inc. ("FTDI") concerning payments to securities dealers
who sell fund shares (commonly referred to as "revenue sharing"). The staff of
the California Attorney General's Office ("CAGO") also has advised the Company
that the California Attorney General is authorized to bring a civil action
against the Company and FTDI arising from the same events. Even though the
Company currently believes that the charges the SEC staff and CAGO staff are
contemplating are unwarranted, it also believes that it is in the best interest
of the Company's and funds' shareholders to resolve these issues voluntarily, to
the extent the Company can reasonably do so. The Company continues to have
discussions towards resolving these governmental investigations.

OTHER LEGAL PROCEEDINGS

The Company, in addition to other entities within Franklin Templeton
Investments, including certain of its subsidiaries, other funds, and current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Massachusetts
administrative complaint described above. The lawsuits are styled as class
actions or derivative actions on behalf of either the named funds or the
Company.


                                                            Annual Report   | 27


FRANKLIN UNIVERSAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS (CONTINUED)

Various subsidiaries of the Company have also been named in multiple lawsuits
filed in state courts in Illinois alleging breach of duty with respect to
valuation of the portfolio securities of certain funds managed by such
subsidiaries.

In addition, the Company and certain of its subsidiaries, as well as certain
current and former officers, employees, and directors have been named in
multiple lawsuits alleging violations of various securities laws and pendent
state law claims relating to the disclosure of directed brokerage payments
and/or payment of allegedly excessive advisory, commission, and distribution
fees. These lawsuits are styled as class actions and derivative actions brought
on behalf of certain funds.

The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.

The Company cannot predict with certainty the eventual outcome of the foregoing
governmental investigations or class actions or other lawsuits. If the Company
finds that it bears responsibility for any unlawful or inappropriate conduct
that caused losses to the Trust, it is committed to making the Trust or its
shareholders whole, as appropriate.


28 |   Annual Report



FRANKLIN UNIVERSAL TRUST

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN UNIVERSAL TRUST

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statement 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 (hereafter referred to as the "Fund") at August 31, 2004, 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 then ended and the financial highlights for
each of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2004 by
correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
October 8, 2004


                                                            Annual Report   | 29


FRANKLIN UNIVERSAL TRUST

TAX DESIGNATION (UNAUDITED)

Under Section 854(b)(2) of the Internal Revenue Code (Code), the Fund hereby
designates up to a maximum of $2,218,413 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
August 31, 2004. In January 2005, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2004. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their individual income tax
returns.

Under Section 854(b)(2) of the Code, the Fund hereby designates 16.95% of the
ordinary income dividends as income qualifying for the dividends received
deduction for the fiscal year ended August 31, 2004.


30 |   Annual Report


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 U.S. registered 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.

INDEPENDENT BOARD MEMBERS



------------------------------------------------------------------------------------------------------------------------------------
                                                                           NUMBER OF PORTFOLIOS IN
                                                      LENGTH OF            FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS             POSITION            TIME SERVED          BY BOARD MEMBER*             OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            
HARRIS J. ASHTON (72)             Trustee             Since 1988           140                          Director, Bar-S Foods
One Franklin Parkway                                                                                    (meat packing company).
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 (76)            Trustee             Since 2000           49                           None
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS); and FORMERLY,
member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and Chief Counsel,
California Department of Transportation.
------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (72)          Trustee             Since 1989           141                          None
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (52)             Trustee             Since January        96                           Director, Amerada Hess
One Franklin Parkway                                  2004                                              Corporation (exploration and
San Mateo, CA 94403-1906                                                                                refining of oil and gas);
                                                                                                        H.J Heinz Company (processed
                                                                                                        foods and allied products);
                                                                                                        RTI International Metals,
                                                                                                        Inc. (manufacture and
                                                                                                        distribution of titanium);
                                                                                                        and Canadian National
                                                                                                        Railway (railroad).
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (75)            Trustee             Since 1988           113                          Director, The California
One Franklin Parkway                                                                                    Center for Land Recycling
San Mateo, CA 94403-1906                                                                                (redevelopment).
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
------------------------------------------------------------------------------------------------------------------------------------



