n-qfutpe053110.htm - Generated by SEC Publisher for SEC Filing

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF

REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-05569

Franklin Universal Trust

(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906

(Address of principal executive offices) (Zip code)

Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906

(Name and address of agent for service)

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

Date of fiscal year end: 8/31

Date of reporting period: 05/31/10

Item 1. Schedule of Investments.

Franklin Universal Trust

Statement of Investments, May 31, 2010 (unaudited)


	Country	Shares		Value

Common Stocks 34.6%
Automobiles & Components 0.0%^a
^b,cHarvard Industries Inc.	United States		109,618	$	1,096


Commercial & Professional Services 0.0%
^b,dVS Holdings Inc.	United States		181,875		—


Energy 1.2%
Spectra Energy Corp.	United States		92,350		1,847,924


Media 0.5%
^bCharter Communications Inc., A	United States		4,260		153,360
^bDex One Corp.	United States		32,496		665,518

					818,878

Utilities 32.9%
Alliant Energy Corp.	United States		85,000		2,731,900
American Electric Power Co. Inc.	United States		75,000		2,397,000
Atmos Energy Corp.	United States		45,000		1,220,400
CenterPoint Energy Inc.	United States		276,600		3,767,292
Consolidated Edison Inc.	United States		42,000		1,788,780
Dominion Resources Inc.	United States		100,000		3,896,000
Duke Energy Corp.	United States		160,000		2,553,600
Edison International	United States		75,000		2,427,000
Entergy Corp.	United States		50,000		3,753,500
Exelon Corp.	United States		70,000		2,702,000
FirstEnergy Corp.	United States		50,000		1,760,500
FPL Group Inc.	United States		50,000		2,496,500
Great Plains Energy Inc.	United States		32,600		572,130
NV Energy Inc.	United States		80,000		943,200
PG&E Corp.	United States		50,000		2,075,000
Pinnacle West Capital Corp.	United States		70,000		2,457,700
PPL Corp.	United States		60,000		1,548,600
Progress Energy Inc.	United States		45,000		1,736,550
Public Service Enterprise Group Inc.	United States		60,000		1,837,800
Sempra Energy	United States		48,500		2,231,000
The Southern Co.	United States		120,000		3,924,000
Westar Energy Inc.	United States		27,300		600,600
Wisconsin Energy Corp.	United States		20,000		980,000
Xcel Energy Inc.	United States		60,000		1,229,400

					51,630,452

Total Common Stocks (Cost $48,434,490)					54,298,350

Preferred Stocks (Cost $214,420) 0.3%
Diversified Financials 0.3%
^eGMAC Inc., 7.00%, pfd., 144A	United States		604		454,359

Principal

Amount^f

^gSenior Floating Rate Interests 1.1%

Materials 0.6%

Novelis Corp., U.S. Term Loan, 2.30% - 2.54%, 7/07/14

United States

992,376

937,381

Utilities 0.5%

^hTexas Competitive Electric Holdings Co. LLC, Term Loan, 5.75%, 10/10/14

United States

1,000,000

765,893

Total Senior Floating Rate Interests (Cost $1,784,876)

1,703,274

Quarterly Statement of Investments See Notes to Statements of Investments.

Franklin Universal Trust

Statement of Investments, May 31, 2010 (unaudited) (continued)


		Principal
		Amount^f

Corporate Bonds 89.0%
Automobiles & Components 3.8%
^eCooper-Standard Automotive Inc., senior note, 144A, 8.50%, 5/01/18	United States	$	400,000	$	396,000
Ford Motor Credit Co. LLC,
7.80%, 6/01/12	United States		2,000,000		2,040,730
senior note, 7.00%, 4/15/15	United States		1,000,000		990,774
senior note, 8.125%, 1/15/20	United States		500,000		501,299
^eTRW Automotive Inc., senior note, 144A, 7.25%, 3/15/17	United States		2,000,000		1,950,000

