UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05569
Franklin Universal Trust
(Exact name of registrant as specified in charter)
One Franklin Parkway,
San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Craig S. Tyle,
One Franklin Parkway,
San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrants telephone number, including area code: (650) 312-2000
Date of fiscal year end: 8/31_
Date of reporting period: 2/28/19
Item 1. | Reports to Stockholders. |
|
Semiannual Report
February 28, 2019 |
Internet Delivery of Fund Reports Unless You Request Paper Copies: Effective January 1, 2021, as permitted by the SEC, paper copies of the Funds shareholder reports will no longer be sent by mail, unless you specifically request them from the Fund or your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. If you have not signed up for electronic delivery, we would encourage you to join fellow shareholders who have. You may elect to receive shareholder reports and other communications electronically from the Fund by calling (800) 416-5585 or by contacting your financial intermediary.
You may elect to continue to receive paper copies of all your future shareholder reports free of charge by contacting your financial intermediary or, if you invest directly with a Fund, calling (800) 416-5585 to let the Fund know of your request. Your election to receive reports in paper will apply to all funds held in your account.
Franklin Templeton
Successful investing begins with ambition. And achievement only comes when you reach for it. Thats why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.
During our more than 70 years of experience, weve managed through all kinds of marketsup, down and those in between. Were always preparing for what may come next. Its because of this, combined with our strength as one of the worlds largest asset managers that weve earned the trust of millions of investors around the world.
Not FDIC Insured | May Lose Value | No Bank Guarantee |
franklintempleton.com | Not part of the semiannual report | 1 |
1. Credit Suisse Group.
2. Source: Morningstar.
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 Funds portfolio.
3. Source: Bureau of Labor Statistics.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Funds Statement of Investments (SOI). The SOI begins on page 8.
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Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
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FRANKLIN UNIVERSAL TRUST
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FRANKLIN UNIVERSAL TRUST
Performance Summary as of February 28, 2019
Total return reflects reinvestment of the Funds dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not reflect any sales charges paid at inception or brokerage commissions paid on secondary market purchases. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Your dividend income will vary depending on dividends or interest paid by securities in the Funds portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 2/28/191
Cumulative Total Return2 | Average Annual Total Return2 | |||||||||||||||||
Based on NAV3 |
Based on market price4 |
Based on NAV3 |
Based on market price4 |
|||||||||||||||
6-Month |
+4.50% | +5.79% | +4.50% | +5.79% | ||||||||||||||
1-Year |
+9.25% | +8.03% | +9.25% | +8.03% | ||||||||||||||
5-Year |
+31.69% | +32.30% | +5.66% | +5.76% | ||||||||||||||
10-Year |
+240.43% | +248.39% | +13.03% | +13.29% |
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.
Share Prices
Symbol: FT |
2/28/19 | 8/31/18 | Change | |||||||||
Net Asset Value (NAV) |
$8.15 | $7.99 | +$0.16 | |||||||||
Market Price (NYSE) |
$6.96 | $6.77 | +$0.19 |
Distributions (9/1/182/28/19)
Net Investment Income |
$0.1920 |
All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. As prices of bonds in a fund adjust to a rise in interest rates, the Funds share price may decline. Investments in lower rated bonds include higher risk of default and loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. In addition to having sensitivity to other factors, securities issued by utility companies have historically been sensitive to interest rate changes. When interest rates fall, utility securities prices, and thus a utilities funds share price, tend to rise; when interest rates rise, their prices generally fall. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease or be totally eliminated without notice. The Fund is actively managed but there is no guarantee that the managers investment decisions will produce the desired results.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 10/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
3. Assumes reinvestment of distributions based on net asset value.
4. Assumes reinvestment of distributions based on the dividend reinvestment and cash purchase plan.
franklintempleton.com | Semiannual Report | 5 |
FRANKLIN UNIVERSAL TRUST
Important Notice to Shareholders
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FRANKLIN UNIVERSAL TRUST
Six Months Ended February 28, 2019 |
Year Ended August 31, | |||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Per share operating performance |
||||||||||||||||||||||||
(for a share outstanding throughout the period) |
||||||||||||||||||||||||
Net asset value, beginning of period |
$ 7.99 | $ 8.24 | $ 7.67 | $ 7.11 | $ 8.34 | $ 7.61 | ||||||||||||||||||
Income from investment operations: |
||||||||||||||||||||||||
Net investment incomea |
0.19 | 0.39 | 0.38 | 0.39 | 0.45 | 0.47 | ||||||||||||||||||
Net realized and unrealized gains (losses) |
0.16 | (0.26 | ) | 0.57 | 0.64 | (1.21 | ) | 0.73 | ||||||||||||||||
Total from investment operations |
0.35 | 0.13 | 0.95 | 1.03 | (0.76 | ) | 1.20 | |||||||||||||||||
Less distributions from net investment income |
(0.19 | ) | (0.38 | ) | (0.38 | ) | (0.47 | ) | (0.47 | ) | (0.47 | ) | ||||||||||||
Net asset value, end of period |
$ 8.15 | $ 7.99 | $ 8.24 | $ 7.67 | $ 7.11 | $ 8.34 | ||||||||||||||||||
Market value, end of periodb |
$ 6.96 | $ 6.77 | $ 7.24 | $ 6.84 | $ 6.10 | $ 7.39 | ||||||||||||||||||
Total return (based on market value per share)c |
5.79% | (1.18)% | 11.81% | 20.76% | (11.57)% | 16.71% | ||||||||||||||||||
Ratios to average net assetsd |
||||||||||||||||||||||||
Expenses before waiver and payments by affiliates |
2.47% | 1.98% | 2.00% | 2.13% | 1.97% | 1.97% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatese |
2.46% | 1.98% | f | 1.99% | 2.12% | 1.97% | f | 1.97% | f | |||||||||||||||
Net investment income |
4.88% | 4.91% | 4.81% | 5.48% | 5.63% | 5.76% | ||||||||||||||||||
Supplemental data |
||||||||||||||||||||||||
Net assets, end of period (000s) |
$204,785 | $200,796 | $206,965 | $192,682 | $178,747 | $209,674 | ||||||||||||||||||
Portfolio turnover rate |
7.83% | 22.96% | 23.25% | 21.13% | 20.30% | 18.25% | ||||||||||||||||||
Total debt outstanding at end of period (000s) |
$65,000 | $65,000 | $60,000 | $60,000 | $60,000 | $60,000 | ||||||||||||||||||
Asset coverage per $1,000 of debt |
$4,151 | $4,089 | $4,449 | $4,211 | $3,979 | $4,495 | ||||||||||||||||||
Average amount of senior rate fixed Notes per share during the period |
$2.59 | $2.39 | $2.39 | $2.39 | $2.39 | $2.39 |
aBased on average daily shares outstanding.
bBased on the last sale on the New York Stock Exchange.
cTotal return is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 7 |
FRANKLIN UNIVERSAL TRUST
Statement of Investments, February 28, 2019 (unaudited)
Country | Shares/ Warrants |
Value | ||||||||||
Common Stocks and Other Equity Interests 41.0% |
||||||||||||
Energy 1.3% |
||||||||||||
a Birch Permian Holdings Inc |
United States | 66,542 | $ | 765,233 | ||||||||
a Chaparral Energy Inc., A |
United States | 5,868 | 31,687 | |||||||||
a,b Chaparral Energy Inc., A, 144A |
United States | 214 | 1,156 | |||||||||
Enbridge Inc. |
Canada | 39,360 | 1,455,926 | |||||||||
a Goodrich Petroleum Corp. |
United States | 19,379 | 251,346 | |||||||||