                                                            Annual Report   | 31




------------------------------------------------------------------------------------------------------------------------------------
                                                                           NUMBER OF PORTFOLIOS IN
                                                      LENGTH OF            FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS             POSITION            TIME SERVED          BY BOARD MEMBER*             OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            
GORDON S. MACKLIN (76)            Trustee             Since 1993           140                          Director, White Mountains
One Franklin Parkway                                                                                    Insurance Group, Ltd.
San Mateo, CA 94403-1906                                                                                (holding company); Martek
                                                                                                        Biosciences Corporation;
                                                                                                        MedImmune, Inc.
                                                                                                        (biotechnology); and
                                                                                                        Overstock.com (Internet
                                                                                                        services); and FORMERLY,
                                                                                                        Director, MCI Communication
                                                                                                        Corporation (subsequently
                                                                                                        known as MCI WorldCom, Inc.
                                                                                                        and WorldCom, Inc.)
                                                                                                        (communications services)
                                                                                                        (1988-2002) and Spacehab,
                                                                                                        Inc. (aerospace services)
                                                                                                        (1994-2003).
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation (financial
services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association of
Securities Dealers, Inc. (1970-1987).
------------------------------------------------------------------------------------------------------------------------------------


INTERESTED BOARD MEMBERS AND OFFICERS



------------------------------------------------------------------------------------------------------------------------------------
                                                                           NUMBER OF PORTFOLIOS IN
                                                      LENGTH OF            FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS             POSITION            TIME SERVED          BY BOARD MEMBER*             OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            
**EDWARD B. JAMIESON (56)         Trustee,            Trustee and          8                            None
One Franklin Parkway              President and       President since
San Mateo, CA 94403-1906          Chief Executive     1993 and Chief
                                  Officer-            Executive Officer
                                  Investment          -Investment
                                  Management          Management
                                                      since 2002
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and Portfolio Manager, Franklin Advisers, Inc.; and officer and/or trustee, as the case may be, of other
subsidiaries of Franklin Resources, Inc. and of five of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (71)         Trustee and         Trustee since        140                          None
One Franklin Parkway              Chairman of         1988 and
San Mateo, CA 94403-1906          the Board           Chairman of the
                                                      Board since 1993
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member-Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------



32 |   Annual Report




------------------------------------------------------------------------------------------------------------------------------------
                                                                           NUMBER OF PORTFOLIOS IN
                                                      LENGTH OF            FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS             POSITION            TIME SERVED          BY BOARD MEMBER*             OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            
RUPERT H. JOHNSON, JR. (64)       Trustee and         Trustee and          123                          None
One Franklin Parkway              Senior Vice         Senior Vice
San Mateo, CA 94403-1906          President           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; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59)              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 49 of
the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52)               Chief               Since July 2004      Not Applicable               None
One Franklin Parkway              Compliance
San Mateo, CA 94403-1906          Officer
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin Resources, Inc.;
and formerly, Director of Compliance, Franklin Resources, Inc. (1994-2001).
------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (42)              Treasurer           Since July 2004      Not Applicable               None
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 34 of the investment companies in Franklin Templeton Investments; and formerly, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (44)           Vice President      Since 1995           Not Applicable               None
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive 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; 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 or trustee, as the case may
be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton
Investments.
------------------------------------------------------------------------------------------------------------------------------------



                                                            Annual Report   | 33




------------------------------------------------------------------------------------------------------------------------------------
                                                                           NUMBER OF PORTFOLIOS IN
                                                      LENGTH OF            FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS             POSITION            TIME SERVED          BY BOARD MEMBER*             OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            
JIMMY D. GAMBILL (57)             Senior Vice         Since 2002           Not Applicable               None
500 East Broward Blvd.            President and
Suite 2100                        Chief Executive
Fort Lauderdale, FL 33394-3091    Officer-
                                  Finance and
                                  Administration
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (57)                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.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 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 (56)             Vice President      Since 2000           Not Applicable               None
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 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, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
------------------------------------------------------------------------------------------------------------------------------------



