UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21357
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FRANKLIN TEMPLETON LIMITED DURATION INCOME TRUST
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
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Date of fiscal year end: 3/31
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Date of reporting period: 9/30/09
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ITEM 1. REPORTS TO STOCKHOLDERS.
SEPTEMBER 30, 2009
SEMIANNUAL REPORT
(GRAPHIC)
FIXED INCOME
FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
FRANKLIN - Templeton - Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with offices in over 25 countries, Templeton offers
investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable, accurate and personal service that has
helped us become one of the most trusted names in
financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
(GRAPHIC)
Not part of the semiannual report
Contents
SEMIANNUAL REPORT
Franklin Templeton Limited Duration Income Trust .......................... 1
Performance Summary ....................................................... 7
Annual Shareholders' Meeting .............................................. 8
Dividend Reinvestment Plan ................................................ 9
Financial Highlights and Statement of Investments ......................... 12
Financial Statements ...................................................... 25
Notes to Financial Statements ............................................. 28
Shareholder Information ................................................... 38
Semiannual Report
Franklin Templeton
Limited Duration Income Trust
YOUR FUND'S GOALS AND MAIN INVESTMENTS: Franklin Templeton Limited Duration
Income Trust seeks to provide high, current income, with a secondary objective
of capital appreciation to the extent it is possible and consistent with the
Fund's primary objective, through a portfolio consisting primarily of high yield
corporate bonds, floating rate bank loans, and mortgage- and other asset-backed
securities.
Dear Shareholder:
We are pleased to bring you Franklin Templeton Limited Duration Income Trust's
semiannual report for the period ended September 30, 2009.
PERFORMANCE OVERVIEW
For the six months under review, Franklin Templeton Limited Duration Income
Trust had cumulative total returns of +30.65% based on net asset value and
+37.49% based on market price. Net asset value increased from $10.15 per share
on March 31, 2009, to $12.76 at period-end, and the market price rose from $8.92
to $11.76 over the same time. You can find the Fund's performance data in the
Performance Summary on page 7.
ECONOMIC AND MARKET OVERVIEW
During the six-month period ended September 30, 2009, the U.S. economy began to
show signs of recovery as many of the forces that had hindered the
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 13.
Semiannual Report | 1
economy dissipated. Financial markets stabilized in response to the federal
stimulus package and the Federal Reserve Board's (Fed's) interventions, and
investor risk appetite improved. In March, many investors reentered the stock
market and started a rally that brought the major indexes off this cycle's lows.
In 2009's third quarter, a number of blue-chip companies released reports that
showed better-than-expected profits resulting from cost-cutting measures.
Manufacturing activity improved over the period. Consumer confidence rebounded
in the second quarter of 2009 due to improved expectations. Economic activity as
measured by gross domestic product (GDP) improved from earlier in 2009. GDP was
an annualized -0.7% in 2009's second quarter and an estimated annualized 3.5% in
the third quarter. These positive signs, however, were constrained by a rising
unemployment rate, which reached 9.8% by period-end, a 26-year high.(1) Despite
improving economic data, most industries eliminated jobs.
As economic conditions improved, oil prices increased from $49 per barrel in
March to $70 in September, still well below 2008 highs. September's inflation
rate was an annualized -1.3%.(1) Core inflation, which excludes food and energy
costs, rose at a 1.5% annualized rate, which was within the Fed's informal
target range of 1.5% to 2.0%.(1) The core personal consumption expenditures
price index reported a 12-month increase of 1.3%.(2)
During the period under review, an improving economy and decelerating inflation
prompted policymakers to maintain low interest rates and discontinue certain
stimulus plans. Noting it now believes the recession has ended, the Fed left the
federal funds target rate unchanged at a range of 0% to 0.25% for an extended
period and began to lay the groundwork for an eventual tightening of monetary
policy. Near period-end, the Fed assessed which support programs it created or
expanded could be phased out.
