SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section.240-14a-11(c) or
Section.240-14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
FRANKLIN UNIVERSAL TRUST
(Name of Registrant as Specified in its Charter)
FRANKLIN UNIVERSAL TRUST
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary material.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[GRAPHIC OMITTED]
FRANKLIN UNIVERSAL TRUST
IMPORTANT SHAREHOLDER INFORMATION
We have enclosed important information about the Annual Shareholders' Meeting
of Franklin Universal Trust (the "Fund") scheduled for Friday, March 30,
2007, at 2:00 p.m., Pacific time. These materials discuss the proposals to be
voted on at the meeting.
THIS MEETING IS VERY IMPORTANT BECAUSE A SHAREHOLDER OF THE FUND HAS
SUBMITTED A PROPOSAL REQUESTING THAT THE FUND'S BOARD OF TRUSTEES PROMPTLY
TAKE THE STEPS NECESSARY TO OPEN-END THE FUND OR OTHERWISE ENABLE
SHAREHOLDERS TO REALIZE NET ASSET VALUE FOR THEIR SHARES. AS DISCUSSED IN
GREATER DETAIL IN THE ENCLOSED PROXY STATEMENT, THE FUND'S TRUSTEES STRONGLY
OPPOSE THE SHAREHOLDER PROPOSAL BECAUSE THEY BELIEVE IT IS IN YOUR BEST
INTERESTS TO RETAIN THE FUND'S CLOSED-END STRUCTURE.
These materials also contain the Notice of Meeting, proxy statement and proxy
card. A proxy card is, in essence, a ballot. When you vote your proxy, it
tells us how you wish to vote on important issues relating to the Fund. If
you complete, sign and return the proxy card, we'll vote it as you indicated.
If you simply sign, date and return the proxy card, but do not specify a vote
on the proposals, your proxy will be voted FOR the election of the nominees
to the position of Trustee (Proposal 1) and AGAINST the shareholder proposal
(Proposal 2).
WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSALS IN THE PROXY
STATEMENT. THEN, PLEASE FILL OUT AND SIGN THE PROXY CARD AND RETURN IT TO US
SO THAT WE KNOW HOW YOU WOULD LIKE TO VOTE. WHEN SHAREHOLDERS RETURN THEIR
PROXIES PROMPTLY, THE FUND MAY BE ABLE TO SAVE MONEY BY NOT HAVING TO CONDUCT
ADDITIONAL MAILINGS. RETURNING YOUR PROXY CARD DOES NOT PRECLUDE YOU FROM
ATTENDING THE MEETING OR LATER CHANGING YOUR VOTE PRIOR TO ITS BEING CAST.
We welcome your comments. If you have any questions, call Fund Information at
1-800/DIAL BEN 168 (1-800/342-5236).
-------------------------------------------------------------------------------
TELEPHONE AND INTERNET VOTING
FOR YOUR CONVENIENCE, YOU MAY BE ABLE TO VOTE BY TELEPHONE OR THROUGH THE
INTERNET, 24 HOURS A DAY. IF YOUR ACCOUNT IS ELIGIBLE, SEPARATE INSTRUCTIONS
ARE ENCLOSED.
-------------------------------------------------------------------------------
FRANKLIN UNIVERSAL TRUST
NOTICE OF 2007 ANNUAL SHAREHOLDERS' MEETING
The Annual Shareholders' Meeting (the "Meeting") of Franklin Universal Trust
(the "Fund") will be held at the Fund's offices, One Franklin Parkway, San
Mateo, California 94403, on Friday, March 30, 2007, at 2:00 p.m., Pacific
time.
During the Meeting, shareholders of the Fund will vote on the following
proposals:
o The election of a Board of Trustees of the Fund.
o To act upon, if properly presented, a shareholder proposal.
o Such other matters as may properly come before the Meeting.
The Board of Trustees has fixed January 2, 2007, as the record date for the
determination of shareholders entitled to vote at the Meeting.
Your vote is very important, especially in light of the shareholder proposal
that is strongly opposed by the Board. Whether or not you plan to attend the
Meeting, and regardless of the number of shares you own, we urge you to vote
FOR your Board's nominees (Proposal 1) and AGAINST the shareholder proposal
(Proposal 2) by promptly completing, signing, dating and returning the
enclosed proxy card. In addition, you may be able to vote your shares by
telephone or Internet. Please consult the materials you receive from your
broker or bank prior to voting by telephone or Internet.
If you have any questions or need additional information, please contact The
Altman Group, Inc., the Fund's proxy solicitors, at 60 East 42nd Street,
Suite 405, New York, NY 10165, or toll- free by telephone at 1-800-
336-5159.
By Order of the Board of Trustees,
Karen L. Skidmore
SECRETARY
San Mateo, California
Dated: January 29, 2007
-------------------------------------------------------------------------------
PLEASE SIGN AND PROMPTLY RETURN YOUR PROXY CARD IN THE SELF- ADDRESSED
ENVELOPE (OR RETURN YOUR PROXY BY TELEPHONE OR THROUGH THE INTERNET, IF YOU
ARE ELIGIBLE TO DO SO) REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
-------------------------------------------------------------------------------
This page intentionally left blank.
FRANKLIN UNIVERSAL TRUST
PROXY STATEMENT
o INFORMATION ABOUT VOTING
WHO IS ASKING FOR MY VOTE?
The Trustees of Franklin Universal Trust (the "Fund"), in connection with
the Fund's Annual Meeting of Shareholders (the "Meeting"), have requested
your vote.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on January 2, 2007, are
entitled to be present and to vote at the Meeting or any adjourned Meeting.
Each share of record is entitled to one vote (and a proportionate
fractional vote for each fractional share) on each matter presented at the
Meeting. The Notice of Meeting, the proxy card, and the proxy statement
were first mailed to shareholders of record on or about January 29, 2007.
ON WHAT ISSUE AM I BEING ASKED TO VOTE?
You are being asked to vote on two proposals:
o The election of nine nominees to the position of Trustee.
o To act upon, if properly presented, a shareholder proposal.
HOW DO THE FUND'S TRUSTEES RECOMMEND THAT I VOTE?
The Trustees unanimously recommend that you vote FOR the election of the
nine nominees as Trustees (Proposal 1) and AGAINST the shareholder proposal
(Proposal 2).
WHY DO THE FUND'S TRUSTEES RECOMMEND THAT I VOTE AGAINST THE SHAREHOLDER
PROPOSAL (PROPOSAL 2)?
The shareholder proposal requests that the Fund's Board of Trustees
promptly take the steps necessary to open-end the Trust or otherwise
enable shareholders to realize net asset value for their shares. The Fund's
Trustees oppose the shareholder proposal because they believe it is in your
best interests to retain the Fund's closed-end structure. No other
closed-end fund offers your Fund's combination of investments in both high
yield bonds and utility stocks, which provides investors with both high
current income as well as the potential for capital appreciation. Combining
this investment strategy with leverage and low cash balances, your Fund has
delivered consistently strong market returns to investors over time. The
Trustees believe strongly that your Fund remains viable in its closed-end
form, but may not be able to provide the same benefits to shareholders if
reorganized or merged into an open-end fund.
HOW DO I ENSURE THAT MY VOTE IS ACCURATELY RECORDED?
You may attend the Meeting and vote in person or you may complete and
return the enclosed proxy card. If you are eligible to vote by telephone or
through the Internet, separate instructions are enclosed.
Proxy cards that are properly signed, dated and received at or prior to the
Meeting will be voted as specified. If you specify a vote for the
proposals, your proxy will be voted as you indicate. If you simply sign,
date and return the proxy card, but don't specify a vote on the proposals,
your shares will be voted FOR the election of the nine nominees for Trustee
(Proposal 1) and AGAINST the shareholder proposal (Proposal 2).
MAY I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by forwarding a
written revocation or a later- dated proxy to the Fund that is received by
the Fund at or prior to the Meeting, or by attending the Meeting and voting
in person.