					5,878,803

Capital Goods 6.4%
^eAllison Transmission Inc., senior note, 144A, 11.00%, 11/01/15	United States		2,000,000		2,100,000
Arvinmeritor Inc., senior note, 10.625%, 3/15/18	United States		400,000		411,000
Case New Holland Inc., senior note,
7.125%, 3/01/14	United States		1,000,000		1,005,000
^e144A, 7.75%, 9/01/13	United States		500,000		511,250
Greenbrier Cos. Inc., senior note, 8.375%, 5/15/15	United States		500,000		470,625
^eLibbey Glass Inc., senior secured note, 144A, 10.00%, 2/15/15	United States		600,000		625,500
Manitowoc Co. Inc., senior note, 9.50%, 2/15/18	United States		600,000		592,500
Oshkosh Corp., senior note,
8.25%, 3/01/17	United States		200,000		207,000
8.50%, 3/01/20	United States		200,000		208,000
^eRBS Global & Rexnord Corp., senior note, 144A, 8.50%, 5/01/18	United States		1,300,000		1,244,750
RSC Equipment Rental Inc./RSC Holdings III LLC, senior note, 9.50%, 12/01/14	United States		1,700,000		1,623,500
^eThermon Industries Inc., senior secured note, 144A, 9.50%, 5/01/17	United States		1,000,000		992,500

					9,991,625

Commercial & Professional Services 0.7%
^e,jJohnsonDiversey Holdings Inc., senior note, 144A, PIK, 10.50%, 5/15/20	United States		1,049,875		1,133,865


Consumer Durables & Apparel 3.5%
Jarden Corp., senior sub. note, 7.50%, 5/01/17	United States		2,000,000		1,970,000
Jostens IH Corp., senior sub. note, 7.625%, 10/01/12	United States		400,000		401,950
KB Home, senior note,
6.25%, 6/15/15	United States		700,000		645,750
7.25%, 6/15/18	United States		800,000		740,000
Phillips-Van Heusen Corp., senior note, 7.375%, 5/15/20	United States		200,000		201,000
Standard Pacific Corp., senior note, 8.375%, 5/15/18	United States		400,000		385,000
Visant Holding Corp., senior note, 8.75%, 12/01/13	United States		1,100,000		1,113,750

					5,457,450

Consumer Services 5.6%
^e,JFontainebleau Las Vegas, 144A, 10.25%, 6/15/15	United States		1,600,000		26,000
Harrah’s Operating Co. Inc., senior secured note, 11.25%, 6/01/17	United States		1,500,000		1,582,500
MGM MIRAGE,
senior note, 6.875%, 4/01/16	United States		1,200,000		924,000
senior note, 7.50%, 6/01/16	United States		1,200,000		966,000
^esenior secured note, 144A, 9.00%, 3/15/20	United States		400,000		403,000
^eNorwegian Cruise Line Ltd., senior secured note, 144A, 11.75%, 11/15/16	United States		1,500,000		1,612,500
Pinnacle Entertainment Inc.,
^esenior note, 144A, 8.625%, 8/01/17	United States		500,000		507,500
senior sub. note, 8.25%, 3/15/12	United States		323,000		323,000
senior sub. note, 7.50%, 6/15/15	United States		700,000		654,500
^eShingle Springs Tribal Gaming, senior note, 144A, 9.375%, 6/15/15	United States		700,000		549,500
^jStation Casinos Inc.,
senior note, 7.75%, 8/15/16	United States		1,100,000		75,625
senior sub. note, 6.50%, 2/01/14	United States		100,000		1,375
senior sub. note, 6.875%, 3/01/16	United States		1,200,000		16,500
^eUniversal City Development,
senior note, 144A, 8.875%, 11/15/15	United States		800,000		796,000

Franklin Universal Trust

Statement of Investments, May 31, 2010 (unaudited) (continued)


		Principal
		Amount^f

senior sub. note, 144A, 10.875%, 11/15/16	United States	$	400,000	$	406,000

					8,844,000

Diversified Financials 2.4%
CIT Group Inc., senior secured sub. bond, 7.00%, 5/01/17	United States		1,500,000		1,361,250
GMAC Inc.,
senior note, 6.875%, 8/28/12	United States		2,000,000		1,985,000
sub. note, 8.00%, 12/31/18	United States		500,000		475,000