a Halcon Resources Corp. |
United States | 52,355 | 78,533 | |||||||||
a Halcon Resources Corp., wts., 9/09/20 |
United States | 4,668 | 93 | |||||||||
a Midstates Petroleum Co. Inc. |
United States | 238 | 2,056 | |||||||||
a,c Midstates Petroleum Co. Inc., wts., 4/21/20 |
United States | 2,311 | | |||||||||
a Riviera Resources Inc. |
United States | 5,272 | 78,395 | |||||||||
a Roan Resources Inc. |
United States | 5,272 | 40,963 | |||||||||
|
|
|||||||||||
2,705,388 | ||||||||||||
|
|
|||||||||||
Materials 1.2% |
||||||||||||
BHP Group PLC, ADR |
United Kingdom | 25,185 | 1,167,828 | |||||||||
Freeport-McMoRan Inc. |
United States | 80,380 | 1,036,902 | |||||||||
South32 Ltd., ADR |
Australia | 10,074 | 140,482 | |||||||||
a Verso Corp., A |
United States | 3,330 | 65,434 | |||||||||
a Verso Corp., wts., 7/25/23 |
United States | 350 | 1,383 | |||||||||
|
|
|||||||||||
2,412,029 | ||||||||||||
|
|
|||||||||||
Transportation 0.1% |
||||||||||||
a CEVA Logistics AG |
Switzerland | 5,770 | 173,710 | |||||||||
|
|
|||||||||||
Utilities 38.4% |
||||||||||||
Alliant Energy Corp. |
United States | 80,000 | 3,669,600 | |||||||||
American Electric Power Co. Inc. |
United States | 65,000 | 5,274,750 | |||||||||
CenterPoint Energy Inc. |
United States | 122,800 | 3,701,192 | |||||||||
CMS Energy Corp. |
United States | 90,000 | 4,896,000 | |||||||||
Consolidated Edison Inc. |
United States | 40,000 | 3,298,000 | |||||||||
Dominion Energy Inc. |
United States | 67,200 | 4,978,848 | |||||||||
DTE Energy Co. |
United States | 30,000 | 3,706,800 | |||||||||
Duke Energy Corp. |
United States | 46,060 | 4,129,740 | |||||||||
Edison International |
United States | 36,000 | 2,156,040 | |||||||||
Entergy Corp. |
United States | 30,000 | 2,799,900 | |||||||||
Evergy Inc. |
United States | 80,000 | 4,472,800 | |||||||||
Exelon Corp. |
United States | 80,000 | 3,887,200 | |||||||||
FirstEnergy Corp. |
United States | 40,000 | 1,630,000 | |||||||||
NextEra Energy Inc. |
United States | 30,000 | 5,631,600 | |||||||||
NiSource Inc. |
United States | 60,000 | 1,618,800 | |||||||||
Pinnacle West Capital Corp. |
United States | 44,800 | 4,199,552 | |||||||||
PPL Corp. |
United States | 24,500 | 788,165 | |||||||||
Public Service Enterprise Group Inc. |
United States | 45,000 | 2,646,450 | |||||||||
Sempra Energy |
United States | 45,000 | 5,419,800 | |||||||||
The Southern Co. |
United States | 68,250 | 3,391,342 | |||||||||
WEC Energy Group Inc. |
United States | 40,000 | 3,051,200 | |||||||||
Xcel Energy Inc. |
United States | 60,000 | 3,291,600 | |||||||||
|
|
|||||||||||
78,639,379 | ||||||||||||
|
|
|||||||||||
Total Common Stocks and Other Equity Interests |
83,930,506 | |||||||||||
|
|
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Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||||
Corporate Bonds 88.3% |
||||||||||||
Automobiles & Components 0.8% |
||||||||||||
b Allison Transmission Inc., senior bond, 144A, 4.75%, 10/01/27 |
United States | $ | 600,000 | $ | 577,500 | |||||||
The Goodyear Tire & Rubber Co., senior bond, 5.00%, 5/31/26 |
United States | 1,100,000 | 1,047,750 | |||||||||
1,625,250 | ||||||||||||
|
|
|||||||||||
Banks 1.3% |
||||||||||||
CIT Group Inc., senior note, 5.25%, 3/07/25 |
United States | 600,000 | 628,500 | |||||||||
d JPMorgan Chase & Co., |
||||||||||||
junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual |
United States | 900,000 | 930,344 | |||||||||
junior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, Perpetual |
United States | 1,100,000 | 1,100,000 | |||||||||
|
|
|||||||||||
2,658,844 | ||||||||||||
|
|
|||||||||||
Capital Goods 6.5% |
||||||||||||
b BBA U.S. Holdings Inc., senior note, 144A, 5.375%, 5/01/26 |
United States | 500,000 | 510,625 | |||||||||
b Beacon Roofing Supply Inc., senior note, 144A, 4.875%, 11/01/25 |
United States | 600,000 | 560,812 | |||||||||
b BWX Technologies Inc., senior note, 144A, 5.375%, 7/15/26 |
United States | 600,000 | 615,000 | |||||||||
b Cloud Crane LLC, secured note, second lien, 144A, 10.125%, 8/01/24 |
United States | 300,000 | 320,250 | |||||||||
CNH Industrial Capital LLC, senior note, 3.875%, 10/15/21 |
United States | 300,000 | 301,350 | |||||||||
H&E Equipment Services Inc., senior note, 5.625%, 9/01/25 |
United States | 1,300,000 | 1,291,875 | |||||||||
b HD Supply Inc., senior note, 144A, 5.375%, 10/15/26 |
United States | 600,000 | 612,000 | |||||||||
b Jeld-Wen Inc., |
||||||||||||
senior bond, 144A, 4.875%, 12/15/27 |
United States | 300,000 | 278,625 | |||||||||
senior note, 144A, 4.625%, 12/15/25 |
United States | 300,000 | 283,125 | |||||||||
b NCI Building Systems Inc., senior secured note, 144A, 8.00%, 4/15/26 |
United States | 900,000 | 852,750 | |||||||||
b Stevens Holding Co. Inc., senior note, 144A, 6.125%, 10/01/26 |
United States | 1,200,000 | 1,230,000 | |||||||||
Tennant Co., senior note, 5.625%, 5/01/25 |
United States | 1,600,000 | 1,598,000 | |||||||||
b Terex Corp., senior note, 144A, 5.625%, 2/01/25 |
United States | 1,400,000 | 1,363,250 | |||||||||
b TransDigm Inc., senior secured note, 144A, 6.25%, 3/15/26 |
United States | 1,700,000 | 1,746,750 | |||||||||
b Vertiv Group Corp., senior note, 144A, 9.25%, 10/15/24 |
United States | 1,700,000 | 1,710,710 | |||||||||
|
|
|||||||||||
13,275,122 | ||||||||||||
|
|
|||||||||||
Commercial & Professional Services 2.3% |
||||||||||||
b Multi-Color Corp., senior note, 144A, 4.875%, 11/01/25 |
United States | 1,100,000 | 1,117,875 | |||||||||
United Rentals North America Inc., |
||||||||||||
senior bond, 5.75%, 11/15/24 |
United States | 1,400,000 | 1,447,250 | |||||||||
senior bond, 5.875%, 9/15/26 |
United States | 100,000 | 102,750 | |||||||||
senior bond, 5.50%, 5/15/27 |
United States | 500,000 | 501,250 | |||||||||
b West Corp., senior note, 144A, 8.50%, 10/15/25 |
United States | 1,800,000 | 1,495,728 | |||||||||
|
|
|||||||||||
4,664,853 | ||||||||||||
|
|
|||||||||||
Consumer Durables & Apparel 3.5% |
||||||||||||
b Ashton Woods USA LLC, senior note, 144A, 6.75%, 8/01/25 |
United States | 1,500,000 | 1,350,525 | |||||||||
b Hanesbrands Inc., senior note, 144A, 4.625%, 5/15/24 |
United States | 1,000,000 | 1,003,900 | |||||||||
PulteGroup Inc., senior bond, 5.00%, 1/15/27 |
United States | 1,500,000 | 1,441,875 | |||||||||
b Taylor Morrison Communities Inc./Taylor Morrison Holdings II Inc., |
||||||||||||
senior note, 144A, 5.25%, 4/15/21 |
United States | 400,000 | 402,000 | |||||||||
senior note, 144A, 5.625%, 3/01/24 |
United States | 600,000 | 595,500 | |||||||||
Toll Brothers Finance Corp., senior bond, 5.625%, 1/15/24 |
United States | 700,000 | 732,375 | |||||||||
Weekley Homes LLC/Weekley Finance Corp., senior note, 6.625%, 8/15/25 |
United States | 1,700,000 | 1,610,750 | |||||||||
7,136,925 | ||||||||||||
|
|
|||||||||||
Consumer Services 7.2% |
||||||||||||
b 1011778 BC ULC/New Red Finance Inc., senior secured note, first lien, 144A, 4.25%, 5/15/24 |
Canada | 900,000 | 878,098 | |||||||||
b 24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22 |
United States | 1,800,000 | 1,773,000 | |||||||||
b Ascend Learning LLC, senior note, 144A, 6.875%, 8/01/25 |
United States | 1,200,000 | 1,174,500 |
franklintempleton.com | Semiannual Report | 9 |
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||||
Corporate Bonds (continued) |
||||||||||||
Consumer Services (continued) |
||||||||||||
b Boyne USA Inc., secured note, second lien, 144A, 7.25%, 5/01/25 |
United States | $ | 1,500,000 | $ | 1,612,500 | |||||||
b Downstream Development Authority of the Quapaw Tribe of Oklahoma, secured note, 144A, 10.50%, 2/15/23 |
United States | 1,500,000 | 1,533,750 | |||||||||
b Golden Nugget Inc., |
||||||||||||
senior note, 144A, 6.75%, 10/15/24 |
United States | 1,100,000 | 1,108,250 | |||||||||
senior note, 144A, 8.75%, 10/01/25 |
United States | 600,000 | 619,500 | |||||||||
b KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, |
||||||||||||
senior note, 144A, 5.00%, 6/01/24 |