Most Treasury prices fell during the period, and fixed income spreads narrowed
relative to Treasury yields due to reduced market turbulence and increased risk
tolerance. The spread between two-year and 10-year Treasury yields rose to 236
basis points (100 basis points equal one percentage point) at the end of
September from 190 basis points at the beginning of the reporting period. The
two-year Treasury bill yield rose from 0.81% to 0.96% over the six-month period,
while the 10-year Treasury note yield rose from 2.71% to 3.31%.
(1.) Source: Bureau of Labor Statistics.
(2.) Source: Bureau of Economic Analysis.
2 | Semiannual Report
INVESTMENT STRATEGY
We invest in a diversified mix of fixed income securities, predominantly high
yield corporate bonds, senior secured floating rate bank loans, and mortgage-
and other asset-backed securities. Our top-down analysis of macroeconomic trends
combined with a bottom-up fundamental analysis of market sectors, industries and
issuers drives our investment process. We seek to maintain a limited duration,
or interest rate sensitivity, to moderate the impact that fluctuating interest
rates might have on the Fund's fixed income portfolio. Within the corporate bond
and bank loan sectors, we seek securities trading at reasonable valuations from
issuers with characteristics such as strong market positions, stable cash flows,
reasonable capital structures, supportive asset values, strong sponsorship and
improving credit fundamentals. In the mortgage- and other asset-backed
securities sector, we look to capture an attractive income stream and total
return through our analysis of security prepayment assumptions, pricing
inefficiencies and underlying collateral characteristics.
MANAGER'S DISCUSSION
The period under review was marked by a remarkable recovery in most financial
markets, including those that represent the majority of the Fund's investments.
Buoyed by hopes that government stimulus plans would cause the desired effect,
the markets seized on an improvement in the rate of economic decline, if not on
economic growth itself, to propel securities prices higher. First and second
fiscal quarter corporate earnings also came in ahead of reduced expectations, as
cost cutting helped offset a decline in revenues. This positive earnings news,
along with the forward-looking nature of the stock market, helped to propel the
Standard & Poor's 500 Index (S&P 500) up 34.02% for the six-month period.(3)
Conversely, U.S. Treasury returns were negative, as expectations for an
improving economy and the resulting fears of inflationary pressures drove up the
10-year Treasury yield. Money market yields remained near zero as the government
kept short-term rates low to provide further economic stimulus. In this
environment, investors moved into riskier asset classes in search of yield and
returns. Accordingly, high yield corporate bonds and leveraged loans generated
impressive returns. The more conservative mortgage-backed securities (MBS)
market generated positive, if more muted, returns. During the period under
review, we increased our holdings of high yield corporate bonds, partially
offset by a reduction in holdings of investment grade corporate bonds. We
reduced our exposure to MBS, while our exposure to bank loans remained
relatively unchanged.
(3.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. Past performance is no guarantee of future results. The
S&P 500 consists of 500 stocks chosen for market size, liquidity and
industry group representation. Each stock's weight in the index is
proportionate to its market value. The S&P 500 is one of the most widely
used benchmarks of U.S. equity performance.
PORTFOLIO BREAKDOWN
Based on Total Investments as of 9/30/09*
(BAR CAHRT)
High Yield Corporate Bonds 34.5%
Floating Rate Loans 32.7%
Mortgage-Backed Securities 18.3%
Other Asset-Backed Securities 7.3%
Investment Grade Corporate Bonds 4.4%
Foreign Government & Agency Securities 2.2%
Preferred Stock 0.1%
Short-Term Investments & Other Net Assets 0.5%
* Total investments include long-term and short-term investments and other
net assets excluding preferred stock issued by the Fund and other financial
leverage.
Semiannual Report | 3
DIVIDEND DISTRIBUTIONS*
4/1/09-9/30/09
MONTH DIVIDEND PER COMMON SHARE
----- -------------------------
April 7.6 cents
May 7.6 cents
June 7.6 cents
July 7.6 cents
August 7.6 cents
September 7.6 cents
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TOTAL 45.6 CENTS
* All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.