WHAT IF MY SHARES ARE HELD IN A BANK OR BROKERAGE ACCOUNT?
If your shares are held by your bank or broker, then in order to vote in
person at the Meeting, you will need to obtain a "Legal Proxy" from your
bank or broker and present it to the Inspector of Election at the Meeting.
o PROPOSAL 1: ELECTION OF TRUSTEES
HOW ARE NOMINEES SELECTED?
The Board of Trustees of the Fund (the "Board" or the "Trustees") has a
Nominating Committee consisting of Harris J. Ashton, Robert F. Carlson,
Edith E. Holiday, Frank W.T. LaHaye, Frank A. Olson and John B. Wilson,
none of whom is an "interested person" of the Fund as defined by the
Investment Company Act of 1940, as amended (the "1940 Act"). Trustees who
are not interested persons of the Fund are referred to as "Independent
Trustees," and Trustees who are interested persons of the Fund are referred
to as "Interested Trustees."
The Nominating Committee is responsible for selecting candidates to serve
as Trustees and recommending such candidates (a) for selection and
nomination as Independent Trustees by the incumbent Independent Trustees
and the full Board; and (b) for selection and nomination as Interested
Trustees by the full Board. In considering a candidate's qualifications,
the Nominating Committee generally considers the potential candidate's
educational background, business or professional experience, and
reputation. In addition, the Nominating Committee has established as
minimum qualifications for Board membership as an Independent Trustee (1)
that such candidate be independent from relationships with the Fund's
investment manager and other principal service providers both within the
terms and the spirit of the statutory independence requirements specified
under the 1940 Act and the rules thereunder; (2) that such candidate
demonstrate an ability and willingness to make the considerable time
commitment, including personal attendance at Board meetings, believed
necessary to his or her function as an effective Board member; and (3) that
such candidate have no continuing relationship as a director, officer or
board member of any U.S. registered investment company other than those
within the Franklin Templeton Investments fund complex.
When the Board has or expects to have a vacancy, the Nominating Committee
receives and reviews information on individuals qualified to be recommended
to the full Board as nominees for election as Trustees, including any
recommendations by OQualifying Fund ShareholdersO (as defined below). Such
individuals are evaluated based upon the criteria described above. To date,
the Nominating Committee has been able to identify, and expects to continue
to be able to identify, from its own resources an ample number of qualified
candidates. The Nominating Committee will, however, review recommendations
from Qualifying Fund Shareholders to fill vacancies on the Board if these
recommendations are submitted in writing and addressed to the Nominating
Committee at the Fund's offices and are presented with appropriate
background material concerning the candidate that demonstrates his or her
ability to serve as a Trustee, including as an Independent Trustee, of the
Fund. A Qualifying Fund Shareholder is a shareholder who (i) has
continuously owned of record, or beneficially through a financial
intermediary, shares of the Fund having a net asset value of not less than
two hundred and fifty thousand dollars ($250,000) during the twenty- four
month period prior to submitting the recommendation; and (ii) provides a
written notice to the Nominating Committee containing the following
information: (a) the name and address of the Qualifying Fund Shareholder
making the recommendation; (b) the number of shares of the Fund which are
owned of record and beneficially by such Qualifying Fund Shareholder and
the length of time that such shares have been so owned by the Qualifying
Fund Shareholder; (c) a description of all arrangements and understandings
between such Qualifying Fund Shareholder and any other person or persons
(naming such person or persons) pursuant to which the recommendation is
being made; (d) the name, age, date of birth, business address and
residence address of the person or persons being recommended; (e) such
other information regarding each person recommended by such Qualifying Fund
Shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the U.S. Securities and Exchange Commission
(OSECO) had the nominee been nominated by the Board; (f) whether the
shareholder making the recommendation believes the person recommended would
or would not be an Ointerested personO of the Fund, as defined in the 1940
Act; and (g) the written consent of each person recommended to serve as a
Trustee of the Fund if so nominated and elected/ appointed.
The Nominating Committee may amend these procedures from time to time,
including the procedures relating to the evaluation of nominees and the
process for submitting recommendations to the Nominating Committee.
The Board has adopted and approved a formal written charter for the
Nominating Committee. A copy of the charter was attached as "Appendix A" to
the proxy statement for the Fund's 2005 Annual Shareholders' Meeting.
WHO ARE THE NOMINEES?
Harris J. Ashton, Robert F. Carlson, Edith E. Holiday, Edward B. Jamieson,
Charles B. Johnson, Rupert H. Johnson, Jr., Frank W.T. LaHaye, Frank A.
Olson and John B. Wilson have been nominated to be Trustees of the Fund, to
hold office until the next Annual Shareholders' Meeting, and until their
successors are duly elected and qualified to serve. Among the nominees,
Edward B. Jamieson, Charles B. Johnson and Rupert H. Johnson, Jr. are
deemed to be "interested persons" of the Fund for purposes of the 1940 Act.
All of the nominees are currently members of the Board; however, Mr. Wilson
is standing for election by shareholders of the Fund for the first time. An
incumbent Independent Trustee nominated Mr. Wilson for consideration by the
Nominating Committee as nominee for Trustee. In addition, all of the
nominees are directors and/or trustees of other investment companies within
the Franklin Templeton Investments fund complex.
Certain Trustees of the Fund hold director and/or officer positions with
Franklin Resources, Inc. ("Resources") and its affiliates. Resources is a
publicly owned holding company, the principal shareholders of which are
Charles B. Johnson and Rupert H. Johnson, Jr., who owned approximately
17.37% and 14.85%, respectively, of its outstanding shares as of January 2,
2007. Resources, a global investment management organization operating as
Franklin Templeton Investments, is primarily engaged, through its various
subsidiaries, in providing investment management, share distribution,
transfer agent and administrative services to a family of investment
companies. Resources is a New York Stock Exchange, Inc. ("NYSE") listed
holding company (NYSE: BEN). Charles B. Johnson, Chairman of the Board and
Trustee of the Fund, and Rupert H. Johnson, Jr., Trustee and Senior Vice
President of the Fund, are brothers.
Each nominee is currently available and has consented to serve if elected.
If any of the nominees should become unavailable, the designated proxy
holders will vote in their discretion for another person or persons who may
be nominated as Trustees.
Listed below, for each nominee, is his or her name, year of birth and
address, as well as position and length of service with the Fund, a brief
description of recent professional experience, the number of portfolios in
the Franklin Templeton Investments fund complex that he or she oversees,
and other directorships held.
NOMINEES FOR INDEPENDENT TRUSTEE
NUMBER OF
PORTFOLIOS IN
NAME, YEAR LENGTH FUND COMPLEX OTHER
OF BIRTH AND OF TIME OVERSEEN DIRECTORSHIPS
ADDRESS POSITION SERVED BY TRUSTEE* HELD
-------------------------------------------------------------------------------
Harris J. Trustee Since 142 Director, Bar-S
Ashton (1932) 1988 Foods (meat
One Franklin packing company).
Parkway
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc.
(bank holding company) (until 2002); and President, Chief Executive Officer
and Chairman of the Board, General Host Corporation (nursery and craft
centers) (until 1998).
-------------------------------------------------------------------------------
Robert F. Trustee Since 57 None
Carlson (1928) 2000
One Franklin
Parkway
San Mateo,
CA 94403- 1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, 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.
-------------------------------------------------------------------------------
Edith E. Trustee Since 143 Director, Hess
Holiday 2004 Corporation
(1952) (formerly,
One Franklin Amerada Hess
Parkway Corporation)
San Mateo, (exploration and
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),
Canadian
National Railway
(railroad) and
White Mountains
Insurance Group,
Ltd. (holding
company).
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. Trustee Since 116 Director, Center
LaHaye (1929) 1988 for Creative
One Franklin Land Recycling
Parkway (redevelopment).