United States | 600,000 | 609,168 | |||||||||
senior note, 144A, 5.25%, 6/01/26 |
United States | 600,000 | 613,062 | |||||||||
b MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer Inc., senior note, 144A, 5.75%, 2/01/27 |
United States | 500,000 | 512,500 | |||||||||
b Stars Group Holdings BV/Stars Group U.S. Co-Borrower LLC, senior note, 144A, 7.00%, 7/15/26 |
Canada | 1,600,000 | 1,641,296 | |||||||||
b Studio City Finance Ltd., senior note, 144A, 7.25%, 2/11/24 |
Macau | 1,300,000 | 1,325,870 | |||||||||
b Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25 |
United States | 1,300,000 | 1,298,765 | |||||||||
|
|
|||||||||||
14,700,259 | ||||||||||||
|
|
|||||||||||
Diversified Financials 1.7% |
||||||||||||
b FirstCash Inc., senior note, 144A, 5.375%, 6/01/24 |
United States | 1,100,000 | 1,119,580 | |||||||||
b MSCI Inc., senior note, 144A, 5.375%, 5/15/27 |
United States | 700,000 | 724,500 | |||||||||
Navient Corp., |
||||||||||||
senior note, 6.625%, 7/26/21 |
United States | 400,000 | 414,500 | |||||||||
senior note, 6.50%, 6/15/22 |
United States | 500,000 | 513,750 | |||||||||
senior note, 7.25%, 9/25/23 |
United States | 600,000 | 621,000 | |||||||||
|
|
|||||||||||
3,393,330 | ||||||||||||
|
|
|||||||||||
Energy 10.5% |
||||||||||||
b Aker BP ASA, senior note, 144A, 5.875%, 3/31/25 |
Norway | 1,000,000 | 1,033,356 | |||||||||
California Resources Corp., |
||||||||||||
b secured note, second lien, 144A, 8.00%, 12/15/22 |
United States | 515,000 | 412,644 | |||||||||
senior bond, 6.00%, 11/15/24 |
United States | 15,000 | 10,650 | |||||||||
senior note, 5.50%, 9/15/21. |
United States | 10,000 | 8,050 | |||||||||
Callon Petroleum Co., senior note, 6.375%, 7/01/26 |
United States | 1,300,000 | 1,306,500 | |||||||||
Calumet Specialty Products Partners LP/Calumet Finance Corp., senior note, 7.75%, 4/15/23 |
United States | 800,000 | 694,000 | |||||||||
Cheniere Corpus Christi Holdings LLC, |
||||||||||||
senior secured note, first lien, 7.00%, 6/30/24 |
United States | 600,000 | 666,000 | |||||||||
senior secured note, first lien, 5.875%, 3/31/25 |
United States | 1,000,000 | 1,067,510 | |||||||||
Cheniere Energy Partners LP, |
||||||||||||
b senior note, 144A, 5.625%, 10/01/26 |
United States | 700,000 | 714,875 | |||||||||
senior secured note, first lien, 5.25%, 10/01/25 |
United States | 1,200,000 | 1,219,500 | |||||||||
Chesapeake Energy Corp., senior note, 7.50%, 10/01/26 |
United States | 1,800,000 | 1,786,500 | |||||||||
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp., |
||||||||||||
senior note, 6.25%, 4/01/23 |
United States | 500,000 | 515,760 | |||||||||
senior note, 5.75%, 4/01/25 |
United States | 800,000 | 809,250 | |||||||||
CSI Compressco LP/CSI Compressco Finance Inc., senior note, 7.25%, 8/15/22 |
United States | 1,300,000 | 1,166,750 | |||||||||
b Diamondback Energy Inc., senior note, 144A, 4.75%, 11/01/24 |
United States | 900,000 | 914,625 | |||||||||
Energy Transfer LP, |
||||||||||||
senior bond, first lien, 7.50%, 10/15/20 |
United States | 1,200,000 | 1,278,000 | |||||||||
senior secured bond, first lien, 5.875%, 1/15/24 |
United States | 200,000 | 215,000 |
10 |
Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||||
Corporate Bonds (continued) |
||||||||||||
Energy (continued) |
||||||||||||
b,e EnQuest PLC, senior note, 144A, PIK, 7.00%, 4/15/22 |
United Kingdom | $ | 688,666 | $ | 565,567 | |||||||
HighPoint Operating Corp., senior note, 8.75%, 6/15/25 |
United States | 1,700,000 | 1,657,500 | |||||||||
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, 2/15/21 |
United States | 600,000 | 587,250 | |||||||||
b,e Murray Energy Corp., secured note, 1.5 lien, 144A, PIK, 12.00%, 4/15/24 |
United States | 746,536 | 338,927 | |||||||||
Oceaneering International Inc., senior note, 6.00%, 2/01/28 |
United States | 800,000 | 760,000 | |||||||||
QEP Resources Inc., senior bond, 5.375%, 10/01/22 |
United States | 1,600,000 | 1,578,000 | |||||||||
Sanchez Energy Corp., |
||||||||||||
senior note, 7.75%, 6/15/21 |
United States | 800,000 | 132,000 | |||||||||
senior note, 6.125%, 1/15/23 |
United States | 100,000 | 15,250 | |||||||||
Sunoco LP/Sunoco Finance Corp., senior note, 4.875%, 1/15/23 |
United States | 700,000 | 710,500 | |||||||||
Weatherford International Ltd., |
||||||||||||
senior note, 5.125%, 9/15/20 |
United States | 200,000 | 168,000 | |||||||||
senior note, 7.75%, 6/15/21 |
United States | 600,000 | 540,000 | |||||||||
senior note, 4.50%, 4/15/22 |
United States | 400,000 | 277,000 | |||||||||
senior note, 8.25%, 6/15/23 |
United States | 600,000 | 430,500 | |||||||||
|
|
|||||||||||
|
21,579,464 |
| ||||||||||
|
|
|||||||||||
Food & Staples Retailing 0.3% |
||||||||||||
b Aramark Services Inc., senior bond, 144A, 5.00%, 2/01/28 |
United States | 700,000 | 693,000 | |||||||||
|
|
|||||||||||
Food, Beverage & Tobacco 2.5% |
||||||||||||
B&G Foods Inc., senior note, 5.25%, 4/01/25 |
United States | 1,200,000 | 1,152,648 | |||||||||
b Cott Holdings Inc., senior note, 144A, 5.50%, 4/01/25 |
Canada | 1,200,000 | 1,191,000 | |||||||||
b Lamb Weston Holdings Inc., |
||||||||||||
senior note, 144A, 4.625%, 11/01/24 |
United States | 700,000 | 705,250 | |||||||||
senior note, 144A, 4.875%, 11/01/26 |
United States | 1,000,000 | 1,006,250 | |||||||||
b Post Holdings Inc., |
||||||||||||
senior bond, 144A, 5.00%, 8/15/26 |
United States | 800,000 | 773,000 | |||||||||
senior bond, 144A, 5.625%, 1/15/28 |
United States | 300,000 | 291,000 | |||||||||
|
|
|||||||||||
|
5,119,148 |
| ||||||||||
|
|
|||||||||||
Health Care Equipment & Services 7.2% |
||||||||||||
b Avantor Inc., senior secured note, first lien, 144A, 6.00%, 10/01/24 |
United States | 700,000 | 715,750 | |||||||||
b Catalent Pharma Solutions Inc., senior note, 144A, 4.875%, 1/15/26 |
United States | 1,400,000 | 1,393,000 | |||||||||
b Centene Corp., senior note, 144A, 5.375%, 6/01/26 |
United States | 1,700,000 | 1,768,000 | |||||||||
CHS/Community Health Systems Inc., |
||||||||||||
senior note, 6.875%, 2/01/22 |
United States | 175,000 | 115,500 | |||||||||
b senior note, 144A, 8.125%, 6/30/24 |
United States | 718,000 | 595,940 | |||||||||
senior secured note, first lien, 6.25%, 3/31/23 |
United States | 600,000 | 579,750 | |||||||||
HCA Inc., |
||||||||||||
senior bond, 5.875%, 2/15/26 |
United States | 1,400,000 | 1,482,250 | |||||||||
senior bond, 5.875%, 2/01/29 |
United States | 600,000 | 630,000 | |||||||||
b MEDNAX Inc., senior note, 144A, 6.25%, 1/15/27 |
United States | 1,500,000 | 1,512,075 | |||||||||
b MPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24 |
United States | 1,300,000 | 1,298,375 | |||||||||
b,e Polaris Intermediate Corp., senior note, 144A, PIK, 8.50%, 12/01/22 |
United States | 400,000 | 396,384 | |||||||||
Tenet Healthcare Corp., |
||||||||||||
senior note, 5.50%, 3/01/19 |
United States | 400,000 | 400,000 | |||||||||
senior note, 8.125%, 4/01/22 |
United States | 1,000,000 | 1,071,250 | |||||||||
b senior note, second lien, 144A, 6.25%, 2/01/27 |
United States | 1,000,000 | 1,030,625 | |||||||||
WellCare Health Plans Inc., |
||||||||||||
senior note, 5.25%, 4/01/25 |
United States | 1,200,000 | 1,229,640 | |||||||||
b senior note, 144A, 5.375%, 8/15/26 |
United States | 500,000 | 515,625 | |||||||||
|
|
|||||||||||
|
14,734,164 |
| ||||||||||
|
|
franklintempleton.com | Semiannual Report | 11 |
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||||
Corporate Bonds (continued) |
||||||||||||
Household & Personal Products 0.4% |
||||||||||||
b Prestige Brands Inc., senior note, 144A, 6.375%, 3/01/24 |
United States | $ | 900,000 | $ | 909,000 | |||||||
|
|
|||||||||||
Materials 10.7% |
||||||||||||
e ARD Finance SA, secured note, PIK, 7.125%, 9/15/23 |
Luxembourg | 400,000 | 403,000 | |||||||||
b BWAY Holding Co., senior note, 144A, 7.25%, 4/15/25 |
United States | 1,800,000 | 1,714,500 | |||||||||
The Chemours Co., |
||||||||||||
senior note, 6.625%, 5/15/23 |
United States | 569,000 | 592,500 | |||||||||