HIGH YIELD CORPORATE BONDS
High yield corporate bonds enjoyed an explosive rebound, with the Credit Suisse
(CS) High Yield Index returning +37.20% as concerns about deteriorating
fundamentals and a rise in default levels gave way to expectations of an
economic recovery.(4) Actual defaults, while elevated from prerecession levels,
proved to be more benign than expected. In addition, capital markets reopened
and allowed companies to refinance debt to extend maturities or remove onerous
covenants, which reduced future default expectations. Highlighting the high
yield sector's improvement was the fact that spreads over Treasuries fell by
nearly half during the period, from 14.95 percentage points to 7.64 percentage
points. At period-end, the spread level was still higher than the historical
average of approximately six percentage points since 1990.(5) Given what we
believed were still favorable valuations and attractive investment opportunities
particularly in the new-issue market, we increased the Fund's exposure to high
yield corporate bonds during the period under review.
FLOATING RATE BANK LOANS
For the six months ended September 30, 2009, the bank loan asset class rallied
strongly and returned +30.42%, as measured by the CS Leveraged Loan Index.(6)
The loan market's strength was driven by loan repayments from net proceeds
raised from new high yield bond and equity issuance that gave investors more
cash. As liquidity and credit market conditions improved, investors saw value in
the lower-rated loans (rated CCC and below), and this category rallied the most,
including those loans closest to covenant or payment default. As a result,
secondary loan prices rebounded from 75.2 cents on the dollar at the beginning
of the period to 91.5 at period-end.(7) The average discounted spread to
maturity narrowed from 991 basis points to 487 basis points.(7)
(4.) Source: (C) 2009 Morningstar. The CS High Yield Index is designed to mirror
the investible universe of the U.S. dollar-denominated high yield debt
market.
(5.) Source: Credit Suisse.
(6.) Source: (C) 2009 Morningstar. The CS Leveraged Loan Index is designed to
mirror the investible universe of the U.S. dollar-denominated leveraged
loan market.
(7.) Source: Standard & Poor's. The S&P/Leveraged Commentary & Data Flow Name
Composite Index comprises the 15 most actively traded loan facilities,
generally drawn from the S&P/LSTA (Loan Syndications and Trading
Association) Leveraged Loan Index (LLI).
4 | Semiannual Report
Amendment activity continued to increase during the period, including
traditional covenant-changing amendments and a new type of amendment known as
"amend and extend." An "amend and extend" transaction allowed an issuer to
extend the maturity on existing term loans in exchange for higher fees and
pricing, thereby pushing out near-term maturities and paving the way for a
comprehensive refinancing when better market conditions return. This exchange
improved the loan's risk/reward profile, which often led to price increases in
the secondary market. The increased amendment activity also resulted in a slower
increase in the overall default rate.
MORTGAGE- AND OTHER ASSET-BACKED SECURITIES
During the six months under review, the overall MBS market delivered positive
results, but lagged the robust performance of the high yield corporate bond and
bank loan sectors. During the period, the Fed's $1.25 trillion agency mortgage
purchase program provided support to the agency mortgage-backed securities
market. The Fed introduced the program, first announced in November 2008, to
facilitate mortgage credit availability during the financial downturn, and it is
expected to conclude by March 31, 2010. As the end of the program approaches,
the market has begun to focus on the Fed's strategy to exit the program, which
created a less favorable technical environment.
The Fund's coupon allocation remained relatively constant over the period. The
increase in Treasury and mortgage rates, along with declining home prices, loss
of home equity and tighter underwriting standards, reduced the prospect for
prepayment risk for higher coupon MBS. Our heaviest MBS allocation was to
coupons in the 5.0% through 6.5% range. We continued to invest in bonds from
higher quality securitized sectors as we found fundamentally sound bonds at what
we considered attractive yields in these markets, and we remained allocated to
higher quality asset-backed securities and commercial MBS.
Semiannual Report | 5
Thank you for your continued participation in Franklin Templeton Limited
Duration Income Trust. We look forward to serving your future investment needs.