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman,
Peregrine Venture Management Company (venture capital).
-------------------------------------------------------------------------------
Frank A. Trustee Since 103 Director, Hess
Olson (1932) 2005 Corporation
One Franklin (formerly,
Parkway Amerada Hess
San Mateo, Corporation)
CA 94403-1906 (exploration and
refining of oil
and gas) and
Sentient Jet
(private jet
service); and
FORMERLY,
Director, Becton
Dickinson and
Company (medical
technology),
Cooper
Industries, Inc.
(electrical
products and
tools and
hardware),
Health Net, Inc.
(formerly
Foundation
Health)
(integrated
managed care),
The Hertz
Corporation,
Pacific
Southwest
Airlines, The
RCA Corporation,
Unicom
(formerly,
Commonwealth
Edison), UAL
Corporation
(airlines) and
White Mountains
Insurance Group,
Ltd. (holding
company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman
of the Board ( 1980- 2000) and Chief Executive Officer ( 1977- 1999)); and
FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL
Corporation ( airlines).
-------------------------------------------------------------------------------
John B. Trustee Since 46 None
Wilson (1959) February
One Franklin 2006
Parkway
San Mateo,
CA 94403- 1906
February 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private
equity investing); serves on private and non- profit boards; and formerly,
Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (
1996- 2000); Chief Financial Officer and Executive Vice President - Finance
Strategy, Staples, Inc. (office supplies) ( 1992- 1996); Executive Vice
President - Corporate Planning, Northwest Airlines, Inc. (airlines) ( 1990-
1992); and Vice President and Partner, Bain & Company ( 1986- 1990).
-------------------------------------------------------------------------------
NOMINEES FOR INTERESTED TRUSTEE
NUMBER OF
PORTFOLIOS IN
NAME, YEAR LENGTH FUND COMPLEX OTHER
OF BIRTH AND OF TIME OVERSEEN DIRECTORSHIPS
ADDRESS POSITION SERVED BY TRUSTEE* HELD
-------------------------------------------------------------------------------
**Edward B. Trustee, Trustee, 1 None
Jamieson (1948) President and President
One Franklin Chief Executive since 1993
Parkway Officer - and Chief
San Mateo, Investment Executive
CA 94403-1906 Management Officer -
- Investment
Management
since 2002
Principal Occupation During Past 5 Years:
President and Director, Franklin Advisers, Inc.; officer and/or trustee, as
the case may be, of some of the other subsidiaries of Franklin Resources,
Inc. and of four of the investment companies in Franklin Templeton
Investments.
-------------------------------------------------------------------------------
**Charles B. Trustee and Trustee since 142 None
Johnson (1933) Chairman of 1988 and
One Franklin the Board Chairman of
Parkway the Board
San Mateo, since 1993
CA 94403-1906
Principal Occupation During Past 5 Years:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin
Resources, 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 41 of
the investment companies in Franklin Templeton Investments.
-------------------------------------------------------------------------------
**Rupert H. Trustee and Since 126 None
Johnson, Jr.(1940) Senior Vice 1988
One Franklin President
Parkway
San Mateo,
CA 94403-1906
Principal Occupation During Past 5 Years:
Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Director, Franklin Advisers, 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 44 of the investment companies in Franklin Templeton Investments.
-------------------------------------------------------------------------------
*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 manager or
affiliated investment managers.
**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. (Resources), which is the parent company of the
Trust's investment manager 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 officer and director of the Trust's
investment manager.
Board members historically have followed a policy of having substantial
investments in one or more of the funds in Franklin Templeton Investments, as
is consistent with their individual financial goals. In February 1998, this
policy was formalized through adoption of a requirement that each board
member invest one- third of fees received for serving as a director or
trustee of a Templeton fund (excluding committee fees) in shares of one or
more Templeton funds and one- third of fees received for serving as a
director or trustee of a Franklin fund (excluding committee fees) in shares
of one or more Franklin funds until the value of such investments equals or
exceeds five times the annual retainer and regular board meeting fees paid
such board member. Investments in the name of family members or entities
controlled by a board member constitute fund holdings of such board member
for purposes of this policy, and a three year phase- in period applies to
such investment requirements for newly elected board members. In implementing
such policy, a board member's fund holdings existing on February 27, 1998,
were valued as of such date with subsequent investments valued at cost.
The following tables provide the dollar range of equity securities of the
Fund and of all funds overseen by the Trustees in the Franklin Templeton
Investments fund complex beneficially owned by the Trustees as of December
31, 2006.
INDEPENDENT TRUSTEES
Aggregate Dollar
Range of Equity
Securities in All
Funds Overseen by
the Trustee
in the Franklin
Name of Dollar Range of Equity Templeton Investments
Trustee Securities in the Fund Fund Complex
-------------------------------------------------------------------------------
Harris J. Ashton $1 - $10,000 Over $100,000
Robert F. Carlson None Over $100,000
Edith E. Holiday None Over $100,000
Frank W.T. LaHaye $10,001 - $50,000 Over $100,000
Frank A. Olson None Over $100,000
John B. Wilson None Over $100,000
INTERESTED TRUSTEES
Aggregate Dollar
Range of Equity
Securities in All
Funds Overseen by
the Trustee
in the Franklin
Name of Dollar Range of Equity Templeton Investments
Trustee Securities in the Fund Fund Complex
-------------------------------------------------------------------------------
Edward B. Jamieson None Over $100,000
Charles B. Johnson $1 - $10,000 Over $100,000
Rupert H. Johnson, Jr. $1 - $10,000 Over $100,000
HOW OFTEN DO THE TRUSTEES MEET AND WHAT ARE THEY PAID?
The role of the Trustees is to provide general oversight of the Fund's
business, and to ensure that the Fund is operated for the benefit of all
shareholders. The Trustees anticipate meeting at least 11 times during the
current fiscal year to review the operations of the Fund and the Fund's
investment performance. The Trustees also oversee the services furnished to
the Fund by Franklin Advisers, Inc., the Fund's investment manager (the
OInvestment ManagerO), and various other service providers. The Fund pays
the Independent Trustees $305 per quarter plus $100 per meeting attended,
effective as of April 1, 2005, and such fees are subject to reductions
resulting from fee caps limiting the amount of fees payable to Board
members who serve on other Boards within the Franklin Templeton Investments
fund complex. Also effective as of April 1, 2005, the Independent Trustees
are paid an additional flat fee of $5,000 as a general retainer, a portion
of which is allocated to the Fund. Board members who serve on the Audit
Committee of the Fund and other Franklin Templeton funds are paid a flat
fee of $2,000 per Audit Committee meeting attended on a day on which a
Board meeting is not held, a portion of which is allocated to the Fund.
Effective as of April 1, 2005, Mr. LaHaye, who serves as Chairman of the
Audit Committee of the Fund, as well as the Audit Committees of certain
other Franklin funds, receives an additional flat fee of $20,000 per year,
a portion of which is allocated to the Fund. Members of a committee are not
compensated for any committee meeting held on a day of a Board meeting.
During the fiscal year ended August 31, 2006, there were nine meetings of
the Board, eight meetings of the Nominating Committee, and four meetings of
the Audit Committee. Each of the Trustees attended at least 75% of the
aggregate of the total number of meetings of the Board and the total number
of meetings held by all committees of the Board on which the Trustee
served.
The Fund does not currently have a formal policy regarding Trustees'
attendance at the annual shareholders' meeting. None of the Trustees
attended the Fund's last annual meeting held on February 16, 2006.
Certain Trustees and officers of the Fund are shareholders of Resources and
may receive indirect remuneration due to their participation in the
management fees and other fees received from the Franklin Templeton funds
by the Investment Manager and its affiliates. The Investment Manager or its
affiliates pay the salaries and expenses of the officers. No pension or
retirement benefits are accrued as part of Fund expenses.