senior note, 5.375%, 5/15/27 |
United States | 300,000 | 294,000 | |||||||||
Crown Americas LLC/Crown Americas Capital Corp. VI, senior note, 4.75%, 2/01/26 |
United States | 700,000 | 705,124 | |||||||||
b Eldorado Gold Corp., senior note, 144A, 6.125%, 12/15/20 |
Canada | 500,000 | 488,750 | |||||||||
b Element Solutions Inc., senior note, 144A, 5.875%, 12/01/25 |
United States | 1,000,000 | 1,016,880 | |||||||||
b First Quantum Minerals Ltd., |
||||||||||||
senior note, 144A, 7.00%, 2/15/21 |
Zambia | 431,000 | 438,919 | |||||||||
senior note, 144A, 7.25%, 4/01/23 |
Zambia | 600,000 | 591,750 | |||||||||
senior note, 144A, 6.875%, 3/01/26 |
Zambia | 800,000 | 748,000 | |||||||||
b FMG Resources (August 2006) Pty. Ltd., |
||||||||||||
senior note, 144A, 4.75%, 5/15/22 |
Australia | 800,000 | 803,000 | |||||||||
senior note, 144A, 5.125%, 3/15/23 |
Australia | 400,000 | 399,964 | |||||||||
b Grinding Media Inc./MC Grinding Media Canada Inc., senior secured note, 144A, 7.375%, 12/15/23 |
United States | 1,000,000 | 1,006,250 | |||||||||
b New Enterprise Stone & Lime Co., senior note, 144A, 6.25%, 3/15/26 |
United States | 900,000 | 873,000 | |||||||||
b New Gold Inc., senior note, 144A, 6.375%, 5/15/25 |
Canada | 700,000 | 570,500 | |||||||||
b Northwest Acquisitions ULC/Dominion Finco Inc., secured note, second lien, 144A, 7.125%, 11/01/22 |
Canada | 400,000 | 370,000 | |||||||||
b Novelis Corp., |
||||||||||||
senior bond, 144A, 5.875%, 9/30/26. |
United States | 500,000 | 488,750 | |||||||||
senior note, 144A, 6.25%, 8/15/24 |
United States | 700,000 | 706,783 | |||||||||
b OCI NV, senior note, 144A, 6.625%, 4/15/23 |
Netherlands | 500,000 | 518,125 | |||||||||
b Owens-Brockway Glass Container Inc., |
||||||||||||
senior note, 144A, 5.00%, 1/15/22 |
United States | 1,000,000 | 1,032,310 | |||||||||
senior note, 144A, 5.875%, 8/15/23 |
United States | 500,000 | 528,125 | |||||||||
b Plastipak Holdings Inc., senior note, 144A, 6.25%, 10/15/25 |
United States | 1,700,000 | 1,564,000 | |||||||||
b Rain CII Carbon LLC / CII Carbon Corp., senior note, 144A, 7.25%, 4/01/25 |
United States | 900,000 | 783,000 | |||||||||
Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA, |
||||||||||||
b senior note, 144A, 7.00%, 7/15/24 |
United States | 200,000 | 205,171 | |||||||||
senior secured note, first lien, 5.75%, 10/15/20 |
United States | 484,554 | 486,129 | |||||||||
b senior secured note, first lien, 144A, 5.125%, 7/15/23 |
United States | 1,000,000 | 1,001,250 | |||||||||
b Sealed Air Corp., |
||||||||||||
senior bond, 144A, 5.50%, 9/15/25 |
United States | 200,000 | 209,000 | |||||||||
senior note, 144A, 6.50%, 12/01/20 |
United States | 400,000 | 418,000 | |||||||||
Steel Dynamics Inc., |
||||||||||||
senior bond, 5.50%, 10/01/24 |
United States | 900,000 | 927,000 | |||||||||
senior bond, 5.00%, 12/15/26 |
United States | 700,000 | 714,000 | |||||||||
b SunCoke Energy Partners LP/SunCoke Energy Partners Finance Corp., senior note, 144A, 7.50%, 6/15/25 |
United States | 1,300,000 | 1,326,000 | |||||||||
|
|
|||||||||||
21,923,780 | ||||||||||||
|
|
12 |
Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||||
Corporate Bonds (continued) |
||||||||||||
Media & Entertainment 9.6% |
||||||||||||
b Altice Luxembourg SA, senior secured note, 144A, 7.75%, 5/15/22 |
Luxembourg | $ | 1,700,000 | $ | 1,697,875 | |||||||
AMC Networks Inc., senior note, 5.00%, 4/01/24 |
United States | 1,200,000 | 1,193,628 | |||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., |
||||||||||||
senior bond, 5.25%, 9/30/22 |
United States | 1,700,000 | 1,736,125 | |||||||||
b senior bond, 144A, 5.75%, 2/15/26 |
United States | 700,000 | 727,153 | |||||||||
Clear Channel Worldwide Holdings Inc., |
||||||||||||
senior note, 6.50%, 11/15/22 |
United States | 1,000,000 | 1,027,500 | |||||||||
senior sub. note, 7.625%, 3/15/20 |
United States | 700,000 | 702,975 | |||||||||
b senior sub. note, 144A, 9.25%, 2/15/24. |
United States | 600,000 | 630,750 | |||||||||
CSC Holdings LLC, |
||||||||||||
b senior bond, 144A, 5.50%, 4/15/27 |
United States | 500,000 | 503,750 | |||||||||
senior note, 6.75%, 11/15/21 |
United States | 700,000 | 747,250 | |||||||||
senior note, 5.25%, 6/01/24. |
United States | 700,000 | 701,512 | |||||||||
b senior note, 144A, 7.50%, 4/01/28 |
United States | 300,000 | 318,000 | |||||||||
b senior secured note, first lien, 144A, 5.50%, 5/15/26 |
United States | 1,200,000 | 1,221,000 | |||||||||
DISH DBS Corp., |
||||||||||||
senior bond, 5.875%, 7/15/22 |
United States | 700,000 | 671,125 | |||||||||
senior note, 7.75%, 7/01/26 |
United States | 1,100,000 | 954,250 | |||||||||
b Gray Escrow Inc., senior note, 144A, 7.00%, 5/15/27 |
United States | 600,000 | 636,000 | |||||||||
Netflix Inc., |
||||||||||||
senior bond, 5.875%, 2/15/25 |
United States | 1,100,000 | 1,168,750 | |||||||||
senior bond, 4.875%, 4/15/28 |
United States | 200,000 | 195,250 | |||||||||
b senior bond, 144A, 5.875%, 11/15/28 |
United States | 200,000 | 208,810 | |||||||||
b Nexstar Broadcasting Inc., senior note, 144A, 5.625%, 8/01/24 |
United States | 900,000 | 895,500 | |||||||||
b Sirius XM Radio Inc., |
||||||||||||
senior bond, 144A, 6.00%, 7/15/24 |
United States | 800,000 | 832,000 | |||||||||
senior bond, 144A, 5.375%, 4/15/25 |
United States | 700,000 | 715,969 | |||||||||
Tegna Inc., senior note, 5.125%, 7/15/20 |
United States | 800,000 | 808,000 | |||||||||
b Univision Communications Inc., senior secured bond, first lien, 144A, 6.75%, 9/15/22 |
United States | 116,000 | 117,305 | |||||||||
b Virgin Media Secured Finance PLC, |
||||||||||||
senior secured bond, first lien, 144A, 5.50%, 1/15/25 |
United Kingdom | 800,000 | 816,000 | |||||||||
senior secured bond, first lien, 144A, 5.50%, 8/15/26 |
United Kingdom | 200,000 | 199,500 | |||||||||
b WMG Acquisition Corp., |
||||||||||||
secured note, first lien, 144A, 5.00%, 8/01/23 |
United States | 200,000 | 201,250 | |||||||||
senior note, 144A, 5.625%, 4/15/22 |
United States | 82,000 | 83,230 | |||||||||
|
|
|||||||||||
19,710,457 | ||||||||||||
|
|
|||||||||||
Pharmaceuticals, Biotechnology & Life Sciences 3.1% |
||||||||||||
Advanz Pharma Corp., senior secured note, first lien, 8.00%, 9/06/24 |
Canada | 258,000 | 246,874 | |||||||||
b Bausch Health Americas Inc., senior note, 144A, 9.25%, 4/01/26 |
United States | 1,500,000 | 1,620,000 | |||||||||
b Bausch Health Cos. Inc., |
||||||||||||
senior bond, 144A, 6.125%, 4/15/25 |
United States | 200,000 | 193,000 | |||||||||
senior note, 144A, 5.625%, 12/01/21 |
United States | 144,000 | 144,306 | |||||||||
senior note, 144A, 5.875%, 5/15/23 |
United States | 200,000 | 199,750 | |||||||||
f senior note, 144A, 5.75%, 8/15/27 |
United States | 100,000 | 101,125 | |||||||||
senior note, first lien, 144A, 7.00%, 3/15/24 |
United States | 200,000 | 211,250 | |||||||||
b Endo DAC/Endo Finance LLC/Endo Finco Inc., |
||||||||||||
senior bond, 144A, 6.00%, 2/01/25 |
United States | 800,000 | 620,000 | |||||||||
senior note, 144A, 6.00%, 7/15/23 |
United States | 1,000,000 | 833,750 | |||||||||
Horizon Pharma USA Inc., senior note, 6.625%, 5/01/23 |
United States | 1,500,000 | 1,552,500 |
franklintempleton.com | Semiannual Report | 13 |
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||||
Corporate Bonds (continued) |
||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences (continued) |
||||||||||||
bJaguar Holding Co. II/Pharmaceutical Product Development LLC, senior note, 144A, 6.375%, 8/01/23 |
United States | $ | 700,000 | $ | 707,000 | |||||||
|
|
|||||||||||
6,429,555 | ||||||||||||
|
|
|||||||||||
Real Estate 2.4% |
||||||||||||
CyrusOne LP/CyrusOne Finance Corp., senior note, 5.00%, 3/15/24 |
United States | 1,400,000 | 1,428,000 | |||||||||
Equinix Inc., |
||||||||||||
senior bond, 5.375%, 4/01/23 |
United States | 1,300,000 | 1,327,625 | |||||||||
senior bond, 5.875%, 1/15/26 |
United States | 200,000 | 210,000 | |||||||||
bFive Point Operating Co. LP/Five Point Capital Corp., senior note, 144A, 7.875%, 11/15/25 |