Sincerely,
(PHOTO OF CHRISTOPHER J. MOLUMPHY)
/s/ Christopher J. Molumphy
Christopher J. Molumphy, CFA
(PHOTO OF ERIC G. TAKAHA)
/s/ Eric G. Takaha
Eric G. Takaha, CFA
(PHOTO OF GLENN I. VOYLES)
/s/ Glenn I. Voyles
Glenn I. Voyles, CFA
(PHOTO OF RICHARD S. HSU)
/s/ Richard S. Hsu
Richard S. Hsu, CFA
(PHOTO OF ROGER A. BAYSTON)
/s/ Roger A. Bayston
Roger A. Bayston, CFA
Portfolio Management Team
Franklin Templeton Limited Duration
Income Trust
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF SEPTEMBER 30, 2009, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
6 | Semiannual Report
Performance Summary as of 9/30/09
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. Total return reflects reinvestment of the Fund's 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 gains
distributions, if any, or any realized gains on the sale of Fund shares.
PRICE AND DISTRIBUTION INFORMATION
SYMBOL: FTF CHANGE 9/30/09 3/31/09
----------- ------ ------- -------
Net Asset Value (NAV) +$2.61 $12.76 $10.15
Market Price (NYSE Amex) +$2.84 $11.76 $ 8.92
DISTRIBUTIONS (4/1/09-9/30/09)
Dividend Income $0.4560
PERFORMANCE(1)
COMMENCEMENT OF
6-MONTH 1-YEAR 5-YEAR OPERATIONS (8/27/03)
------- ------ ------- --------------------
Cumulative Total Return(2)
Based on change in NAV(3) +30.65% +17.73% +28.37% +41.80%
Based on change in market price(4) +37.49% +54.75% +23.40% +29.79%
Average Annual Total Return(2)
Based on change in NAV(3) +30.65% +17.73% +5.12% +5.90%
Based on change in market price(4) +37.49% +54.75% +4.29% +4.37%
Distribution Rate(5) 7.76%
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.
ENDNOTES
INTEREST RATE MOVEMENTS AND MORTGAGE PREPAYMENTS WILL AFFECT THE FUND'S SHARE
PRICE AND YIELD. THE RISKS ASSOCIATED WITH HIGHER YIELDING, LOWER-RATED
SECURITIES INCLUDE HIGHER RISK OF DEFAULT AND LOSS OF PRINCIPAL.
(1.) Figures are for common shares. As of 9/30/09, the Fund had leverage in the
amount of 31.68% of the Fund's total assets. The Fund employs leverage
through the issuance of Auction Preferred Shares and purchase of Mortgage
Dollar Rolls. The use of financial leverage creates an opportunity for
increased income but, at the same time, creates special risks (including
the likelihood of greater volatility of net asset value and market price of
common shares). The cost of leverage rises and falls with changes in
short-term interest rates. Such increases/decreases in the cost of the
Fund's leverage may be offset by increased/decreased income from the Fund's
floating rate investments.
(2.) Total return calculations represent the cumulative and average annual
changes in value of an investment over the periods indicated. Six-month
return has not been annualized.
(3.) Assumes reinvestment of distributions at net asset value.
(4.) Assumes reinvestment of distributions based on the dividend reinvestment
plan.
(5.) Distribution rate is based on an annualization of the Fund's 7.6 cent per
share September dividend and the NYSE Amex closing price of $11.76 on
9/30/09.
Semiannual Report | 7
Annual Shareholders' Meeting
SEPTEMBER 24, 2009
At an annual Meeting of Shareholders of Franklin Templeton Limited Duration
Income Trust (Fund) held on September 24, 2009, shareholders approved the
following:
Regarding the proposal to elect Trustees:
COMMON % OF % OF
SHARES OUTSTANDING % OF WITHHELD OR OUTSTANDING % OF
TRUSTEES FOR SHARES VOTED ABSTAIN SHARES VOTED
-------- ------------- ----------- ------ ----------- ----------- -----
Frank W.T. LaHaye 21,972,070.74 85.25% 97.53% 555,607.00 2.16% 2.47%
Frank A. Olson 21,972,070.74 85.25% 97.53% 555,607.00 2.16% 2.47%
PREFERRED % OF % OF
SHARES OUTSTANDING % OF WITHHELD OR OUTSTANDING % OF
TRUSTEES FOR SHARES VOTED ABSTAIN SHARES VOTED
-------- ------------- ----------- ------ ----------- ----------- -----
Frank W.T. LaHaye 2,742.00 76.17% 98.42% 44.00 1.22% 1.58%
Frank A. Olson 2,742.00 76.17% 98.42% 44.00 1.22% 1.58%
Charles B. Johnson 2,742.00 76.17% 98.42% 44.00 1.22% 1.58%
8 | Semiannual Report
Dividend Reinvestment Plan
The Fund's Dividend Reinvestment Plan (Plan) offers you a prompt and simple way
to reinvest dividends and capital gain distributions (Distributions) in shares
of the Fund. PNC Global Investment Servicing (Agent), P.O. Box 43027,
Providence, RI 02940-3027, will act as your Agent in administering the Plan. The
Agent will open an account for you under the Plan in the same name as your
outstanding shares are registered. The complete Terms and Conditions of the
Dividend Reinvestment Plan are contained in the Fund's Dividend Reinvestment
Plan Brochure. A copy of that Brochure may be obtained from the Fund at the
address on the back cover of this report.