The following table indicates the aggregate compensation paid to the
Independent Trustees by the Fund individually and by all of the funds in
Franklin Templeton Investments. These Trustees also serve as directors or
trustees of other funds in Franklin Templeton Investments, many of which
hold meetings at different dates and times. The Trustees and the Fund's
management believe that having the same individuals serving on the boards
of many of the funds in Franklin Templeton Investments enhances the ability
of each fund to obtain, at a relatively modest cost to each separate fund,
the services of high caliber, experienced and knowledgeable Independent
Trustees who can more effectively oversee the management of the funds.
Number of
Boards within
Total Compensation Franklin
Aggregate from Franklin Templeton
Compensation Templeton Investments Investments on
Name of Trustee from the Fund(1) Fund Complex(2) Which Each Serves(3)
-------------------------------------------------------------------------------
Harris J. Ashton $1,620 $409,510 41
Robert F. Carlson $2,139 $132,523 14
S. Joseph Fortunato(4) $3,524 $292,948 N/A
Edith E. Holiday $1,627 $422,501 42
Frank W.T. LaHaye $3,593 $225,560 25
Gordon S. Macklin(5) $1,620 $302,820 N/A
Frank A. Olson $2,128 $373,818 29
John B. Wilson(6) $1,228 $117,917 14
(1) Compensation received for the fiscal year ended August 31, 2006.
(2) Compensation received for the calendar year ended December 31, 2006.
(3) We base the number of boards on the number of U.S. registered
investment companies in the Franklin Templeton Investments fund complex.
This number does not include the total number of series or funds within
each investment company for which the Board members are responsible.
Franklin Templeton Investments currently includes 46 U.S. registered
investment companies, with approximately 155 U.S. based funds or series.
(4) Mr. Fortunato retired effective September 5, 2006.
(5) Mr. Macklin retired effective September 12, 2006.
(6) Mr. Wilson was appointed to the Board effective February 28, 2006.
WHO ARE THE EXECUTIVE OFFICERS OF THE FUND?
Officers of the Fund are appointed by the Trustees and serve at the
pleasure of the Board. Listed below, for each Executive Officer, are his or
her name, year of birth, address, a brief description of his or her recent
professional experience, and his or her position and length of service with
the Fund:
Name, Year of
Birth and
Address Position Length of Time Served
-------------------------------------------------------------------------------
Edward B. Trustee, President and Chief Trustee, President since 1993
Jamieson (1948) Executive Officer - Investment and Chief Executive Officer -
One Franklin Management Investment Management since
Parkway 2002
San Mateo,
CA 94403-1906
Please refer to the table "Nominees for Interested Trustee" for additional
information about Mr. Edward B. Jamieson.
-------------------------------------------------------------------------------
Charles B. Trustee and Chairman of the Trustee since 1988 and Chairman
Johnson (1933) Board of the Board since 1993
One Franklin
Parkway
San Mateo,
CA 94403-1906
Please refer to the table "Nominees for Interested Trustee" for additional
information about Mr. Charles B. Johnson.
-------------------------------------------------------------------------------
Rupert H. Trustee and Since 1988
Johnson, Jr. Senior Vice President
(1940)
One Franklin
Parkway
San Mateo,
CA 94403- 1906
Please refer to the table "Nominees for Interested Trustee" for additional
information about Mr. Rupert H. Johnson, Jr.
-------------------------------------------------------------------------------
James M. Chief Compliance Officer Since 2004
Davis (1952)
One Franklin
Parkway
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 46 of the
investment companies in Franklin Templeton Investments; and formerly,
Director of Compliance, Franklin Resources, Inc. ( 1994- 2001).
-------------------------------------------------------------------------------
Laura Treasurer Since 2004
Fergerson (1962)
One Franklin
Parkway
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 30 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).
-------------------------------------------------------------------------------
Jimmy D. Senior Vice President Since 2002
Gambill (1947) and Chief Executive
500 East Officer - Finance
Broward Blvd. and Administration
Suite 2100
Fort Lauderdale,
FL 33394- 3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton
Worldwide, Inc.; and officer of 46 of the investment companies in Franklin
Templeton Investments.
-------------------------------------------------------------------------------
David P. Goss Vice President Since 2000
(1947)
One Franklin
Parkway
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and
director of one of the subsidiaries of Franklin Resources, Inc.; and officer
of 46 of the investment companies in Franklin Templeton Investments.
-------------------------------------------------------------------------------
Barbara J. Vice President Since 2000
Green (1947)
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, LLC, 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 46 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).
-------------------------------------------------------------------------------
Karen L. Vice President and Secretary Vice President since March 2006
Skidmore (1952) and Secretary since April 2006
One Franklin
Parkway
San Mateo,
CA 94403- 1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Vice
President and Secretary, Templeton Funds Annuity Company; and officer of 30
of the investment companies in Franklin Templeton Investments.
-------------------------------------------------------------------------------
Craig S. Tyle Vice President Since 2005
(1960)
One Franklin
Parkway
San Mateo,
CA 94403- 1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.;
officer of 46 of the investment companies in Franklin Templeton Investments;
and formerly, Partner, Shearman & Sterling, LLP (2004- 2005); and General
Counsel, Investment Company Institute (ICI) (1997- 2004).
-------------------------------------------------------------------------------
Galen G. Chief Financial Officer and Since 2004
Vetter (1951) Chief Accounting Officer
500 East
Broward Blvd.
Suite 2100
Fort Lauderdale,
FL 33394- 3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 46 of the
investment companies in Franklin Templeton Investments; and formerly,
Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey
& Pullen, LLP (1979-1987 and 1991-2004).
-------------------------------------------------------------------------------
o PROPOSAL 2: A SHAREHOLDER PROPOSAL
A shareholder (the OShareholder ProponentO) has submitted the following
proposal (the OShareholder ProposalO) to be included in this proxy
statement:
RESOLVED: The shareholders of Franklin Universal Trust
(the OTrustO) request that the Board of Trustees promptly
take the steps necessary to open end the Trust or
otherwise enable shareholders to realize net asset value
(ONAVO) for their shares.
OPPOSITION STATEMENT OF FRANKLIN UNIVERSAL TRUST
YOUR FUND'S BOARD OPPOSES THE SHAREHOLDER PROPOSAL AND BELIEVES IT IS IN
YOUR BEST INTERESTS TO RETAIN THE FUND'S CLOSED-END STRUCTURE. No other
closed-end fund offers your Fund's combination of investments in both high
yield bonds and utility stocks, which provides investors with both high
current income as well as the potential for capital appreciation. Combining
this investment strategy with leverage and low cash balances, your Fund has
delivered consistently strong market returns to investors over time. The
Board believes strongly that your Fund remains viable in its closed-end
form, but may not be able to provide the same benefits to shareholders if
reorganized or merged into an open-end fund. THE BOARD THEREFORE
RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE SHAREHOLDER PROPOSAL.
REASONS FOR THE BOARD'S RECOMMENDATION
Your Fund's Board has reviewed and considered the Shareholder Proposal but
believes that it is not in the best interests of the Fund and its
shareholders. For the reasons discussed below, the Board believes that the
Fund's shareholders, and particularly the Fund's long-term shareholders,
are best served by retaining the Fund's closed-end structure.
1. ADVANTAGES OF KEEPING YOUR FUND AS A CLOSED-END FUND
As a closed-end fund, your Fund has particular advantages over open-end
funds, including:
YOUR FUND CAN USE LEVERAGE; OPEN-END FUNDS CANNOT. As a closed-end
fund, your Fund is able to issue debt securities and use the proceeds to
make investments. Your Fund would not be able to do this if it were
reorganized or merged into an open-end fund. The Fund currently has
issued and outstanding $55 million in 5- year notes maturing in August
2008, representing approximately 22% of its total assets. As a shareholder,
you receive direct benefits from this leverage to the extent that the total
return on portfolio securities purchased with the leverage exceeds the
interest payments on the debt securities. The Fund pays a fixed rate of
interest on its debt securities at an annual rate of 4.14%, which is
currently approximately 52 basis points below comparable yields on U.S.