United States | 1,000,000 | 971,250 | |||||||||
MPT Operating Partnership LP/MPT Finance Corp., |
||||||||||||
senior bond, 5.25%, 8/01/26 |
United States | 300,000 | 305,250 | |||||||||
senior note, 6.375%, 3/01/24 |
United States | 600,000 | 631,500 | |||||||||
|
|
|||||||||||
4,873,625 | ||||||||||||
|
|
|||||||||||
Retailing 1.4% |
||||||||||||
bParty City Holdings Inc., senior note, 144A, 6.625%, 8/01/26 |
United States | 1,700,000 | 1,678,750 | |||||||||
bPetSmart Inc., |
||||||||||||
senior note, 144A, 7.125%, 3/15/23 |
United States | 300,000 | 204,750 | |||||||||
senior note, 144A, 8.875%, 6/01/25 |
United States | 300,000 | 204,000 | |||||||||
senior secured note, first lien, 144A, 5.875%, 6/01/25 |
United States | 900,000 | 720,000 | |||||||||
|
|
|||||||||||
2,807,500 | ||||||||||||
|
|
|||||||||||
Semiconductors & Semiconductor Equipment 0.7% |
||||||||||||
bQorvo Inc., senior note, 144A, 5.50%, 7/15/26 |
United States | 1,400,000 | 1,431,500 | |||||||||
|
|
|||||||||||
Software & Services 2.2% |
||||||||||||
bFirst Data Corp., secured note, second lien, 144A, 5.75%, 1/15/24 |
United States | 2,100,000 | 2,175,264 | |||||||||
Infor (U.S.) Inc., senior note, 6.50%, 5/15/22 |
United States | 1,700,000 | 1,739,984 | |||||||||
bSymantec Corp., senior note, 144A, 5.00%, 4/15/25 |
United States | 500,000 | 498,622 | |||||||||
|
|
|||||||||||
4,413,870 | ||||||||||||
|
|
|||||||||||
Technology Hardware & Equipment 3.6% |
||||||||||||
bBlackboard Inc., secured note, second lien, 144A, 9.75%, 10/15/21 |
United States | 1,542,000 | 1,130,093 | |||||||||
CDW LLC/CDW Finance Corp., senior note, 5.00%, 9/01/25 |
United States | 700,000 | 710,500 | |||||||||
bCommScope Technologies LLC, senior bond, 144A, 6.00%, 6/15/25 |
United States | 1,700,000 | 1,610,750 | |||||||||
bDell International LLC/EMC Corp., |
||||||||||||
senior note, 144A, 5.875%, 6/15/21 |
United States | 200,000 | 204,085 | |||||||||
senior note, 144A, 7.125%, 6/15/24 |
United States | 200,000 | 212,238 | |||||||||
senior secured bond, first lien, 144A, 6.02%, 6/15/26 |
United States | 200,000 | 212,290 | |||||||||
bItron Inc., senior note, 144A, 5.00%, 1/15/26 |
United States | 1,800,000 | 1,755,000 | |||||||||
bTempo Acquisition LLC/Tempo Acquisition Finance Corp., senior note, 144A, 6.75%, 6/01/25 |
United States | 1,600,000 | 1,624,000 | |||||||||
|
|
|||||||||||
7,458,956 | ||||||||||||
|
|
|||||||||||
Telecommunication Services 5.0% |
||||||||||||
bBlock Communications Inc., senior note, 144A, 6.875%, 2/15/25 |
United States | 300,000 | 311,250 | |||||||||
bDigicel Group One Ltd., senior secured note, first lien, 144A, 8.25%, 12/30/22 |
Jamaica | 463,000 | 311,368 | |||||||||
bDigicel Group Two Ltd., senior note, 144A, 8.25%, 9/30/22 |
Bermuda | 437,000 | 187,910 | |||||||||
bDigicel Ltd., |
||||||||||||
senior note, 144A, 6.00%, 4/15/21 |
Bermuda | 500,000 | 411,213 | |||||||||
senior note, 144A, 6.75%, 3/01/23 |
Bermuda | 300,000 | 208,677 |
14 |
Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | |
Principal Amount* |
|
Value | ||||||||
Corporate Bonds (continued) |
||||||||||||
Telecommunication Services (continued) |
||||||||||||
b DKT Finance ApS, senior secured note, first lien, 144A, 9.375%, 6/17/23 |
Denmark | $ | 1,500,000 | $ | 1,615,200 | |||||||
Hughes Satellite Systems Corp., senior bond, 6.625%, 8/01/26 |
United States | 1,700,000 | 1,676,625 | |||||||||
Sprint Corp., |
||||||||||||
senior bond, 7.875%, 9/15/23 |
United States | 500,000 | 535,625 | |||||||||
senior bond, 7.125%, 6/15/24 |
United States | 500,000 | 517,865 | |||||||||
senior note, 7.625%, 3/01/26 |
United States | 600,000 | 624,000 | |||||||||
b Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC, senior secured bond, first lien, 144A, 4.738%, 9/20/29 |
United States | 1,300,000 | 1,305,544 | |||||||||
T-Mobile USA Inc., senior bond, 6.50%, 1/15/24 |
United States | 200,000 | 208,000 | |||||||||
senior bond, 6.375%, 3/01/25 |
United States | 500,000 | 521,562 | |||||||||
senior bond, 4.75%, 2/01/28 |
United States | 600,000 | 582,750 | |||||||||
senior note, 6.00%, 4/15/24 |
United States | 200,000 | 208,250 | |||||||||
b Zayo Group LLC/Zayo Capital Inc., senior note, 144A, 5.75%, 1/15/27 |
United States | 1,000,000 | 972,500 | |||||||||
|
|
|||||||||||
10,198,339 | ||||||||||||
|
|
|||||||||||
Transportation 1.1% |
||||||||||||
b,f Avolon Holdings Funding Ltd., senior note, 144A, 5.25%, 5/15/24 |
Ireland | 500,000 | 513,125 | |||||||||
b DAE Funding LLC, |
||||||||||||
senior note, 144A, 4.50%, 8/01/22 |
United Arab Emirates | 700,000 | 695,625 | |||||||||
senior note, 144A, 5.00%, 8/01/24 |
United Arab Emirates | 700,000 | 696,500 | |||||||||
b Park Aerospace Holdings Ltd., senior note, 144A, 5.50%, 2/15/24 |
Ireland | 300,000 | 310,875 | |||||||||
|
|
|||||||||||
2,216,125 | ||||||||||||
|
|
|||||||||||
Utilities 4.3% |
||||||||||||
Calpine Corp., senior bond, 5.75%, 1/15/25 |
United States | 1,800,000 | 1,725,750 | |||||||||
Clearway Energy Operating LLC, |
||||||||||||
senior bond, 5.375%, 8/15/24 |
United States | 900,000 | 886,500 | |||||||||
senior bond, 5.00%, 9/15/26 |
United States | 900,000 | 843,750 | |||||||||
b senior note, 144A, 5.75%, 10/15/25 |
United States | 400,000 | 394,500 | |||||||||
Ferrellgas LP/Ferrellgas Finance Corp., senior note, 6.75%, 6/15/23 |
United States | 700,000 | 630,000 | |||||||||
Ferrellgas Partners LP/Ferrellgas Partners Finance Corp., senior note, 8.625%, 6/15/20 |
United States | 800,000 | 625,000 | |||||||||
b InterGen NV, secured bond, 144A, 7.00%, 6/30/23 |
Netherlands | 400,000 | 362,000 | |||||||||
Talen Energy Supply LLC, senior note, 6.50%, 6/01/25 |
United States | 2,100,000 | 1,881,600 | |||||||||
b Vistra Operations Co. LLC, senior note, 144A, 5.625%, 2/15/27 |
United States | 1,500,000 | 1,548,750 | |||||||||
|
|
|||||||||||
8,897,850 | ||||||||||||
|
|
|||||||||||
Total Corporate Bonds (Cost $183,467,598) |
180,850,916 | |||||||||||
|
|
|||||||||||
Shares | ||||||||||||
|
|
|||||||||||
Escrows and Litigation Trusts 0.0% |
||||||||||||
a,c Midstates Petroleum Co. Inc./Midstates Petroleum Co. LLC, Escrow Account | United States | 700,000 | | |||||||||
a,c NewPage Corp., Litigation Trust | United States | 1,200,000 | | |||||||||
a,c T-Mobile USA Inc., Escrow Account | United States | 1,500,000 | | |||||||||
a Vistra Energy Corp., Escrow Account |
United States | 700,000 | 2,450 | |||||||||
|
|
|||||||||||
Total Escrows and Litigation Trusts (Cost $20,297) |
2,450 | |||||||||||
|
|
|||||||||||
Total Investments before Short Term Investments |
264,783,872 | |||||||||||
|
|
franklintempleton.com | Semiannual Report | 15 |
FRANKLIN UNIVERSAL TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Shares | Value | ||||||||||
Short Term Investments (Cost $4,433,934) 2.2% |
||||||||||||
Money Market Funds 2.2% |
||||||||||||
g,h Institutional Fiduciary Trust Money Market Portfolio, 2.06% |
United States | 4,433,934 | $ | 4,433,934 | ||||||||
|
|
|||||||||||
Total Investments (Cost $228,446,961) 131.5% |
269,217,806 | |||||||||||
Notes Payable (31.7)% |
(64,892,126 | ) | ||||||||||
Other Assets, less Liabilities 0.2% |
459,150 | |||||||||||
|
|
|||||||||||
Net Assets 100.0% |
$ | 204,784,830 | ||||||||||
|
|
See Abbreviations on page 26.
Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bSecurity 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 Funds Board of Trustees. At February 28, 2019, the aggregate value of these securities was $108,660,617, representing 53.1% of net assets.
cFair valued using significant unobservable inputs. See Note 9 regarding fair value measurements.
dPerpetual security with no stated maturity date.
eIncome may be received in additional securities and/or cash.
fSecurity purchased on a when-issued basis. See Note 1(b).
gSee Note 4(c) regarding investments in affiliated management investment companies.
hThe rate shown is the annualized seven-day effective yield at period end.