You are automatically enrolled in the Plan unless you elect to receive
Distributions in cash. If you own shares in your own name, you should notify the
Agent, in writing, if you wish to receive Distributions in cash.
If the Fund declares a Distribution, you, as a participant in the Plan, will
automatically receive an equivalent amount of shares of the Fund purchased on
your behalf by the Agent.
If on the payment date for a Distribution, the net asset value per share is
equal to or less than the market price per share plus estimated brokerage
commissions, the Agent shall receive newly issued shares, including fractions,
from the Fund for your account. The number of additional shares to be credited
shall be determined by dividing the dollar amount of the Distribution by the
greater of the net asset value per share on the payment date, or 95% of the then
current market price per share.
If the net asset value per share exceeds the market price plus estimated
brokerage commissions on the payment date for a Distribution, the Agent (or a
broker-dealer selected by the Agent) shall try, for a purchase period of 30
days, to apply the amount of such Distribution on your shares (less your pro
rata share of brokerage commissions incurred) to purchase shares on the open
market. The weighted average price (including brokerage commissions) of all
shares it purchases shall be your allocated price per share. If, before the
Agent has completed its purchases, the market price plus estimated brokerage
commissions exceeds the net asset value of the shares as of the payment date,
the purchase price the Agent paid may exceed the net asset value of the shares,
resulting in the acquisition of fewer shares than if such Distribution had been
paid in shares issued by the Fund. Participants should note that they will not
be able to instruct the Agent to purchase shares at a specific time or at a
specific price. The Agent may make open-market purchases on any securities
exchange where shares are traded, in the over-the-counter market or in
negotiated transactions, and may be on such terms as to price, delivery and
otherwise as the Agent shall determine.
Semiannual Report | 9
The market price of shares on a particular date shall be the last sales price on
NYSE Amex, or, if there is no sale on the exchange on that date, then the mean
between the closing bid and asked quotations on the exchange on such date. The
net asset value per share on a particular date shall be the amount most recently
calculated by or on behalf of the Fund as required by law.
The Agent shall at all times act in good faith and agree to use its best efforts
within reasonable limits to ensure the accuracy of all services performed under
this agreement and to comply with applicable law, but assumes no responsibility
and shall not be liable for loss or damage due to errors unless such error is
caused by the Agent's negligence, bad faith, or willful misconduct or that of
its employees. Your uninvested funds held by the Agent will not bear interest.
The Agent shall have no responsibility for the value of shares acquired. For the
purpose of cash investments, the Agent may commingle your funds with those of
other participants in the same Fund.
There is no direct charge to participants for reinvesting Distributions, since
the Agent's fees are paid by the Fund. However, when shares are purchased in the
open market, each participant will pay a pro rata portion of any brokerage
commissions incurred. If you elect by notice to the Agent to have it sell part
or all of your shares and remit the proceeds, the Agent will deduct brokerage
commissions from the proceeds.
The automatic reinvestment of Distributions does not relieve you of any taxes
that may be payable on Distributions. In connection with the reinvestment of
Distributions, shareholders generally will be treated as having received a
Distribution equal to the cash Distribution that would have been paid.
