Franklin Universal Trust : Semiannual Report

SEMIANNUAL REPORT

Distribution Policy: The Fund's Board of Trustees (the "Board") has authorized a distribution policy (the "Distribution Policy"). Under the Distribution Policy, the Fund pays monthly distributions and seeks to maintain a relatively stable level of distributions to shareholders. With each distribution, the Fund will issue a notice to its shareholders and an accompanying press release that provides estimates regarding the amount and composition of the distribution. The Fund will send a Form 1099-DIV to shareholders for the calendar year that will describe how to report the Fund's distributions for federal income tax purposes. Shareholders should not draw any conclusions about the Fund's investment performance from the amount of distributions or from the terms of the Fund's Distribution Policy. The Board may amend or terminate the Distribution Policy at any time without prior notice to shareholders; however, at this time there are no reasonably foreseeable circumstances that might cause the termination of the Distribution Policy.

Contents

Semiannual Report

Franklin Universal Trust ......................................................... 2

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

Financial Highlights and Statement of Investments ............... 8

Financial Statements ........................................................... 41

Notes to Financial Statements ............................................. 45

Important Information to Shareholders ................................ 55

Annual Meeting of Shareholders ......................................... 56

Dividend Reinvestment and Cash Purchase Plan ............... 57

Shareholder Information ...................................................... 59

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Not FDIC InsuredMay Lose ValueNo Bank Guarantee

SEMIANNUAL REPORT

Franklin Universal Trust

Dear Shareholder:

This semiannual report for Franklin Universal Trust covers the period ended February 28, 2022.

Your Fund's Goal and Main Investments

The Fund's primary investment objective is to provide high, current income consistent with preservation of capital. Its secondary objective is growth of income through dividend increases and capital appreciation.

Performance Overview

For the six months under review, the Fund's cumulative total returns were -0.88% based on net asset value and -3.90% based on market price, as shown in the Performance Summary on page 5. For comparison, the Credit Suisse (CS) High Yield Index, which is designed to mirror the investable universe of the U.S. dollar-denominated high-yield debt market, posted a -2.60% cumulative total return,1 and utilities stocks, as measured by the Standard & Poor's® (S&P®) 500 Utilities Index, which tracks all electric utility stocks in the broad S&P 500® Index, posted a +0.58% cumulative total return for the same period.2

The Fund has a policy of seeking to maintain a relatively stable level of distributions to shareholders. This policy has no impact on the Fund's investment strategy and may reduce the Fund's net asset value. The Fund's investment manager believes the policy helps maintain the Fund's competitiveness and may benefit the Fund's market price and premium/discount to the Fund's net asset value.

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. Source: Credit Suisse Group.

  Economic and Market Overview

  The U.S. bond market, as measured by the Bloomberg U.S. Aggregate Bond Index, posted a -0.66% total return for the six months ended February 28, 2022.2 The inflation rate continued to increase during the six-month period amid increased demand and supply-chain bottlenecks, reaching its highest point since 1982. U.S. consumer spending on goods remained strong, adding to pressure on the prices of many products. Inflation reduces the value of bonds in real terms, so rising inflation during the period negatively impacted bond prices. However, the armed conflict in Europe that began late in the period drove a partial recovery in bond prices, as uncertainty led investors to move into bonds and away from equities.

  In an effort to support the economy, the U.S. Federal Reserve (Fed) kept the federal funds target rate at a record-low range of 0.00%-0.25%. While the Fed also maintained quantitative easing measures with U.S. Treasury (UST) and mortgage bond purchasing, it began to reduce the rate of purchases beginning in November 2021 and accelerated the pace of tapering in December. The Fed also noted in its January 2022 meeting statement that the persistently high inflation rate and strong labor market meant that it expected conditions will soon be appropriate to raise the federal funds target rate.

  UST bonds, as measured by the Bloomberg U.S. Treasury Index, posted a -2.11% total return for the six-month period.2 The 10-year UST yield (which moves inversely to price) grew notably amid high inflation and the Fed's less accommodative stance. Yields rose more slowly on the longest-term (20-year and 30-year) USTs, while rising faster on USTs with terms between six months and seven years.