16 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
Statement of Assets and Liabilities
February 28, 2019 (unaudited)
Assets: |
||||
Investments in securities: |
||||
Cost - Unaffiliated issuers |
$224,013,027 | |||
Cost - Non-controlled affiliates (Note 4c) |
4,433,934 | |||
|
|
|||
Value - Unaffiliated issuers |
$264,783,872 | |||
Value - Non-controlled affiliates (Note 4c) |
4,433,934 | |||
Receivables: |
||||
Dividends and interest |
3,432,984 | |||
|
|
|||
Total assets |
272,650,790 | |||
|
|
|||
Liabilities: |
||||
Payables: |
||||
Investment securities purchased |
600,000 | |||
Management fees |
165,449 | |||
Distributions to shareholders |
804,220 | |||
Accrued interest (Note 3) |
1,298,988 | |||
Senior fixed rate Notes, at par value of $65,000,000 less unamortized Note issuance costs of $107,874 (Note 3) |
64,892,126 | |||
Accrued expenses and other liabilities |
105,177 | |||
|
|
|||
Total liabilities |
67,865,960 | |||
|
|
|||
Net assets, at value |
$204,784,830 | |||
|
|
|||
Net assets consist of: |
||||
Paid-in capital |
$164,229,880 | |||
Total distributable earnings (loss) |
40,554,950 | |||
|
|
|||
Net assets, at value |
$204,784,830 | |||
|
|
|||
Shares outstanding |
25,131,894 | |||
|
|
|||
Net asset value per share |
$8.15 | |||
|
|
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 17 |
FRANKLIN UNIVERSAL TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the six months ended February 28, 2019 (unaudited)
Investment income: |
||||
Dividends: (net of foreign taxes)* |
||||
Unaffiliated issuers |
$ | 1,515,421 | ||
Non-controlled affiliates (Note 4c) |
66,101 | |||
Interest: |
||||
Unaffiliated issuers |
5,621,975 | |||
|
|
|||
Total investment income |
7,203,497 | |||
|
|
|||
Expenses: |
||||
Management fees (Note 4a) |
986,306 | |||
Interest expense (Note 3) |
1,277,809 | |||
Transfer agent fees |
41,583 | |||
Custodian fees (Note 5) |
1,084 | |||
Reports to shareholders |
17,054 | |||
Professional fees |
41,292 | |||
Trustees fees and expenses |
7,993 | |||
Amortization of Note issuance costs (Note 3) |
10,818 | |||
Other |
42,363 | |||
|
|
|||
Total expenses |
2,426,302 | |||
Expense reductions (Note 5) |
(509 | ) | ||
Expenses waived/paid by affiliates (Note 4c) |
(12,387 | ) | ||
|
|
|||
Net expenses |
2,413,406 | |||
|
|
|||
Net investment income |
4,790,091 | |||
|
|
|||
Realized and unrealized gains (losses): |
||||
Net realized gain (loss) from: |
||||
Investments: |
||||
Unaffiliated issuers |
240,972 | |||
|
|
|||
Net change in unrealized appreciation (depreciation) on: |
||||
Investments: |
||||
Unaffiliated issuers |
3,783,109 | |||
|
|
|||
Net realized and unrealized gain (loss) |
4,024,081 | |||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
$ | 8,814,172 | ||
|
|
*Foreign taxes withheld on dividends |
$ | 6,525 |
18 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
|
Six Months Ended February 28, 2019 (unaudited) |
Year Ended August 31, 2018 |
||||||
Increase (decrease) in net assets: |
||||||||
Operations: |
||||||||
Net investment income |
$ 4,790,091 | $ 9,893,712 | ||||||
Net realized gain (loss) |
240,972 | 3,064,408 | ||||||
Net change in unrealized appreciation (depreciation) |
3,783,109 | (9,475,996 | ) | |||||
|
|
|||||||
Net increase (decrease) in net assets resulting from operations |
8,814,172 | 3,482,124 | ||||||
|
|
|||||||
Distributions to shareholders (Note 1d) |
(4,825,323 | ) | (9,650,646 | ) | ||||
|
|
|||||||
Net increase (decrease) in net assets |
3,988,849 | (6,168,522 | ) | |||||
Net assets: |
||||||||
Beginning of period |
200,795,981 | 206,964,503 | ||||||
|
|
|||||||
End of period (Note 1d) |
$204,784,830 | $200,795,981 | ||||||
|
|
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report |
19 |
FRANKLIN UNIVERSAL TRUST
FINANCIAL STATEMENTS
Statement of Cash Flows
for the six months ended February 28, 2019 (unaudited)
Cash flow from operating activities: |
||||
Dividends, interest and other income received |
$ | 7,036,251 | ||
Operating expenses paid |
(1,233,442 | ) | ||
Purchases of long-term investments |
(28,027,125 | ) | ||
Sales and maturities of long-term investments |
19,967,432 | |||
Net sales of short-term investments |
7,082,207 | |||
|
|
|||
Cash provided - operating activities |
4,825,323 | |||
|
|
|||
Cash flow from financing activities: |
||||
Cash distributions to shareholders |
(4,825,323 | ) | ||
|
|
|||
Cash used - financing activities |
(4,825,323 | ) | ||
|
|
|||
Net increase (decrease) in cash |
| |||
|
|
|||
Cash at beginning of period |
| |||
|
|
|||
Cash at end of period |
$ | | ||
|
|
|||
Reconciliation of Net Increase (Decrease) in Net Assets resulting from Operating Activities to Net Cash Provided by Operating Activities |
||||
for the six months ended February 28, 2019 (unaudited) |
||||
Net increase (decrease) in net assets resulting from operating activities |
$ | 8,814,172 | ||
Adjustments to reconcile net increase (decrease) in net assets resulting from operating activities to net cash provided by operating activities: |
||||
Amortization of Note issuance costs |
10,818 | |||
Net amortization income |
(13,160 | ) | ||
Reinvested dividends from non-controlled affiliates |
(66,101 | ) | ||
Interest received in the form of securities |
(7,398 | ) | ||
Increase in dividends and interest receivable and other assets |
(73,189 | ) | ||
Increase in interest payable |
1,277,809 | |||
Decrease in payables to affiliates, accrued expenses, and other liabilities |
(108,663 | ) | ||
Increase in payable for investments purchased |
600,000 | |||
Increase in cost of investments |
(1,825,856 | ) | ||
Increase in unrealized depreciation on investments |
(3,783,109 | ) | ||
|
|
|||
Net cash provided by operating activities |
$ | 4,825,323 | ||
|
|
20 |
Semiannual Report | |
The accompanying notes are an integral part of these financial statements. |
franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
Notes to Financial Statements (unaudited)
franklintempleton.com | Semiannual Report | 21 |
FRANKLIN UNIVERSAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
22 |
Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
*Effective during the current reporting period, it is no longer required to present certain line items in the Statements of Changes in Net Assets. The below prior period amounts affected by this change are shown as they were in the prior year Statements of Changes in Net Assets.
For the year ended August 31, 2018, distributions to shareholders were as follows:
Net investment income |
$ | (9,650,646 | ) |
For the year ended August 31, 2018, distributions in excess of net investment income included in net assets was $(337,306).
2. Shares of Beneficial Interest
At February 28, 2019, there were an unlimited number of shares authorized ($0.01 par value). During the periods ended February 28, 2019 and August 31, 2018, there were no shares issued; all reinvested distributions were satisfied with previously issued shares purchased in the open market.
Under the Board approved open-market share repurchase program, the Fund may purchase, from time to time, Fund shares in open-market transactions, at the discretion of management. During the periods ended February 28, 2019 and August 31, 2018, there were no shares repurchased.
3. Senior Fixed Rate Notes
On August 28, 2018, the Fund issued $65 million principal amount of a new class of five-year senior fixed rate notes (Notes). The Notes bear interest, payable semi-annually, at a rate of 3.91% per year, to maturity on September 15, 2023. The Notes are general unsecured obligations of the Fund and rank senior to trust shares and all existing or future unsecured indebtedness of the Fund. As at period ended February 28, 2019, total interest accrued by the Fund on the Notes was $1,298,988. The Fund is required to maintain on a monthly basis a specified discounted asset value for its portfolio in compliance with guidelines established in the Notes Agreement, and is required under the 1940 Act to maintain asset coverage for the Notes of at least 300%. The Fund has met these requirements during the period ended February 28, 2019. The issuance costs of $118,872 incurred by the Fund are deferred and amortized on an interest method basis over the term of the Notes. For the period ended February 28, 2019, the Fund amortized $10,818 of Notes issuance costs. Subject to certain restrictions and make whole premiums, the Fund may prepay the Notes at any time. At February 28, 2019, if the Notes were fully prepaid, the make whole premium related to the current balance of the Notes would have been approximately $2,351,000.
The Fund employs an income-based approach to determine the fair value of the Notes, which uses the Notes current credit rating, remaining time to maturity, stated coupon rates, the current yield of a comparable asset, and a liquidity premium. At February 28, 2019, the estimated fair value of the Notes was approximately $66,317,000. The inputs used in determining the fair value of the Notes represent Level 3 in the fair value hierarchy. See Note 9 regarding fair value measurements for additional information about fair value hierarchy and Level 3 inputs.
franklintempleton.com | Semiannual Report | 23 |
FRANKLIN UNIVERSAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:
Subsidiary | Affiliation | |||
Franklin Advisers, Inc. (Advisers) | Investment manager | |||
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
a. Management Fees
The Fund pays an investment management fee to Advisers of 0.75% per year of the average weekly managed assets. Managed assets are defined as the Funds gross asset value minus the sum of accrued liabilities, other than the principal amount of the Notes.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Funds average daily net assets, and is not an additional expense of the Fund.
c. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the period ended February 28, 2019, the Fund held investments in affiliated management investment companies as follows:
Number of Shares Held at Beginning of Period |
Gross Additions |
Gross Reductions |
Number of Shares Held at End of Period |
Value at End of Period |
Dividend Income |
Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||
Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 2.06% |
10,068,808 | 16,256,327 | (21,891,201 | ) | 4,433,934 | $ | 4,433,934 | $66,101 | $ | | $ | |
5. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds custodian expenses. During the period ended February 28, 2019, the custodian fees were reduced as noted in the Statement of Operations.
6. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At August 31, 2018, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration:
Short term |
$84,105 |
24 |
Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
At February 28, 2019, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Cost of investments |
$ | 229,058,160 | ||
Unrealized appreciation |
$ | 51,344,723 | ||
Unrealized depreciation |
(11,185,077 | ) | ||
Net unrealized appreciation (depreciation) |
$ | 40,159,646 |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities and bond discounts and premiums.
7. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended February 28, 2019, aggregated $28,627,125 and $19,967,300, respectively.
8. Credit Risk
At February 28, 2019, the Fund had 65.8% of its portfolio invested in high yield or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
9. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds financial instruments and are summarized in the following fair value hierarchy:
| Level 1 quoted prices in active markets for identical financial instruments |
| Level 2 other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
franklintempleton.com | Semiannual Report | 25 |
FRANKLIN UNIVERSAL TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
9. Fair Value Measurements (continued)
A summary of inputs used as of February 28, 2019, in valuing the Funds assets carried at fair value, is as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Investments in Securities:a |
||||||||||||||||
Equity Investments:b |
||||||||||||||||
Energy |
$ | 1,940,155 | $ | 765,233 | $ | | c | $ | 2,705,388 | |||||||
All Other Equity Investments |
81,225,118 | | | 81,225,118 | ||||||||||||
Corporate Bonds |
| 180,850,916 | | 180,850,916 | ||||||||||||
Escrows and Litigation Trusts |
| 2,450 | | c | 2,450 | |||||||||||
Short Term Investments |
4,433,934 | | | 4,433,934 | ||||||||||||
Total Investments in Securities |
$ | 87,599,207 | $ | 181,618,599 | $ | | $ | 269,217,806 |
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common stocks as well as other equity interests.
cIncludes securities determined to have no value at February 28, 2019.