					3,821,250

Energy 14.1%
^eAntero Resources Finance, senior note, 144A, 9.375%, 12/01/17	United States		1,000,000		985,000
Berry Petroleum Co., senior note, 10.25%, 6/01/14	United States		800,000		856,000
Chesapeake Energy Corp., senior note, 6.25%, 1/15/18	United States		2,000,000		1,995,000
Compagnie Generale de Geophysique-Veritas, senior note,
7.50%, 5/15/15	France		400,000		390,000
7.75%, 5/15/17	France		600,000		573,000
^eConsol Energy Inc., senior note, 144A,
8.00%, 4/01/17	United States		300,000		306,375
8.25%, 4/01/20	United States		300,000		307,875
Copano Energy LLC, senior note, 8.125%, 3/01/16	United States		1,000,000		970,000
^eCrosstex Energy LP/Crosstex Energy Finance Corp., senior note, 144A, 8.875%, 2/15/18	United States		300,000		297,000
Denbury Resources Inc., senior sub. note, 8.25%, 2/15/20	United States		500,000		518,750
El Paso Corp., senior note, 12.00%, 12/12/13	United States		1,200,000		1,392,000
enterprise Products Operating LLC, junior sub. note, FRN, 7.034%, 1/15/68	United States		1,200,000		1,102,571
^eExpro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		1,100,000		1,072,500
^eGeneral Maritime Corp., senior note, 144A, 12.00%, 11/15/17	United States		700,000		714,875
^eHolly Corp., senior note, 144A, 9.875%, 6/15/17	United States		400,000		406,000
^eLinn Energy Corp., senior note, 144A, 8.625%, 4/15/20	United States		1,000,000		995,000
Mariner Energy Inc., senior note, 7.50%, 4/15/13	United States		600,000		612,000
MarkWest Energy Partners LP, senior note, 6.875%, 11/01/14	United States		1,500,000		1,440,000
^eMartin Midstream Partners LP, senior note, 144A, 8.875%, 4/01/18	United States		400,000		388,000
^eOPTI Canada Inc., senior secured note, 144A, 9.00%, 12/15/12	Canada		400,000		404,000
Penn Virginia Resource, senior note, 8.25%, 4/15/18	United States		200,000		197,000
Plains Exploration & Production Co., senior note, 7.625%, 6/01/18	United States		1,900,000		1,781,250
Quicksilver Resources Inc., senior note, 8.25%, 8/01/15	United States		1,500,000		1,470,000
^eSandRidge Energy Inc., senior note, 144A, 8.00%, 6/01/18	United States		1,900,000		1,710,000
Tesoro Corp., senior note, 6.50%, 6/01/17	United States		1,500,000		1,342,500

					22,226,696

Food & Staples Retailing 0.9%
Rite Aid Corp., senior secured note, 9.75%, 6/12/16	United States		1,000,000		1,066,250
SUPERVALU Inc., senior note, 8.00%, 5/01/16	United States		400,000		396,000

					1,462,250

Food, Beverage & Tobacco 2.8%
^eCEDC Finance Corp. International Inc., senior secured note, 144A, 9.125%, 12/01/16	United States		700,000		691,250
^eCott Beverages Inc., senior note, 144A, 8.375%, 11/15/17	United States		700,000		708,750
Dole Food Co. Inc., senior secured note, 13.875%, 3/15/14	United States		676,000		784,160
^eJBS USA LLC, senior note, 144A, 11.625%, 5/01/14	United States		1,200,000		1,324,500
^ePinnacle Foods Finance LLC, senior note, 144A, 9.25%, 4/01/15	United States		800,000		802,000

					4,310,660

Health Care Equipment & Services 7.4%
FMC Finance III SA, senior note, 6.875%, 7/15/17	Germany		1,500,000		1,545,000
^eFresenius US Finance II, senior note, 144A, 9.00%, 7/15/15	Germany		700,000		766,500
HCAInc,
senior note, 6.50%, 2/15/16	United States		2,500,000		2,293,750
ⁱsenior secured note, PIK, 9.625%, 11/15/16	United States		1,051,000		1,108,805
Tenet Healthcare Corp., senior note, 7.375%, 2/01/13	United States		1,700,000		1,708,500
ⁱUnited Surgical Partners International Inc., senior sub. note, PIK, 9.25%, 5/01/17	United States		2,000,000		1,995,000