  Consequently, the yield curve flattened, reflecting investors' concerns about long-term economic growth. Mortgage-backed securities (MBS), as measured by the Bloomberg U.S. MBS Index, posted a -2.88% total return for the period.2

  Corporate bond total returns were mixed, as the yield spread between USTs and corporate bonds widened. High-yield corporate bonds, as represented by the Bloomberg U.S. Corporate High Yield Bond Index, posted a +0.64%

• 2. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.

The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund's portfolio.

Seewww.franklintempletondatasources.comfor additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund's Statement of Investments (SOI). The SOI begins on page 9.

FRANKLIN UNIVERSAL TRUST

total return, while investment-grade corporate bonds, as represented by the Bloomberg U.S. Corporate Bond Index, posted a -3.40% total return.2

Investment Strategy

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

Manager's Discussion

As the U.S. economy transitioned from summer into fall of 2021, inflation and commensurate risks of higher commodity prices took center stage. As supply chain-induced inflation persisted, U.S. policymakers signaled a move away from the "transitory inflation" stance, leading to renewed market focus on the timing of a Fed bond-buying taper and interest-rate hike. Amid ever-changing views around the trajectory of Fed tapering, UST yields experienced periods of volatility. During November 2021, news of the highly contagious Omicron variant weighed on market sentiment. Against this backdrop, the Fed began the process of winding down its pandemic-era asset purchases, which was followed with a December 2021 announcement that tapering of asset purchases will be accelerated to the monthly rate of $30 billion starting in January 2022; at this pace, the Fed will cease their purchases by mid-March of 2022. As the Fed had turned much more hawkish in ending accommodative policies to rein in inflation, market participants speculated on whether the Fed will likely raise interest rates at its March 2022 meeting by 25 or 50 basis points (bps). Toward the end of February, concerns related to the Russia-Ukraine conflict, geopolitical tensions and a sharp rise in inflation expectations weighed on market sentiment. Investors grew increasingly concerned about the potential global-growth ramifications of international sanctions on Russia. Despite risk-off market volatility, UST rates rose as the yield curve flattened; credit spreads widened and fixed income sectors generally posted negative total returns.

Portfolio Composition 2/28/22

% of Total Investments*

Corporate Bonds 54.4%

Common Stocks 34.0%

Marketplace Loans 8.6%

Asset-Backed Securities 1.2%

Other** 0.3%

Short-Term Investments 1.5%

*Percentage of total investments of the Fund. Total investments of the fund include long-term and short -term investments, excluding long-term debt issued by the Fund.

**Includes convertible bonds, escrows and litigation trusts, preferred stocks, and warrants.

Top 10 Holdings 2/28/22

% of Total
Issuer	Net Assets
a	a
NextEra Energy, Inc.	4.2%
Sempra Energy	3.0%
American Electric Power Co., Inc.	2.7%
CMS Energy Corp.	2.7%
Dominion Energy, Inc.	2.4%
Alliant Energy Corp.	2.2%
Evergy, Inc.	2.1%
Duke Energy Corp.	1.9%
Freeport-McMoRan, Inc.	1.8%
Xcel Energy, Inc.	1.7%
High-Yield Corporate Bonds

For the six-month period under review, the CS High Yield Index posted negative returns as CCC-rated high-yield (HY) bonds generally performed better than their higher-rated counterparts on a relative basis. From a sector standpoint, issuers in energy were notable outperformers.

In the period leading up to the end of 2021, the HY sector enjoyed a favorable environment for leveraged credit, and investors' reach for yield remained strong as market participants focused on the positives. HY spreads ended 2021 close to the lows of the year despite a scare in the closing weeks from the Omicron variant and the Fed's hawkish pivot. Since then, a broader risk-off tone set in as markets priced in more Fed tightening and escalating geopolitical risks around the Russia-Ukraine conflict prompted HY spreads to widen. HY credit fundamentals and corporate balance sheets, however, remained generally good, in our view. As of the fourth quarter of 2021, net leverage for the overall asset class and interest coverage levels were healthy. While input-cost inflation pressures and