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the period.
10. 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.
Abbreviations
Selected Portfolio | ||||
ADR | American Depositary Receipt | |||
FRN | Floating Rate Note | |||
PIK | Payment-In-Kind |
26 |
Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
Dividend Reinvestment and Cash Purchase Plan
franklintempleton.com | Semiannual Report | 27 |
FRANKLIN UNIVERSAL TRUST
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
28 |
Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
franklintempleton.com | Semiannual Report | 29 |
FRANKLIN UNIVERSAL TRUST
SHAREHOLDER INFORMATION
30 |
Semiannual Report | franklintempleton.com |
FRANKLIN UNIVERSAL TRUST
SHAREHOLDER INFORMATION
franklintempleton.com | Semiannual Report | 31 |
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Semiannual Report Franklin Universal Trust
Investment Manager Franklin Advisers, Inc. (800) DIAL BEN® / 342-5236
Transfer Agent American Stock Transfer & Trust Co., LLC 6201 15th Avenue Brooklyn, NY 11219 www.astfinancial.com |
||||||
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded. |
||||||
© 2019 Franklin Templeton Investments. All rights reserved. |
FUT S 04/19 |
Item 2. | Code of Ethics. |
(a) | The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer. |
(c) | N/A |
(d) | N/A |
(f) | Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer. |
Item 3. | Audit Committee Financial Expert. |
(a) | (1) The Registrant has an audit committee financial expert serving on its audit committee. |
(2) | The Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Funds Audit Committee includes at least one member who is an Audit Committee Financial Expert within the meaning of such Act and Rules. To the extent that the Funds Audit Committee does not include at least one Audit Committee Financial Expert, the SEC Rules require an explanation as to why it does not. The Funds Audit Committee currently does not have an Audit Committee Financial Expert following the departure from the Board of Trustees of the Funds previous Audit Committee Financial Expert. The Audit Committee believes that, as a result of the collective experience of the remaining Audit Committee members with respect to mutual funds, investments, financial statements and accounting principles, there is adequate oversight over the Funds financial operations and financial statements. It is anticipated that the Funds Board of Trustees will designate a new Audit Committee Financial Expert in the near future. |
Item 4. | Principal Accountant Fees and Services. N/A |
Item 5. | Audit Committee of Listed Registrants. |
Members of the Audit Committee are: Mary C. Choksi, J. Michael Luttig and Larry D. Thompson.
Item 6. | Schedule of Investments. N/A |
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
The board of trustees of the Fund has delegated the authority to vote proxies related to the portfolio securities held by the Fund to the Funds investment manager, Franklin Advisers, Inc. in accordance with the Proxy Voting Policies and Procedures (Policies) adopted by the investment manager.
The investment manager has delegated its administrative duties with respect to the voting of proxies for securities to the Proxy Group within Franklin
Templeton Companies, LLC (Proxy Group), an affiliate and wholly owned subsidiary of Franklin Resources, Inc. All proxies received by the Proxy Group will be voted based upon the investment managers instructions and/or policies. The investment manager votes proxies solely in the best interests of the Fund and its shareholders.
To assist it in analyzing proxies of equity securities, the investment manager subscribes to Institutional Shareholder Services, Inc. (ISS), an unaffiliated third-party corporate governance research service that provides in-depth analyses of shareholder meeting agendas, vote recommendations, vote execution services, ballot reconciliation services, recordkeeping and vote disclosure services. In addition, the investment manager subscribes to Glass, Lewis & Co., LLC (Glass Lewis), an unaffiliated third-party analytical research firm, to receive analyses and vote recommendations on the shareholder meetings of publicly held U.S. companies, as well as a limited subscription to its international research. Also, the investment manager has a supplemental subscription to Egan-Jones Proxy Services (Egan-Jones), an unaffiliated third party proxy advisory firm, to receive analyses and vote recommendations. Although analyses provided by ISS, Glass Lewis, Egan-Jones, and/or another independent third party proxy service provider (each a Proxy Service) are thoroughly reviewed and considered in making a final voting decision, the investment manager does not consider recommendations from a Proxy Service or any third party to be determinative of the investment managers ultimate decision. Rather, the investment manager exercises its independent judgment in making voting decisions. For most proxy proposals, the investment managers evaluation should result in the same position being taken for all Funds. In some cases, however, the evaluation may result in a Fund voting differently, depending upon the nature and objective of the Fund, the composition of its portfolio and other factors. As a matter of policy, the officers, directors/trustees and employees of the investment manager and the Proxy Group will not be influenced by outside sources whose interests conflict with the interests of the Fund and its shareholders. Efforts are made to resolve all conflicts in the best interests of the investment managers clients. Material conflicts of interest are identified by the Proxy Group based upon analyses of client, distributor, broker-dealer and vendor lists, information periodically gathered from directors and officers, and information derived from other sources, including public filings. In situations where a material conflict of interest is identified, the Proxy Group may vote consistent with the voting recommendation of a Proxy Service; or send the proxy directly to the Funds board or a committee of the board with the investment managers recommendation regarding the vote for approval.
Where a material conflict of interest has been identified, but the items on which the investment managers vote recommendations differ from a Proxy Service and relate specifically to (1) shareholder proposals regarding social or environmental issues, (2) Other Business without describing the matters that might be considered, or (3) items the investment manager wishes to vote in opposition to the recommendations of an issuers management, the Proxy Group may defer to the vote recommendations of the investment manager rather than sending the proxy directly to the Funds board or a board committee for approval.
To avoid certain potential conflicts of interest, the investment manager will employ echo voting or pass-through voting, if possible, in the following instances: (1) when the Fund invests in an underlying fund in reliance on any one of Sections 12(d) (1) (F), or (G) of the 1940 Act, the rules thereunder, or pursuant to a SEC exemptive order thereunder; (2) when the Fund invests
uninvested cash in affiliated money market funds pursuant to the rules under the 1940 Act or any exemptive orders thereunder (cash sweep arrangement); or (3) when required pursuant to the Funds governing documents or applicable law. Echo voting means that the investment manager will vote the shares in the same proportion as the vote of all of the other holders of the underlying funds shares. With respect to instances when a Franklin Templeton U.S. registered investment company invests in an underlying fund in reliance on any one of Sections 12(d)(1)(F) or (G) of the 1940 Act, the rules thereunder, or pursuant to an SEC exemptive order thereunder, and there are no other unaffiliated shareholders also invested in the underlying fund, the Investment Manager will vote in accordance with the recommendation of such investment companys board of trustees or directors. In addition, to avoid certain potential conflicts of interest, and where required under a funds governing documents or applicable law, the Investment Manager will employ pass-through voting when a Franklin Templeton U.S. registered investment company invests in an underlying fund in reliance on Section 12(d)(1)(E) of the 1940 Act, the rules thereunder, or pursuant to an SEC exemptive order thereunder. In pass-through voting, a feeder fund will solicit voting instructions from its shareholders as to how to vote on the master funds proposals.
The recommendation of management on any issue is a factor that the investment manager considers in determining how proxies should be voted. However, the investment manager does not consider recommendations from management to be determinative of the investment managers ultimate decision. As a matter of practice, the votes with respect to most issues are cast in accordance with the position of the companys management. Each issue, however, is considered on its own merits, and the investment manager will not support the position of the companys management in any situation where it deems that the ratification of managements position would adversely affect the investment merits of owning that companys shares.
Engagement with issuers. The investment manager believes that engagement with issuers is important to good corporate governance and to assist in making proxy voting decisions. The investment manager may engage with issuers to discuss specific ballot items to be voted on in advance of an annual or special meeting to obtain further information or clarification on the proposals. The investment manager may also engage with management on a range of environmental, social or corporate governance issues throughout the year.
Investment managers proxy voting policies and principles The investment manager has adopted general proxy voting guidelines, which are summarized below. These guidelines are not an exhaustive list of all the issues that may arise and the investment manager cannot anticipate all future situations. In all cases, each proxy and proposal (including both management and shareholder proposals) will be considered based on the relevant facts and circumstances on a case-by-case basis.
Board of directors. The investment manager supports an independent, diverse board of directors, and prefers that key committees such as audit, nominating, and compensation committees be comprised of independent directors. The investment manager supports boards with strong risk management oversight. The investment manager will generally vote against management efforts to classify a board and will generally support proposals to declassify the board of directors. The investment manager will consider withholding votes from directors who have attended less than 75% of meetings without a valid reason. While generally in favor of separating Chairman and CEO positions, the investment manager will review this issue as well as proposals to restore or
provide for cumulative voting on a case-by-case basis, taking into consideration factors such as the companys corporate governance guidelines or provisions and performance. The investment manager generally will support non-binding shareholder proposals to require a majority vote standard for the election of directors; however, if these proposals are binding, the investment manager will give careful review on a case-by-case basis of the potential ramifications of such implementation.
In the event of a contested election, the investment manager will review a number of factors in making a decision including managements track record, the companys financial performance, qualifications of candidates on both slates, and the strategic plan of the dissidents and/or shareholder nominees.
Ratification of auditors of portfolio companies. The investment manager will closely scrutinize the independence, role and performance of auditors. On a case-by-case basis, the investment manager will examine proposals relating to non-audit relationships and non-audit fees. The investment manager will also consider, on a case-by-case basis, proposals to rotate auditors, and will vote against the ratification of auditors when there is clear and compelling evidence of a lack of independence, accounting irregularities or negligence. The investment manager may also consider whether the ratification of auditors has been approved by an appropriate audit committee that meets applicable composition and independence requirements.