Treasury securities as of October 31, 2006. This is a very attractive
borrowing rate for your Fund and directly benefits the Fund's shareholders.
By using fixed-rate leverage that currently carries a below- market
interest rate, your Fund has the potential to experience enhanced returns
compared to closed-end funds with floating rate leverage whose borrowing
costs rise with rising interest rates. Moreover, repayment of your Fund's
outstanding debt in connection with a reorganization or merger into an
open-end fund would generate transaction costs and could require payment
of a make-whole premium, which would increase costs for the Fund's
shareholders.
YOUR FUND HAS THE ABILITY TO ALWAYS BE FULLY INVESTED; OPEN-END FUNDS DO
NOT. By definition, an open-end fund permits shareholders to redeem their
shares every business day. As a result, open-end funds typically cannot
have their assets fully invested because they need to maintain cash
balances to pay for redemptions. Alternatively, open-end funds can
temporarily borrow cash to finance redemptions, but they must pay interest
on those borrowings. In either case, maintaining cash balances or paying
interest on borrowing instead of investing in appreciable assets can reduce
an open-end fund's total return. A closed-end fund like your Fund, by
contrast, does not generally permit redemptions except in extraordinary
circumstances, such as in a tender offer or liquidation. As a result, your
Fund typically maintains cash balances of less than 1% of total assets,
thus potentially enhancing returns by remaining essentially fully invested
at all times.
YOUR FUND HAS LOWER EXPENSES THAN IT WOULD AS AN OPEN-END FUND. Another
direct consequence of open-end funds' daily purchases and redemptions is
that open-end funds often have higher expenses than closed-end funds.
Open-end funds, unlike closed-end funds, often incur distribution costs
because they must continually sell shares in order to offset redemptions.
Your Fund, by contrast, incurs no distribution costs and does not carry a
12b-1 fee. The fluctuations in asset levels that come from constant
purchases and redemptions may also result in open-end funds having higher
portfolio transaction costs, which can lower returns compared to closed-
end funds. Your Fund, by contrast, had a relatively low portfolio turnover
rate of 32.95% for its 2006 fiscal year ending August 31. Similarly, open-
end funds may be subject to higher transfer agency costs associated with
keeping track of shareholders as they come and go. For its 2006 fiscal
year, your Fund incurred transfer agency costs representing less than half
a basis point of its average net assets. A 1998 study by CDA/Weisenberger
of closed-end funds that reorganize or merge into open-end funds found
that long-term shareholders of closed-end funds are frequently subject
to higher expenses as a result of these transactions.
FUND HAS THE ABILITY TO TRADE THROUGHOUT THE DAY; MOST OPEN-END FUNDS DO
NOT. Open-end funds typically price their shares once a day, usually just
after the close of trading on the New York Stock Exchange ("NYSE") at 4:00
p.m., Eastern time. Closed-end funds like your Fund, however, can be
traded throughout the day. That means that a closed-end fund
shareholder's buy or sell order can be executed for the market price
prevailing on the exchange at precisely the time the shareholder's broker-
dealer places the trade, rather than at the very end of the trading day.
This may give holders of closed-end fund shares certain liquidity and
trading advantages that are not available to holders of most open-end
fund shares.
Certain open-end funds, known as exchange- traded funds or ETFs, trade
on a stock exchange throughout the day, but only as long as a large
institution, such as a bank or broker- dealer, agrees to make a market in
the ETF's securities. Closed-end funds like your Fund, however, will
continue to trade as long as they are listed on a stock exchange,
regardless of whether an institution agrees to make a market in their
securities. This may give holders of closed-end fund shares fewer
concerns about the liquidity of their shares than may be available to
shareholders of ETFs.
2. YOUR FUND'S DISCOUNT IS CYCLICAL, NOT PERMANENT
As with most other closed-end funds, the market price of the Fund's
shares often trade at a lower price than the Fund's NAV per share. That is,
the Fund's shares often trade at a discount. Discounts tend to be cyclical,
however, often moving in conjunction with interest rates. Indeed, from
March 2001 through April 2003, your Fund's shares traded at a premium.
Based on history, it should not be assumed that the Fund's current discount
will last indefinitely. Accordingly, the Board believes that the presence
of a discount should not, by itself, necessitate the drastic step of
reorganizing or merging your Fund into an open-end fund.
Your Fund's Board has already taken steps to address the discount,
authorizing the Fund's management in January 2006 to implement an open-
market share repurchase program that allows the Fund to purchase up to 10%
of its common stock in open-market transactions. As of October 31, 2006,
the share repurchase program has resulted in the repurchase of
approximately 2.67% of the Fund's outstanding shares. The share repurchase
program is intended to benefit shareholders by enabling your Fund to
acquire its own shares at a discount to NAV, thereby increasing the
proportionate interest of each remaining shareholder in the Fund. The Board
also hopes that the share repurchase program will help bring the market
price of the Fund's shares closer to NAV. At the same time, beginning in
February 2006, the Board authorized an increase in your Fund's monthly
dividend from 3.5 cents to 3.8 cents per share. Both of these measures were
designed by the Board to help address your Fund's discount.
The Board believes that these measures, together with other market factors,
have helped reduce your Fund's discount compared to its Lipper peer group.
Between January 18, 2006-- the day before the announcement of the share
repurchase program and the increase in the Fund's dividend--and October 31,
2006, your Fund's discount narrowed by 3.2 percentage points, compared to
an average narrowing of 2.8 percentage points for the Lipper high yield
closed-end fund peer group (1.8 percentage points excluding an outlier
fund). Over the past year, your Fund's discount has narrowed 4.0 percentage
points, compared to a narrowing of 3.0 percentage points for the Lipper
peer group. Over the past two years ending October 31, 2006, your Fund's
discount has narrowed 3.9 percentage points compared to a widening of 6.4
percentage points for the Lipper peer group.
3. YOUR FUND'S UNIQUE MARKET POSITION AND COMPETITIVE PERFORMANCE
Despite the Fund's current market price discount to NAV, the Board believes
that your Fund's performance, coupled with its unique position in the
marketplace, justifies retaining your Fund's closed-end structure as in
the best interests of long-term shareholders. For these shareholders, the
Fund's investment approach and long-term market price performance may be
more important than its discount.
Your Fund has a unique strategy and investment parameters that are
different from its closed-end fund competitors, as well as any open-end
fund in the Franklin Templeton complex. As stated in its prospectus, the
Fund invests 55- 65% of its assets in high yield debt of U.S. issuers,
20- 30% in utility stocks, and typically has exposure to some emerging
market sovereign debt. Your Fund is the only closed-end fund currently in
existence that has this unique asset mix, which provides investors with
both high current income as well as the potential for price appreciation on
both high yield bonds and utility stocks. This portfolio composition and
risk/return profile may directly appeal to many of the Fund's current
long-term shareholders, who might not be able to find a comparable
investment if, for example, the Fund were to merge with a dissimilar open-
end fund.
Your Fund's long-term performance at market price has been consistently
competitive, both in absolute terms and relative to its Lipper peer group
and benchmark indices, as shown in the table below:
PERFORMANCE AS OF OCTOBER 31, 2006
Cumulative Total
Return(1) Average Annual Total Return(1)
-------------------------------------------------------------------------------
YTD 1-Year 3-Year 5-Year 10-Year
-------------------------------------------------------------------------------
Fund Return Based on
Change in Market Price(2) 14.67% 19.65% 13.84% 5.21% 6.43%
Fund Return Based on
Change in Net Asset
Value(3) 11.50% 13.77% 13.25% 9.80% 6.25%
Credit Suisse (CS)
High Yield Index(4) 8.63% 10.29% 8.86% 11.13% 7.14%
Standard & Poor's
(S&P) 500 Utilities
Index(5) 16.84% 17.90% 21.92% 7.81% 8.01%
Lipper Closed End
High Current Yield
Funds (Leveraged)(6) 9.39% 12.10% 11.45% 12.87% 5.33%
Rank in Lipper Category
Based on Change in NAV 5/29 7/29 5/29 18/22 6/14
Performance data represent past performance, which does not guarantee
future results. Investment return and principal value will fluctuate, and
you may have a gain or loss when you sell your shares. Current performance
may differ from figures shown.