The Agent will forward to you any proxy solicitation material and will vote any
shares so held for you first in accordance with the instructions set forth on
proxies you return to the Fund, and then with respect to any proxies you do not
return to the Fund in the same portion as the Agent votes proxies the
participants return to the Fund.
As long as you participate in the Plan, the Agent will hold the shares it has
acquired for you in safekeeping, in its name or in the name of its nominee. This
convenience provides added protection against loss, theft or inadvertent
destruction of certificates. However, you may request that a certificate
representing your Plan shares be issued to you. Upon your written request, the
Agent will deliver to you, without charge, a certificate or certificates for the
full shares. The Agent will send you a confirmation of each acquisition made for
your account as soon as practicable, but not later than 60 days after the
acquisition date. Although from time to time you may have an undivided
fractional interest in a share of the Fund, no certificates for a fractional
share will be issued.
10 | Semiannual Report
Distributions on fractional shares will be credited to your account. If you
terminate your account under the Plan, the Agent will adjust for any such
undivided fractional interest in cash at the market value of shares at the time
of termination.
You may withdraw from the Plan at any time, without penalty, by notifying the
Agent in writing at the address above or by telephone at (800) 331-1710. Such
termination will be effective with respect to a Distribution if the Agent
receives your notice prior to the Distribution record date. The Agent or the
Fund may terminate the Plan upon notice to you in writing mailed at least 30
days prior to any record date for the payment of any Distribution. Upon any
termination, the Agent will issue, without charge, stock certificates for all
full shares you own and will convert any fractional shares you hold at the time
of termination to cash at current market price and send you a check for the
proceeds.
The Fund or the Agent may amend the Plan. You will receive written notice at
least 30 days before the effective date of any amendment.
Semiannual Report | 11
Franklin Templeton
Limited Duration Income Trust
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, 2009 ----------------------------------------------------------
(UNAUDITED) 2009 2008 2007 2006 2005
------------------ -------- -------- -------- -------- --------
PER COMMON SHARE OPERATING PERFORMANCE
(for a common share outstanding
throughout the period)
Net asset value, beginning of period ..... $ 10.15 $ 12.85 $ 14.24 $ 14.14 $ 14.41 $ 14.75
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income(a) .............. 0.45 0.93 1.28 1.32 1.18 1.10
Net realized and unrealized gains
(losses) ........................... 2.65 (2.56) (1.29) 0.16 (0.10) (0.12)
Dividends to preferred shareholders
from net investment income ......... (0.03) (0.14) (0.37) (0.35) (0.26) (0.13)
-------- -------- -------- -------- -------- --------
Total from investment operations ......... 3.07 (1.77) (0.38) 1.13 0.82 0.85
-------- -------- -------- -------- -------- --------
Less distributions to common
shareholders from net investment
income ................................ (0.46) (0.93) (1.01) (1.03) (1.09) (1.19)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ........... $ 12.76 $ 10.15 $ 12.85 $ 14.24 $ 14.14 $ 14.41
======== ======== ======== ======== ======== ========
Market value, end of period(b) ........... $ 11.76 $ 8.92 $ 10.94 $ 14.27 $ 12.87 $ 13.89
======== ======== ======== ======== ======== ========
Total return (based on market value
per share)(c) ......................... 37.49% (9.97)% (16.64)% 19.66% 0.60% 1.38%
RATIOS TO AVERAGE NET ASSETS
APPLICABLE TO COMMON SHARES(d)
Expenses before expense reduction ........ 1.16% 1.33% 1.28% 1.27% 1.26% 1.21%
Expenses net of expense reduction ........ 1.16%(e) 1.33%(e) 1.28%(e) 1.26% 1.26%(e) 1.21%(e)
Net investment income .................... 7.56% 8.16% 9.38% 9.32% 8.24% 7.50%
SUPPLEMENTAL DATA
Net assets applicable to common shares,
end of period (000's) ................. $341,732 $271,679 $344,010 $380,813 $378,080 $385,344
Portfolio turnover rate .................. 103.07% 203.31% 47.48% 52.17% 46.55% 55.02%
Portfolio turnover rate excluding
mortgage dollar rolls(f) .............. 25.88% 42.58% 47.48% 52.17% 46.55% 55.02%
Asset coverage per preferred share ....... $138,941 $115,173 $ 70,264 $ 75,107 $ 74,747 $ 75,703
Liquidation preference per preferred
share ................................. $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
(a) Based on average daily common shares outstanding.