Franklin Universal Trust

Statement of Investments, May 31, 2010 (unaudited) (continued)


		Principal
		Amount^f

^g,JUS Oncology Holdings Inc., senior note, PIK, FRN, 7.178%, 3/15/12	United States	$	2,397,000	$	2,178,226

					11,595,781

Materials 9.8%
^eBuilding Materials Corp. of America, senior note, 144A, 7.50%, 3/15/20	United States		500,000		491,250
CF Industries Holdings Inc., senior note, 6.875%, 5/01/18	United States		600,000		600,000
Freeport-McMoRan Copper & Gold Inc., senior note, 8.375%, 4/01/17	United States		1,500,000		1,633,386
Huntsman International LLC, senior sub. note, 7.875%, 11/15/14	United States		2,000,000		1,920,000
^elneos Group Holdings PLC, senior secured note, 144A, 8.50%, 2/15/16	United Kingdom		1,500,000		1,143,750
^eLBI Escrow Corp., senior secured note, 144A, 8.00%, 11/01/17	United States		400,000		408,000
^eMacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17	United States		1,800,000		1,813,500
Nalco Co., senior sub. note, 8.875%, 11/15/13	United States		1,500,000		1,533,750
NewPage Corp., senior secured note, 11.375%, 12/31/14	United States		1,500,000		1,410,000
Novelis Inc., senior note,
7.25%, 2/15/15	Canada		300,000		282,690
11.50%, 2/15/15	Canada		250,000		272,500
Owens-Brockway Glass Container Inc., senior note, 6.75%, 12/01/14	United States		1,500,000		1,511,250
Solo Cup Co.,
senior secured note, 10.50%, 11/01/13	United States		300,000		306,750
senior sub. note, 8.50%, 2/15/14	United States		1,000,000		927,500
Teck Resources Ltd., senior secured note, 10.75%, 5/15/19	Canada		900,000		1,086,134

					15,340,460

Media 10.4%
^eCablevision Systems Corp., senior note, 144A, 8.625%, 9/15/17	United States		500,000		505,000
^eCCH II LLC/CCH II Capital Corp., senior note, 144A, 13.50%, 11/30/16	United States		1,700,134		1,940,278
^eCCO Holdings LLC, senior note, 144A, 8.125%, 4/30/20	United States		400,000		398,000
^eClear Channel Worldwide Holdings Inc., senior note,
A, 144A, 9.25%, 12/15/17	United States		200,000		203,500
B, 144A, 9.25%, 12/15/17	United States		600,000		613,500
EchoStar DBS Corp., senior note, 7.125%, 2/01/16	United States		1,500,000		1,477,500
Lamar Media Corp., senior sub. note, B, 6.625%, 8/15/15	United States		2,000,000		1,890,000
LIN Television Corp., senior sub. note, 6.50%, 5/15/13	United States		1,500,000		1,460,625
^eLive Nation Entertainment Inc., senior note, 144A, 8.125%, 5/15/18	United States		1,000,000		995,000
^eMedia General Inc., senior secured note, 144A, 11.75%, 2/15/17	United States		800,000		776,000
^kRadio One Inc., senior sub. note, 6.375%, 2/15/13	United States		1,700,000		1,445,000
^eSinclair Television Group Inc., senior secured note, 144A, 9.25%, 11/01/17	United States		1,200,000		1,194,000
^e,iUnivision Communications Inc., senior note, 144A, PIK, 10.50%, 3/15/15	United States		1,107,756		925,238
^eUPC Germany GmbH, senior secured bond, 144A, 8.125%, 12/01/17	Germany		1,200,000		1,193,989
^eUPC Holding BV, senior note, 144A, 9.875%, 4/15/18	Netherlands		300,000		304,500
WMG Acquisition Corp., senior secured note, 9.50%, 6/15/16	United States		900,000		936,000