34 |   Annual Report




------------------------------------------------------------------------------------------------------------------------------------
                                                                           NUMBER OF PORTFOLIOS IN
                                                      LENGTH OF            FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS             POSITION            TIME SERVED          BY BOARD MEMBER*             OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            
MURRAY L. SIMPSON (67)            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, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 51 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).
------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (52)              Chief Financial     Since May 2004       Not Applicable               None
500 East Broward Blvd.            Officer and
Suite 2100                        Chief
Fort Lauderdale, FL 33394-3091    Accounting
                                  Officer

------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Senior Vice President, Franklin Templeton Services,
LLC; and FORMERLY, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
------------------------------------------------------------------------------------------------------------------------------------


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

**    Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be
      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 Fund's
      adviser and distributor. Edward B. Jamieson is considered to be an
      interested person of the Trust under the federal securities laws due to
      his position as an officer of Franklin Advisers, Inc., which is the
      Trust's adviser.

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

THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.


                                                            Annual Report   | 35


FRANKLIN UNIVERSAL TRUST

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the 12-month period beginning July 1, 2003, and
ending June 30, 2004.

QUARTERLY STATEMENT OF INVESTMENTS

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

CERTIFICATIONS

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

In addition, the Fund's Chief Executive Officer - Finance and Administration and
Chief Financial Officer and Chief Accounting Officer are required by the rules
of the SEC to provide certain certifications with respect to the Fund's Form
N-CSR and Form N-CSRS (which includes the Fund's annual and semi-annual reports
to shareholders) that are filed semi-annually with the SEC. The Fund has filed
such certifications with its Form N-CSRS for the six months ended February 29,
2004. Additionally, the Fund expects to file, on or before October 29, 2004,
such certifications with its Form N-CSR for the year ended August 31, 2004.


36 |   Annual Report


LITERATURE REQUEST

TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT 1-800/DIAL BEN(R)
(1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

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

GLOBAL

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

GROWTH

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

VALUE

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

BLEND

Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund(4)

SECTOR

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

ASSET ALLOCATION

Franklin Templeton Corefolio
  Allocation Fund
Franklin Templeton Founding Funds
  Allocation Fund
Franklin Templeton Perspectives
  Allocation Fund

TARGET FUNDS

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

INCOME

Franklin Adjustable U.S. Government Securities Fund(5)
Franklin's AGE High Income Fund
Franklin Federal Money Fund(5), (6)
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust(3)
Franklin Income Fund
Franklin Limited Maturity
  U.S. Government Securities Fund(5), (7)
Franklin Money Fund(5), (6)
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund

TAX-FREE INCOME(8)

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(9)
Tax-Exempt Money Fund(5), (6)

LIMITED-TERM FUNDS

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

INTERMEDIATE-TERM FUNDS

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

STATE-SPECIFIC

Alabama
Arizona
California(10)
Colorado
Connecticut
Florida(10)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(9)
Michigan(9)
Minnesota(9)
Missouri
New Jersey
New York(10)
North Carolina
Ohio(9)
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance
  Products Trust(11)

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

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

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

(4)   Upon reaching approximately $350 million in assets, the fund intends to
      close to all investors.

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

(6)   Although the fund seeks to preserve the value of your investment at $1.00
      per share, it is possible to lose money by investing in the fund.

(7)   Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
      Effective 9/1/04, the fund's name changed; its investment goal and
      strategy remained the same.

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

(9)   Portfolio of insured municipal securities.

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

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

09/04                                              Not part of the annual report


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


ANNUAL REPORT

FRANKLIN UNIVERSAL TRUST

INVESTMENT MANAGER

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

TRANSFER AGENT

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

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

FUT A2004 10/04

      ITEM 2. CODE OF ETHICS.