(1)Total return calculations represent the cumulative and average annual
changes in value of an investment over the periods indicated.
(2)Assumes reinvestment of distributions based on the dividend reinvestment
and cash purchase plan.
(3)Assumes reinvestment of distributions based on net asset value.
(4)Source: Credit Suisse. The Credit Suisse High Yield Index is designed to
mirror the investible universe of the U.S. dollar denominated high yield
debt market. The index is unmanaged and includes reinvestment of any income
or distributions. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
(5)Source: S&P's Micropal: The S&P 500 Utilities Index is a market
capitalization weighted index that includes electric utility stocks in the
S&P 500. The index is unmanaged and includes reinvestment of any income or
distributions. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
(6)Source: Lipper Inc. The Lipper Closed-End High Current Yield Fund
(Leveraged) Universe is comprised of the Fund and all closed-end debt
leveraged high current yield funds regardless of asset size or primary
channel of distribution. Returns are based on change in net asset value.
4. LONG-TERM SHAREHOLDERS WILL BEAR THE COSTS AND CONSEQUENCES OF
IMPLEMENTING THE SHAREHOLDER PROPOSAL
Long-term shareholders who wish to stay in the Fund after a reorganization
or merger into an open-end fund will likely bear a large proportion of the
costs and consequences of implementing the Shareholder Proposal, including
(1) the costs of additional proxy solicitations to obtain shareholder
approval of the reorganization or merger, (2) the costs of implementing a
reorganization or merger, and (3) the potentially higher expenses of an
open-end fund. These higher costs may be exacerbated if a large number of
shareholders (including, perhaps, the Shareholder Proponent) decide to
redeem thei shares of the Fund after it becomes an open-end fund. This is
because significant redemptions would cause the Fund's fixed expenses to be
paid for out of a smaller asset base, thus increasing the expenses paid by
the remaining shareholders. While redemptions may be discouraged by the
imposition of a temporary redemption fee and the Fund's management would
actively market the Fund to encourage new purchases, there is no guarantee
that the Fund, as an open-end fund, would be able to retain its current
asset level, much less grow it. Accordingly, the Board does not believe
that the Shareholder Proposal is in the best interests of the long-term
shareholders who would wish to continue their investment in the Fund after
a reorganization or merger.
5. APPLES AND ORANGES: YOUR FUND'S CIRCUMSTANCES ARE DIFFERENT FROM
FRANKLIN MULTI-INCOME TRUST
Given the costs and consequences of reorganizing or merging your Fund into
an open-end fund, the Board would only recommend this action in the face
of compelling circumstances, such as if there were serious concerns about
the continuing viability of the Fund as a suitable longer- term investment
for shareholders. The Board does not believe that these circumstances are
present in the case of your Fund.
The board of Franklin Multi-Income Trust ("FMI"), which included many of
the same Trustees who currently serve on the Fund's Board, did recommend in
2005 that FMI (another closed-end fund) merge with an open-end fund.
However, FMI was approximately one-quarter of the size of the Fund, and
thus regularly experienced limited trading liquidity and a higher level of
expenses. As a result, the continued viability of FMI as a successful
closed-end fund was in question.
By contrast, the Board believes that your Fund is much better situated as a
closed-end fund. The Fund continues to maintain adequate trading volume,
a reasonable discount that has been declining, and viable size. The Board
therefore believes that, unlike the case of FMI, a merger or reorganization
of the Fund into an open-end fund would likely prove to be detrimental to
the Fund and its long-term shareholders.
CONCLUSION
For the reasons stated above, the Board recommends that Shareholders vote
AGAINST the Shareholder Proposal.
SUPPORTING STATEMENT OF THE SHAREHOLDER PROPONENT
Despite a share repurchase program the shares of the Trust have continued
to trade at a significant discount to NAV. For example, on July 19, 2006
the Trust's stock closed at $6.30, a 9.1% discount from its net asset value
of $6.93.
Open-ending the Trust would allow all shareholders to obtain a higher
price for their shares whenever they decide to sell. In 2005 the same
Trustees that serve on the Trust's board recommended that another closed-
end fund, Franklin Multi-Income Trust ("FMI") merge into Franklin Income
Trust, an open-end fund because FMI had been trading at a persistent
discount to NAV. Shareholders of FMI subsequently approved the transaction
and FMI's discount was permanently eliminated.
We think the time is right to permanently eliminate the Trust's discount to
NAV. If you agree, please vote in favor of this proposal.
---------------------
The Shareholder Proponent is Opportunity Partners, L.P., 60 Heritage Drive,
Pleasantville, New York 10570. According to a Schedule 13D/A filed as of
August 8, 2006, the aggregate number of shares held by the Shareholder
Proponent and members of its group was 1,766,300. Neither the Fund, its
Board of Trustees or management is responsible for the contents of the
Shareholder Proposal or the Supporting Statement of the Shareholder
Proponent.
o ADDITIONAL INFORMATION ABOUT THE FUND
THE INVESTMENT MANAGER. The Investment Manager is Franklin Advisers, Inc.,
a California corporation, whose principal address is One Franklin Parkway,
San Mateo, CA 94403. The Investment Manager is a wholly-owned subsidiary
of Resources.
THE ADMINISTRATOR. The administrator of the Fund is Franklin Templeton
Services, LLC (OFT ServicesO), whose principal address is also One Franklin
Parkway, San Mateo, CA 94403. Under an agreement with Advisers, FT Services
performs certain administrative functions, such as portfolio recordkeeping,
for the Fund. FT Services is an indirect, wholly-owned subsidiary of
Resources.
THE TRANSFER AGENT. The transfer agent, registrar and dividend disbursement
agent for the Fund is PFPC Inc., 4400 Computer Drive, Westborough, MA 01850.
THE CUSTODIAN. Bank of New York, Mutual Funds Division, 90 Washington
Street, New York, NY 10286, acts as custodian of the Fund's securities and
other assets.
REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS. The Fund's last audited
financial statements and annual report for the fiscal year ended August 31,
2006, are available free of charge. To obtain a copy, please call 1-
800/DIAL BEN 168 ( 1-800/342-5236) or forward a written request to Franklin
Templeton Investor Services, LLC, P.O. Box 997151, Sacramento, CA 95899-
9983.
PRINCIPAL SHAREHOLDERS. As of January 2, 2007, the Fund had 26,977,893.784
shares outstanding and total net assets of $203,646,566.30. The Fund's
shares are listed on the NYSE (symbol: FT). From time to time, the number
of shares held in Ostreet nameO accounts of various securities dealers for
the benefit of their clients may exceed 5% of the total shares outstanding.
To the knowledge of the Fund's management, as of January 2, 2007, there
were no other entities holding beneficially or of record more than 5% of
the Fund's outstanding shares, except as shown in the following table:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES
-------------------------------------------------------------------------------
Bulldog Investors, 1,766,300(1) 6.33(2)
Phillip Goldstein and
Andrew Dakos
60 Heritage Drive
Pleasantville,
NY 10570
(1) The nature of beneficial ownership is shared voting and dispositive
power by Phillip Goldstein and Andrew Dakos (1,573,100 shares), sole voting
and dispositive power by Mr. Dakos (128,300 shares), and sole voting and
dispositive power (48,000 shares) and sole dispositive power (16,900
shares) by Mr. Goldstein, as reported on Schedule 13D/A, filed with the
U.S. Securities and Exchange Commission as of August 8, 2006.