					16,258,130

Pharmaceuticals, Biotechnology & Life Sciences 1.1%
^eMylan Inc., senior note, 144A, 7.875%, 7/15/20	United States		1,000,000		1,006,250
^eTalecris Biotherapeutics Holdings Corp., senior note, 144A, 7.75%, 11/15/16	United States		800,000		784,000

					1,790,250

Real Estate 0.9%
FelCor Lodging LP, senior secured note, 10.00%, 10/01/14	United States		600,000		603,000
Forest City Enterprises Inc., senior note, 7.625%, 6/01/15	United States		900,000		828,000

					1,431,000

Retailing 1.4%
Michaels Stores Inc., senior note, 10.00%, 11/01/14	United States		1,500,000		1,546,875

Franklin Universal Trust

Statement of Investments, May 31, 2010 (unaudited) (continued)


		Principal
		Amount^f

^eQVC Inc., senior secured note, 144A, 7.50%, 10/01/19	United States	$	700,000	$	679,000

					2,225,875

Semiconductors & Semiconductor Equipment 1.1%
^eAdvanced Micro Devices Inc., senior note, 144A, 8.125%, 12/15/17	United States		300,000		295,875
Freescale Semiconductor Inc., senior note, 8.875%, 12/15/14	United States		1,500,000		1,357,500

					1,653,375

Software & Services 2.3%
First Data Corp., senior note, 9.875%, 9/24/15	United States		1,300,000		1,059,500
^eSitel LLC, senior note, 144A, 11.50%, 4/01/18	United States		700,000		652,750
SunGard Data Systems Inc.,
senior note, 9.125%, 8/15/13	United States		400,000		406,000
senior sub. note, 10.25%, 8/15/15	United States		1,400,000		1,422,750

					3,541,000

Technology Hardware & Equipment 1.4%
Jabil Circuit Inc., senior note, 7.75%, 7/15/16	United States		500,000		513,750
Sanmina-SCI Corp.,
^e,gsenior note, 144A, FRN, 3.007%, 6/15/14	United States		700,000		658,000
senior sub. note, 6.75%, 3/01/13	United States		600,000		582,000
senior sub. note, 8.125%, 3/01/16	United States		400,000		383,000

					2,136,750

Telecommunication Services 8.2%
Crown Castle International Corp.,
senior bond, 7.125%, 11/01/19	United States		100,000		97,500
senior note, 9.00%, 1/15/15	United States		800,000		845,000
^eDigicel Group Ltd., senior note, 144A, 8.875%, 1/15/15	Jamaica		2,000,000		1,945,000
^elntegra Telecom Inc., senior secured note, 144A, 10.75%, 4/15/16	United States		700,000		679,000
Intelsat Bermuda Ltd., senior note, 11.25%, 6/15/16	Bermuda		500,000		530,000
Intelsat Subsidiary Holding Co. Ltd., senior note, 8.50%, 1/15/13	Bermuda		1,500,000		1,518,750
MetroPCS Wireless Inc., senior note, 9.25%, 11/01/14	United States		2,000,000		2,070,000
^eNew Communications Holdings, senior note, 144A,
8.25%, 4/15/17	United States		200,000		199,000
8.50%, 4/15/20	United States		300,000		297,000
8.75%, 4/15/22	United States		500,000		493,750
Qwest Communications International Inc., senior note, 7.50%, 2/15/14	United States		2,000,000		1,980,000
^eSBA Telecommunications Inc., senior note, 144A, 8.25%, 8/15/19	United States		600,000		628,500
^eWind Acquisition Finance SA, senior note, 144A, 12.00%, 12/01/15	Italy		1,500,000		1,552,500

					12,836,000

Transportation 1.1%
^eCeva Group PLC, senior secured note, 144A, 11.50%, 4/01/18	United Kingdom		1,100,000		1,138,500
^eDelta Air Lines Inc., senior secured note, 144A, 9.50%, 9/15/14	United States		500,000		520,000

					1,658,500

Utilities 3.7%
Ameren Corp., senior note, 8.875%, 5/15/14	United States		800,000		916,280
CMS Energy Corp., senior note, 8.75%, 6/15/19	United States		700,000		767,394
^eDynegy Holdings Inc., senior note, 144A, 7.50%, 6/01/15	United States		1,500,000		1,230,000
NRG Energy Inc., senior note, 7.375%,
2/01/16	United States		1,800,000		1,746,000
1/15/17	United States		200,000		190,500
Texas Competitive Electric Holdings Co. LLC, senior note, A, 10.25%, 11/01/15	United States		1,500,000		1,016,250