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

(c) N/A

(d) N/A

(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

      ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

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

(2) The audit committee financial expert is Frank W. T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

      ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a)      Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $20,816 for the fiscal year ended August 31, 2004 and $19,271 for the
fiscal year ended August 31, 2003.

(b)      Audit-Related Fees
The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4 were $12,500 for
the fiscal year ended August 31, 2004 and $12,500 for the fiscal year ended
August 31, 2003. The services for which these fees were paid included
attestation services.

The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of the their financial
statements were $45,000 for the fiscal year ended August 31, 2004 and $3,614 for
the fiscal year ended August 31, 2003. The services for which these fees were
paid included attestation services.

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

There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.

(d)      All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $109 for the fiscal year ended August 31, 2004
and $0 for the fiscal year ended August 31, 2003. The services for which these
fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $99,891 for the fiscal year ended August
31, 2004 and $0 for the fiscal year ended August 31, 2003. The services for
which these fees were paid included review of materials provided to the fund
Board in connection with the investment management contract renewal process.

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

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

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

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

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

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

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

(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $157,500 for the fiscal year ended August 31, 2004 and $16,114
for the fiscal year ended August 31, 2003.

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

      ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
      Member of the Audit Committee are: Robert F. Carlson, S. Joseph
Fortunato and Frank W.T. LaHaye

      ITEM 6. SCHEDULE OF INVESTMENTS. N/A

      ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. The Board has delegated the authority to vote
proxies related to the portfolio securities held by the Fund to the Fund's
manager Franklin Advisers, Inc. (Advisers) in accordance with the Proxy Voting
Policies and Procedures (Policies) adopted by the manager.

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

To assist it in analyzing proxies, the manager subscribes to Institutional
Shareholder Services (ISS), an unaffiliated third party corporate governance
research service that provides in-depth analyses of shareholder meeting agendas,
vote recommendations, recordkeeping and vote disclosure services. In addition,
the manager subscribes to Glass Lewis & Co., LLC (Glass Lewis), an unaffiliated
third party analytical research firm, to receive analyses and vote
recommendations on the shareholder meetings of publicly held U.S. companies.
Although ISS' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from ISS, Glass Lewis or any other third party to be
determinative of the manager's ultimate decision. The manager votes proxies
solely in the interests of the Fund and its shareholders. As a matter of policy,
the officers, trustees and employees of the Fund, the manager and the Proxy
Group will not be influenced by outside sources whose interests conflict with
the interests of the Fund and its shareholders. All conflicts are resolved in
the interests of the manager's clients. In situations where the manager
perceives a material conflict of interest, the manager may: disclose the
conflict to the Fund's board of trustees; defer to the voting recommendation of
the Fund's board of trustees, ISS, Glass Lewis or those of another independent
third party provider of proxy services; or take such other action in good faith
(in consultation with counsel) which would protect the interests of the Fund and
its shareholders.

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

MANAGER'S PROXY VOTING POLICIES AND PRINCIPLES

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

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

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

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

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

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

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

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

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

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

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

Shareholders may view the complete Policies on-line at franklintempleton.com.
Alternatively, shareholders may request copies of the Policies free of charge by
calling the Proxy Group collect at 1-954-847-2268 or by sending a written
request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite
1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Fund's
proxy voting records are available on-line at franklintempleton.com and posted
on the SEC website at WWW.SEC.GOV and reflect the twelve-month period beginning
July 1, 2003, and ending June 30, 2004.

      ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A

      ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.

      ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

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

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

ITEM 11. EXHIBITS.

(A) Code of Ethics

(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

                                   SIGNATURES

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

FRANKLIN UNIVERSAL TRUST

By /s/Jimmy D. Gambill
      Chief Executive Officer - Finance and Administration
Date    October 29, 2004

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


By /s/Jimmy D. Gambill
      Chief Executive Officer - Finance and Administration
Date    October 29, 2004


By /s/Galen G. Vetter
      Chief Financial Officer
Date    October 29, 2004