(2) As reported on Schedule 13D/A, filed with the U.S. Securities and
Exchange Commission as of August 8, 2006.
In addition, to the knowledge of the Fund's management, as of January 2,
2007, no Trustee of the Fund owned 1% or more of the outstanding shares of
the Fund, and the officers and Trustees of the Fund owned, as a group, less
than 1% of the outstanding shares of the Fund.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. U.S. securities
law requires that the Fund's Trustees, officers and shareholders owning
more than 10% of outstanding shares, as well as affiliated persons of its
Investment Manager, report their ownership of the Fund's shares and any
changes in that ownership. Specific due dates for these reports have been
established and the Fund is required to report in this proxy statement any
failure to file by these dates during the fiscal year ended August 31,
2006. Based solely on its review of copies of such reports or written
representations from such Trustees, officers, and 10% shareholders, the
Fund believes that all Section 16(a) filing requirements applicable to its
Trustees, officers, and 10% shareholders were complied with during the
fiscal year ended August 31, 2006.
CONTACTING THE BOARD OF TRUSTEES. If a shareholder wishes to send a
communication to the Board, such correspondence should be in writing and
addressed to the Board of Trustees at the Fund's offices, One Franklin
Parkway, San Mateo, California 94403. The correspondence will then be given
to the Board for their review and consideration.
o AUDIT COMMITTEE
The Board has a standing Audit Committee currently consisting of Messrs.
LaHaye (Chairman), Carlson and Wilson, all of whom are Independent Trustees
and also are considered to be OindependentO as that term is defined by the
NYSE's listing standards. The Fund's Audit Committee is responsible for the
appointment, compensation and retention of the Fund's independent
registered public accounting firm (auditors), including evaluating their
independence, recommending the selection of the Fund's auditors to the full
Board, and meeting with such auditors to consider and review matters
relating to the Fund's financial reports and internal accounting.
SELECTION OF AUDITORS. The Audit Committee and the Board have selected the
firm of PricewaterhouseCoopers LLP (OPwCO) as auditors of the Fund for the
current fiscal year. Representatives of PwC are not expected to be present
at the Meeting, but will have the opportunity to make a statement if they
wish, and will be available should any matter arise requiring their
presence.
AUDIT FEES. The aggregate fees paid to PwC for professional services
rendered by PwC for the audit of the Fund's annual financial statements or
for services that are normally provided by PwC in connection with statutory
and regulatory filings or engagements were $22,209 for the fiscal year
ended August 31, 2006, and $16,505 for the fiscal year ended August 31,
2005.
AUDIT- RELATED FEES. The aggregate fees paid to PwC for assurance and
related services rendered by PwC to the Fund that are reasonably related to
the performance of the audit or review of the Fund's financial statements
and are not reported under OAudit FeesO above were $8,736 for the fiscal
year ended August 31, 2006, and $8,400 for the fiscal year ended August 31,
2005. The services for which these fees were paid included attestation
services.
There were no fees paid to PwC for assurance and related services rendered
by PwC to the Investment Manager and any entity controlling, controlled by
or under common control with the Investment Manager that provides ongoing
services to the Fund that are reasonably related to the performance of the
audit of its financial statements for the fiscal years ended August 31,
2006, and August 31, 2005.
TAX FEES. There were no fees paid to PwC for professional services rendered
by PwC to the Fund for tax compliance, tax advice and tax planning for
fiscal years ended August 31, 2006, and August 31, 2006.
There were no fees paid to PwC for professional services rendered by PwC to
the Investment Manager and any entity controlling, controlled by or under
common control with the Investment Manager that provides ongoing services
to the Fund for tax compliance, tax advice and tax planning for the fiscal
years ended August 31, 2006, and August 31, 2005.
ALL OTHER FEES. The aggregate fees paid to PwC for products and services
rendered by PwC to the Fund not reported in previous paragraphs were $110
for the fiscal year ended August 31, 2006, and $0 for the fiscal year ended
August 31, 2005. 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 PwC for products and services rendered by PwC to
the Investment Manager and any entity controlling, controlled by or under
common control with the Investment Manager that provides ongoing services
to the Fund not reported in previous paragraphs were $175,751 for the
fiscal year ended August 31, 2006, and $0 for the fiscal year ended August
31, 2005. The services for which these fees were paid included review of
materials provided to the Fund's Board in connection with the investment
management contract renewal process.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES. As of the date of
this proxy statement, the Audit Committee has not adopted pre-approval
policies and procedures. As a result, all such services described above and
provided by PwC must be directly pre- approved by the Audit Committee.
AGGREGATE NON- AUDIT FEES. The aggregate fees paid to PwC for non- audit
services to the Fund, and to the Investment Manager and any entity
controlling, controlled by, or under common control with the Investment
Manager that provides ongoing services to the Fund, were $184,597 for the
fiscal year ended August 31, 2006, and $8,400 for the fiscal year ended
August 31, 2005.
The Audit Committee has determined that the provision of the non-audit
services that were rendered to the Investment Manager and to any entities
controlling, controlled by, or under common control with the Investment
Manager that provide ongoing services to the Fund is compatible with
maintaining PwC's independence.
AUDIT COMMITTEE REPORT. The Board has adopted and approved a revised formal
written charter for the Audit Committee, which sets forth the Audit
Committee's responsibilities. A copy of the charter was attached as
OAppendix AO to the proxy statement for the Fund's 2006 Annual
Shareholders' Meeting.
As required by the charter, the Audit Committee reviewed the Fund's audited
financial statements and met with management, as well as with PwC, the
Fund's auditors, to discuss the financial statements.
The Audit Committee received the written disclosures and the letter from
PwC required by Independence Standards Board Standard No. 1. The Audit
Committee also received the report of PwC regarding the results of their
audit. In connection with their review of the financial statements and the
auditors' report, the members of the Audit Committee discussed with a
representative of PwC, PwC's independence, as well as the following: the
auditors' responsibilities in accordance with generally accepted auditing
standards; the auditors' responsibilities for information prepared by
management that accompanies the Fund's audited financial statements and any
procedures performed and the results; the initial selection of, and whether
there were any changes in, significant accounting policies or their
application; management's judgments and accounting estimates; whether there
were any significant audit adjustments; whether there were any
disagreements with management; whether there was any consultation with
other accountants; whether there were any major issues discussed with
management prior to the auditors' retention; whether the auditors
encountered any difficulties in dealing with management in performing the
audit; and the auditors' judgments about the quality of the Fund's
accounting principles.
Based on its review and discussions with management and the Fund's
auditors, the Audit Committee did not become aware of any material
misstatements or omissions in the financial statements.
Accordingly, the Audit Committee recommended to the Board that the audited
financial statements be included in the Fund's Annual Report to
Shareholders for the fiscal year ended August 31, 2006, for filing with the
U.S. Securities and Exchange Commission.
THE AUDIT COMMITTEE
Frank W.T. LaHaye (Chairman)
Robert F. Carlson
John B. Wilson
o FURTHER INFORMATION ABOUT VOTING AND THE MEETING
SOLICITATION OF PROXIES. Your vote is being solicited by the Trustees of
the Fund. The cost of soliciting these proxies will be borne by the Fund.
The Fund reimburses brokerage firms and others for their expenses in
forwarding proxy material to the beneficial owners and soliciting them to
execute proxies. In addition, the Fund has made arrangements with The
Altman Group, Inc. to assist with solicitation of proxies. The Fund expects
that the solicitation will be primarily by mail, but also may include
telephone, telecopy, electronic, oral, or other means of communication. If
the Fund does not receive your proxy by a certain time you may receive a
telephone call from a proxy soliciting agent asking you to vote. It is
currently estimated that soliciting fees will be approximately $22,000 to
$38,000, plus expenses. The Fund does not reimburse Trustees and officers
of the Fund, or regular employees and agents of the Investment Manager
involved in the solicitation of proxies. The Fund intends to pay all costs
associated with the solicitation and the Meeting.