Management and director compensation. A companys equity-based compensation plan should be in alignment with the shareholders long-term interests. The investment manager believes that executive compensation should be directly linked to the performance of the company. The investment manager evaluates plans on a case-by-case basis by considering several factors to determine whether the plan is fair and reasonable, including the ISS quantitative model utilized to assess such plans and/or the Glass Lewis evaluation of the plans. The investment manager will generally oppose plans that have the potential to be excessively dilutive, and will almost always oppose plans that are structured to allow the repricing of underwater options, or plans that have an automatic share replenishment evergreen feature. The investment manager will generally support employee stock option plans in which the purchase price is at least 85% of fair market value, and when potential dilution is 10% or less.
Severance compensation arrangements will be reviewed on a case-by-case basis, although the investment manager will generally oppose golden parachutes that are considered to be excessive. The investment manager will normally support proposals that require a percentage of directors compensation to be in the form of common stock, as it aligns their interests with those of shareholders.
The investment manager will review non-binding say-on-pay proposals on a case-by-case basis, and will generally vote in favor of such proposals unless compensation is misaligned with performance and/or shareholders interests, the company has not provided reasonably clear disclosure regarding its compensation practices, or there are concerns with the companys remuneration practices.
Anti-takeover mechanisms and related issues. The investment manager generally opposes anti-takeover measures since they tend to reduce shareholder rights. However, as with all proxy issues, the investment manager conducts an independent review of each anti-takeover proposal. On occasion, the investment manager may vote with management when the research analyst has concluded that the proposal is not onerous and would not harm the Fund or its shareholders interests. The investment manager generally supports proposals that require
shareholder rights plans (poison pills) to be subject to a shareholder vote and will closely evaluate such plans on a case-by-case basis to determine whether or not they warrant support. In addition, the investment manager will generally vote against any proposal to issue stock that has unequal or subordinate voting rights. The investment manager generally opposes any supermajority voting requirements as well as the payment of greenmail. The investment manager generally supports fair price provisions and confidential voting. The investment manager will review a companys proposal to reincorporate to a different state or country on a case-by-case basis taking into consideration financial benefits such as tax treatment as well as comparing corporate governance provisions and general business laws that may result from the change in domicile.
Changes to capital structure. The investment manager realizes that a companys financing decisions have a significant impact on its shareholders, particularly when they involve the issuance of additional shares of common or preferred stock or the assumption of additional debt. The investment manager will review, on a case-by-case basis, proposals by companies to increase authorized shares and the purpose for the increase. The investment manager will generally not vote in favor of dual-class capital structures to increase the number of authorized shares where that class of stock would have superior voting rights. The investment manager will generally vote in favor of the issuance of preferred stock in cases where the company specifies the voting, dividend, conversion and other rights of such stock and the terms of the preferred stock issuance are deemed reasonable. The investment manager will review proposals seeking preemptive rights on a case-by-case basis.
Mergers and corporate restructuring. Mergers and acquisitions will be subject to careful review by the research analyst to determine whether they would be beneficial to shareholders. The investment manager will analyze various economic and strategic factors in making the final decision on a merger or acquisition. Corporate restructuring proposals are also subject to a thorough examination on a case-by-case basis.
Environmental and social issues. The investment manager considers environmental and social issues alongside traditional financial measures to provide a more comprehensive view of the value, risk and return potential of an investment. Companies may face significant financial, legal and reputational risks resulting from poor environmental and social practices, or negligent oversight of environmental or social issues. Franklin Templetons Responsible Investment Principles and Policies describes the investment managers approach to consideration of environmental, social and governance issues within the investment managers processes and ownership practices.
In the investment managers experience, those companies that are managed well are often effective in dealing with the relevant environmental and social issues that pertain to their business. As such, the investment manager will generally give management discretion with regard to environmental and social issues. However, in cases where management and the board have not demonstrated adequate efforts to mitigate material environmental or social risks, have engaged in inappropriate or illegal conduct, or have failed to adequately address current or emergent risks that threaten shareholder value, the investment manager may choose to support well-crafted shareholder proposals that serve to promote or protect shareholder value. This may include seeking appropriate disclosure regarding material environmental and social issues. The investment manager will review shareholder proposals on a case-by-case basis and may support those that serve to enhance value or mitigate risk, are drafted
appropriately, and do not disrupt the course of business or require a disproportionate or inappropriate use of company resources.
The investment manager will consider supporting a shareholder proposal seeking disclosure and greater board oversight of lobbying and corporate political contributions if the investment manager believes that there is evidence of inadequate oversight by the companys board, if the companys current disclosure is significantly deficient, or if the disclosure is notably lacking in comparison to the companys peers.
Governance matters. The investment manager generally supports the right of shareholders to call special meetings and act by written consent. However, the investment manager will review such shareholder proposals on a case-by-case basis in an effort to ensure that such proposals do not disrupt the course of business or require a disproportionate or inappropriate use of company resources.
Proxy access. In cases where the investment manager is satisfied with company performance and the responsiveness of management, it will generally vote against shareholder proxy access proposals not supported by management. In other instances, the investment manager will consider such proposals on a case-by-case basis, taking into account factors such as the size of the company, ownership thresholds and holding periods, nomination limits (e.g., number of candidates that can be nominated), the intentions of the shareholder proponent, and shareholder base.
Global corporate governance. Many of the tenets discussed above are applied to the investment managers proxy voting decisions for international investments. However, the investment manager must be flexible in these worldwide markets. Principles of good corporate governance may vary by country, given the constraints of a countrys laws and acceptable practices in the markets. As a result, it is on occasion difficult to apply a consistent set of governance practices to all issuers. As experienced money managers, the investment managers analysts are skilled in understanding the complexities of the regions in which they specialize and are trained to analyze proxy issues germane to their regions.
The investment manager will generally attempt to process every proxy it receives for all domestic and foreign securities. However, there may be situations in which the investment manager may be unable to successfully vote a proxy, or may choose not to vote a proxy, such as where: (i) a proxy ballot was not received from the custodian bank; (ii) a meeting notice was received too late; (iii) there are fees imposed upon the exercise of a vote and it is determined that such fees outweigh the benefit of voting; (iv) there are legal encumbrances to voting, including blocking restrictions in certain markets that preclude the ability to dispose of a security if the investment manager votes a proxy or where the investment manager is prohibited from voting by applicable law, economic or other sanctions, or other regulatory or market requirements, including but not limited to, effective Powers of Attorney; (v) additional documentation or the disclosure of beneficial owner details is required; (vi) the investment manager held shares on the record date but has sold them prior to the meeting date; (vii) a proxy voting service is not offered by the custodian in the market; (viii) due to either system error or human error, the investment managers intended vote is not correctly submitted; (ix) the investment manager believes it is not in the best interest of the Fund or its shareholders to vote the proxy for any other reason not enumerated herein; or
(x) a security is subject to a securities lending or similar program that has transferred legal title to the security to another person.
In some non-U.S. jurisdictions, even if the investment manager uses reasonable efforts to vote a proxy on behalf of the Fund, such vote or proxy may be rejected because of (a) operational or procedural issues experienced by one or more third parties involved in voting proxies in such jurisdictions; (b) changes in the process or agenda for the meeting by the issuer for which the investment manager does not have sufficient notice; or (c) the exercise by the issuer of its discretion to reject the vote of the investment manager. In addition, despite the best efforts of the Proxy Group and its agents, there may be situations where the investment managers votes are not received, or properly tabulated, by an issuer or the issuers agent.
The investment manager or its affiliates may, on behalf of one or more of the proprietary registered investment companies advised by the investment manager or its affiliates, determine to use its best efforts to recall any security on loan where the investment manager or its affiliates (a) learn of a vote on a material event that may affect a security on loan and (b) determine that it is in the best interests of such proprietary registered investment companies to recall the security for voting purposes.
Procedures for meetings involving fixed income securities. From time to time, certain custodians may process events for fixed income securities through their proxy voting channels rather than corporate action channels for administrative convenience. In such cases, the Proxy Group will receive ballots for such events on the ISS voting platform. The Proxy Group will solicit voting instructions from the investment manager for each Fund involved. If the Proxy Group does not receive voting instructions from the investment manager, the Proxy Group will take no action on the event. The investment manager may be unable to vote a proxy for a fixed income security, or may choose not to vote a proxy, for the reasons described under the section entitled Proxy Procedures.
The Proxy Group will monitor such meetings involving fixed income securities for conflicts of interest in accordance with these procedures for fixed income securities. If a fixed income issuer is flagged as a potential conflict of interest, the investment manager may nonetheless vote as it deems in the best interests of the Fund. The investment manager will report such decisions on an annual basis to the Fund board as may be required.
Shareholders may view the complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301-1923, Attention: Proxy Group. Copies of the Funds proxy voting records are available online at franklintempleton.com and posted on the SEC website at www.sec.gov. The proxy voting records are updated each year by August 31 to reflect the most recent 12-month period ended June 30.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. N/A |
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
N/A
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrants Board of Trustees that would require disclosure herein.
Item 11. | Controls and Procedures. |
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrants filings under the Securities Exchange Act of 1934, as amended, 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 Registrants management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrants management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrants management, including the Registrants principal executive officer and the Registrants principal financial officer, of the effectiveness of the design and operation of the Registrants disclosure controls and procedures. Based on such evaluation, the Registrants principal executive officer and principal financial officer concluded that the Registrants disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There have been no changes in the Registrants internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A |
Item 13. | Exhibits. |
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, 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/MATTHEW T. HINKLE | |
Matthew T. Hinkle | ||
Chief Executive Officer Finance and Administration | ||
Date | April 26, 2019 |
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/MATTHEW T. HINKLE | |
Matthew T. Hinkle | ||
Chief Executive Officer Finance and Administration | ||
Date | April 26, 2019 | |
By | /s/GASTON GARDEY | |
Gaston Gardey | ||
Chief Financial Officer and Chief Accounting Officer | ||
Date | April 26, 2019 |