					5,866,424


Total Corporate Bonds (Cost $140,513,780)					139,460,144


Total Investments before Short Term Investments (Cost $190,947,566)					195,916,127

Franklin Universal Trust

Statement of Investments, May 31, 2010 (unaudited) (continued)


		Shares
Short Term Investments (Cost $1,149,906) 0.7%
Money Market Funds 0.7%
^linstitutional Fiduciary Trust Money Market Portfolio, 0.00%	United States		1,149,906	$	1,149,906


Total Investments (Cost $192,097,472) 125.7%					197,066,033
Notes Payable (26.8)%					(42,000,000	)
Other Assets, less Liabilities 1.1%					1,689,568

Net Assets 100.0%				$	156,755,601


^a		Rounds to less than 0.1% of net assets.

^b		Non-income producing.

^c		Security has been deemed illiquid because it may not be able to be sold within seven days. At May 31, 2010, the value of of this security was $1,096, representing less than 0.01% of net assets.

^d		See Note 4 regarding restricted securities.

^e		Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Fund’s Board of Trustees. At May 31, 2010, the aggregate value of these securities was $51,252,979, representing 32.70% of net assets.

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

^g		The coupon rate shown represents the rate at period end.

^h		Security purchased on a delayed delivery basis.

ⁱ		Income may be received in additional securities and/or cash.

^j		Defaulted security or security for which income has been deemed uncollectible.

^k		See Note 5 regarding other considerations.

^l		The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund’s investment manager. The rate shown is the annualized seven-day yield at period end.

Franklin Universal Trust

Statement of Investments, May 31, 2010 (unaudited) (continued)

ABBREVIATIONS
Selected Portfolio


FRN		Floating Rate Note

PIK		Payment-In-Kind

Franklin Universal Trust

Notes to Statement of Investments (unaudited)

1. ORGANIZATION

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

2. FINANCIAL INSTRUMENT VALUATION

The Fund values its investments in securities and other assets and liabilities carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.

Under procedures approved by the Fund’s Board of Trustees, the Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity and other securities listed on a securities exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter securities and listed securities for which there is no reported sale are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities may be valued utilizing a market-based approach in which the fundamental characteristics or relationships to similar securities are used to determine the fair value of the security held.

Additionally, for certain equity securities, the Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services utilize a market-based approach through which quotes from market makers are used to determine fair value. In other instances, the pricing services utilize proprietary valuation models to develop an income-based valuation which may consider characteristics such as credit risk, yield spreads, benchmark quotes and other unique security features in order to estimate the relevant cash flows which are then used to calculate the fair value.

Corporate debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services utilize a market-based approach through which quotes from market makers are used to determine fair value. In other instances, the pricing services utilize proprietary valuation models to develop an income-based valuation which may consider characteristics such as option-adjusted spreads, credit risk and spreads, benchmark yield curves, coupon rates, maturity and other unique security features in order to estimate the relevant cash flows which are then used to calculate the fair value.

Senior secured corporate loans with floating or variable interest rates generally trade in the over-the-counter market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services utilize a market-based approach through which quotes from market makers, loan dealers, or financial institutions are used to determine fair value. In other instances, the pricing services utilize proprietary valuation models to develop an income-based valuation which may consider characteristics such as issuer type, coupon, maturity, weighted average maturity, interest rate spreads and yield curves, cash flow and credit risk/quality analysis in order to estimate the relevant cash flows which are then used to calculate the fair value.

The Fund has procedures to determine the fair value of investments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach, which may use prices of recent transactions, various market multiples, book values, and other relevant information for the investment, related assets or liabilities or other comparable assets or liabilities to determine the fair value of the investment. In developing this fair value, the Fund may also give consideration to an income-based approach valuation, which considers anticipated future cash flows of the investment and converts those amounts into a net present value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had a ready market existed.