VOTING BY BROKER-DEALERS. The Fund expects that, before the Meeting,
broker- dealer firms holding shares of the Fund in Ostreet nameO for their
customers will request voting instructions from their customers and
beneficial owners. If these instructions are not received by the date
specified in the broker- dealer firms' instruction materials, the Fund
understands that NYSE rules permit the broker- dealers, on behalf of their
customers and beneficial owners, to vote on the election of Trustees, but
not on the Shareholder Proposal. Certain broker- dealers may exercise
discretion over shares held in their name for which no instructions are
received by voting those shares in the same proportion as they vote shares
for which they received instructions.
QUORUM. Forty percent of the shares entitled to vote -- present in person or
represented by proxy -- constitutes a quorum at the Meeting. The shares over
which broker- dealers have discretionary voting power, the shares that
represent Obroker non- votesO (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners
or persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on a particular matter), and the shares whose
proxies reflect an abstention on any item are all counted as shares present
and entitled to vote for purposes of determining whether the required
quorum of shares exists.
REQUIRED VOTE. Provided that a quorum is present, the election of Trustees
requires a plurality of shares voted, meaning that the nine nominees
receiving the greatest number of votes shall be elected. All voting rights
are non-cumulative, which means that the holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of such Trustees
if they choose to do so, and in such event, the holders of the remaining
shares voting will not be able to elect any Trustees.
Provided that a quorum has been established, the affirmative vote of a
majority of shares voted at the Meeting is required to approve the
Shareholder Proposal. For purposes of the Shareholder Proposal, abstentions
and broker non- votes will have no effect on the result of the vote. The
Shareholder Proposal is only a recommendation and, if it is approved by the
required vote, will have no binding effect on the Fund or the Board of
Trustees. In considering whether or not to take action in response to the
proposal, the Board of Trustees will give the request set forth in the
Shareholder Proposal such weight as it believes appropriate based on the
voting of shareholders for the proposal and other relevant factors.
ADJOURNMENT. Whether or not a quorum is present at the Meeting, the Meeting
may be adjourned by a majority vote of the shares represented at the
Meeting, either in person or by proxy, properly cast upon the question of
adjournment. If the Meeting is adjourned, notice need not be given of the
adjourned meeting at which the adjournment is taken, unless a new record
date of the adjourned meeting is fixed or unless the adjournment is for
more than 60 days from the date set for the original Meeting, in which case
the Board of Trustees shall set a new date. At any adjourned Meeting, the
Fund may transact any business which might have been transacted at the
original Meeting.
Whether or not a quorum is present, the persons named as proxies may
propose one or more adjournments of the Meeting to permit the further
solicitation of proxies. The persons named as proxies will vote in their
discretion on questions of adjournment those shares for which proxies have
been received that grant discretionary authority to vote on matters that
may properly come before the Meeting, and on any other proposals properly
raised at the Meeting to the extent permitted by the SEC's proxy rules,
including proposals for which management of the Fund did not have timely
notice, as set forth in the SEC's proxy rules.
SHAREHOLDER PROPOSALS. The Fund anticipates mailing this proxy statement on
or about January 29, 2007. The Fund anticipates that its next annual
meeting of shareholders will be held on or about February 15, 2008.
Shareholder proposals to be presented at the next annual meeting must be
received at the Fund's offices, One Franklin Parkway, San Mateo, California
94403, Attention: Secretary, no later than September 8, 2007, in order to
be considered for inclusion in the Fund's proxy statement and proxy card
relating to that meeting and presented at that meeting. Submission of a
proposal by a shareholder does not guarantee that the proposal will be
included in the proxy statement. A shareholder who wishes to make a
proposal at the 2008 Annual Shareholders' Meeting without including the
proposal in the Fund's proxy statement must notify the Fund at the Fund's
offices of such proposal by November 22, 2007. If a shareholder fails to
give notice by this date, then the persons named as proxies in the proxies
solicited by the Board for the 2008 Annual Shareholders' Meeting may
exercise discretionary voting power with respect to any such proposal.
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment or
postponement of the Meeting, the designated proxy holders will vote on such
matters in accordance with the views of management.
By order of the Board of Trustees,
Karen L. Skidmore
SECRETARY
Dated: January 29, 2007
San Mateo, California
FUT PROXY 03/07
PROXY
[GRAPHIC OMITTED]
FRANKLIN UNIVERSAL TRUST
ANNUAL SHAREHOLDERS' MEETING - MARCH 30, 2007
The undersigned hereby revokes all previous proxies for his or her shares and
appoints Craig S. Tyle, Barbara J. Green, David P. Goss and Karen L. Skidmore,
and each of them, proxies of the undersigned with full power of substitution to
vote all shares of Franklin Universal Trust (the "Fund") that the undersigned is
entitled to vote at the Fund's Annual Shareholders' Meeting (the "Meeting") to
be held at One Franklin Parkway, Building 920, San Mateo, CA 94403 at 2:00 p.m.,
Pacific time, on March 30, 2007, including any postponements or adjournments
thereof, upon the matters set forth on the reverse side, and instructs them to
vote upon any other matters that may properly be acted upon at the Meeting.
The Board of Trustees of the Fund solicits this proxy. It will be voted as
specified on the reverse. If no specification is made, this proxy shall be voted
FOR the election of the nominees to the position of Trustee (Proposal 1) and
AGAINST the shareholder proposal (Proposal 2). If any other matters properly
come before the Meeting to be voted on, the proxy holders will vote, act and
consent on those matters in accordance with the views of management. Management
is not aware of any such matters.
You are urged to date and sign this proxy and return it
promptly. This will save the expense of follow-up letters
to shareholders who have not responded.
__________________________________________________________
Signature(s) and Title(s), if applicable Date
----------------------------------------------------------
Signature(s) and Title(s), if applicable Date
Sign your name exactly as it appears in the registration
on the proxy card. If the shares are held jointly, either
party may sign, but the name of the party signing should
conform exactly to the name shown in the registration on
the proxy card. If signing is by attorney, executor,
administrator, trustee or guardian, please print your
full title below your signature.
-------------------------------------------------------------------------------
FOLD HERE
Three simple methods to vote your proxy:
-----------
Internet: Log on to www.myproxyonline.com. Make sure
---------------------
to have this proxy card available when you CONTROL
plan to vote your shares. You will need the NUMBER:
control number and check digit found in the
box at the right at the time you execute
your vote.
Touchtone Simply dial toll-free (866) 458-9861 and CHECK
Phone: follow the automated instructions. Please DIGIT
have this proxy card available at the time ID:
of the call.
Mail: Simply sign, date, and complete the reverse
side of this proxy card and return it in the
postage paid envelope provided.
-----------
TAGID: 12345678 CUSIP: 123456789
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE. [x]
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES.
1. Proposal: Election of Trustees.
WITHHOLD
FOR ALL FROM ALL
NOMINEES: (NOMINEES) (NOMINEES)
(01) Harris J. Ashton (04) Edward B. Jamieson (07) Frank W.T. LaHaye
(02) Robert F. Carlson (05) Charles B. Johnson (08) Frank A. Olson
(03) Edith E. Holiday (06) Rupert H. Johnson, Jr. (09) John B. Wilson
----------------------------------------------------------------------
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided above.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL 2.
2. Shareholder Proposal: FOR AGAINST ABSTAIN
RESOLVED: The shareholders of Franklin Universal Trust (the "Trust")
request that the Board of Trustees promptly take the steps necessary
to open end the Trust or otherwise enable shareholders to realize net
asset value ("NAV") for their shares.
If you should have any questions about the proxy material or the execution of
your vote, simply call 1 800-336-5159 between the hours of 10 am and 10 pm
Eastern time. Representatives will be happy to assist you. Please have this
proxy card available at the time of the call.
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!