Trading in securities on foreign exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the availability (including the reliability) of the value of a foreign security held by the Fund. As a result, variances may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these discrepancies, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

Investments in open-end mutual funds are valued at the closing net asset value.

3. INCOME TAXES

At May 31, 2010, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	192,392,141


Unrealized appreciation	$	17,289,120
Unrealized depreciation		(12,615,228	)

Net unrealized appreciation (depreciation)	$	4,673,892

4. RESTRICTED SECURITIES

At May 31, 2010, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:

Shares

Issuer

Acquisition Date

Cost

Value

181,875

VS Holdings Inc.

12/06/01

181,875

—

Total Restricted Securities (0.00% of Net Assets)

5. OTHER CONSIDERATIONS

From time to time, officers, directors or employees of the Fund’s Investment Manager may have discussions or enter into agreements with issuers, underwriters or creditors’ committees which, pursuant to the Fund’s policies and requirements of applicable securities laws, could prevent the Fund from trading in the securities of such company for limited or extended periods of time.

6. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized in the following fair value hierarchy:

	•		Level 1 — quoted prices in active markets for identical securities

	•		Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used as of May 31, 2010, in valuing the Fund’s assets carried at fair value:


	Level 1		Level 2		Level 3			Total

Assets:
Investments in Securities:
Equity Investments:^a
Automobiles & Components	$	—	$	—	$	1,096		$	1,096
Commercial & Professional Services		—		—		—	^b		—	^b
Diversified Financials		—		454,359		—			454,359
Other Equity Investments^c		54,297,254		—		—			54,297,254
Senior Floating Rate Interests		—		1,703,274		—			1,703,274
Corporate Bonds		—		139,460,144		—			139,460,144
Short Term Investments		1,149,906		—		—			1,149,906

Total Investments in Securities	$	55,447,160	$	141,617,777	$	1,096		$	197,066,033


^a		Includes common and preferred stock.

^b		Includes security determined to have no value at May 31, 2010.

⁰		For detailed industry descriptions, see the accompanying Statement of Investments.

At May 31, 2010, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value, is as follows:


																	Net Change in
																	Unrealized
																	Appreciation
							Net Change in							Balance			(Depreciation)
	Balance at			Net			Unrealized		Net			Transfer		at End			on Assets
	Beginning of			Realized			Appreciation		Purchases			In (Out) of		of			Held at Period
	Period			Gain (Loss)			(Depreciation)		(Sales)			Level 3		Period			End

Assets
Equity Investments:
Automobiles & Components	$	1,096		$	—		$	—	$	—		$	—	$	1,096		$	—
Commercial & Professional Services		—	^a		—			—		—			—		—	^a		—
Corporate Bonds		7,216			(718,255	)		714,387		(3,348	)		—		—			—

Total	$	8,312		$	(718,255	)	$	714,387	$	(3,348	)	$	—	$	1,096		$	—


^a		includes security determined to have no value at May 31, 2010.

7. NEW ACCOUNTING PRONOUNCEMENTS

In January 2010, the Financial Accounting Standards Board issued an Accounting Standards Update which enhances and clarifies existing fair value measurement disclosure requirements and is effective for interim and annual periods beginning after December 15, 2009. The Fund believes the adoption of this Accounting Standards Update will not have a material impact on its financial statements.

8. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

For information on the Fund’s policy regarding other significant accounting policies, please refer to the Fund’s most recent semiannual or annual shareholder report.

Item 2. 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 Quarterly Schedule of Portfolio Holdings on Form N-Q, 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 Quarterly Schedule of Portfolio Holdings on Form N-Q.

Item 3. Exhibits.

(a) Certification pursuant to Section 30a-2 under the Investment Company Act of 1940 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting 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/LAURA F. FERGERSON

Laura F. Fergerson

Chief Executive Officer –

Finance and Administration

Date July 27, 2010

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/LAURA F. FERGERSON

Laura F. Fergerson

Chief Executive Officer –

Finance and Administration

Date July 27, 2010

By /s/GASTON GARDEY

Gaston Gardey

Chief Financial Officer and

Chief Accounting Officer

Date July 27, 2010