(b) Based on the last sale on the NYSE Amex.
(c) Total return is not annualized for periods less than one year.
(d) Ratios are annualized for periods less than one year.
(e) Benefit of expense reduction rounds to less than 0.01%.
(f) See Note 1(e) regarding mortgage dollar rolls.
The accompanying notes are an integral part of these financial statements.
12 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED)
COUNTRY SHARES VALUE
------------- ------------- -------------
PREFERRED STOCKS (COST $237,850) 0.1%
DIVERSIFIED FINANCIALS 0.1%
(a) Preferred Blocker Inc., 7.00%, pfd., 144A ............ United States 670 $ 389,668
-------------
PRINCIPAL
AMOUNT(b)
-------------
CORPORATE BONDS 57.0%
AUTOMOBILES & COMPONENTS 1.5%
Ford Motor Credit Co. LLC, senior note,
9.75%, 9/15/10 .................................... United States 2,000,000 2,044,234
9.875%, 8/10/11 ................................... United States 2,000,000 2,050,000
(a) TRW Automotive Inc., senior note, 144A, 7.25%,
3/15/17 ........................................... United States 1,000,000 885,000
-------------
4,979,234
-------------
CAPITAL GOODS 2.0%
(a) Allison Transmission Inc., senior note, 144A, 11.00%,
11/01/15 .......................................... United States 1,000,000 985,000
Case New Holland Inc., senior note, 7.125%,
3/01/14 ........................................... United States 2,000,000 1,970,000
RBS Global & Rexnord Corp., senior note, 9.50%,
8/01/14 ........................................... United States 2,000,000 1,950,000
RSC Equipment Rental Inc., senior note, 9.50%,
12/01/14 .......................................... United States 2,000,000 1,940,000
-------------
6,845,000
-------------
COMMERCIAL & PROFESSIONAL SERVICES 2.0%
(a) Acco Brands Corp., senior secured note,
144A, 10.625%, 3/15/15 ............................ United States 700,000 735,000
(c) ARAMARK Corp., senior note, FRN, 3.983%, 2/01/15 ..... United States 2,500,000 2,181,250
(a) Casella Waste Systems Inc., senior secured note, 144A,
11.00%, 7/15/14 ................................... United States 900,000 959,625
(a) Clean Harbors Inc., senior secured note, 144A, 7.625%,
8/15/16 ........................................... United States 500,000 514,375
JohnsonDiversey Holdings Inc., senior disc. note,
10.67%, 5/15/13 ................................... United States 2,500,000 2,412,500
-------------
6,802,750
-------------
CONSUMER DURABLES & APPAREL 1.4%
Jarden Corp., senior sub. note, 7.50%, 5/01/17 ....... United States 2,500,000 2,443,750
Jostens IH Corp., senior sub. note, 7.625%,
10/01/12 .......................................... United States 2,000,000 2,012,500
KB Home, senior note, 6.375%, 8/15/11 ................ United States 209,000 212,135
-------------
4,668,385
-------------
CONSUMER SERVICES 4.2%
(a) Harrah's Operating Co. Inc., senior secured note,
144A, 11.25%, 6/01/17 ............................. United States 500,000 507,500
(a) Harrah's Operating Escrow, senior secured note, 144A,
11.25%, 6/01/17 ................................... United States 2,500,000 2,581,250
Host Hotels & Resorts LP, senior note, K, 7.125%,
11/01/13 .......................................... United States 1,500,000 1,488,750
MGM MIRAGE, senior note,
6.75%, 4/01/13 .................................... United States 3,000,000 2,475,000
6.625%, 7/15/15 ................................... United States 500,000 388,750
(a) Pinnacle Entertainment Inc., senior note, 144A,
8.625%, 8/01/17 ................................... United States 2,000,000 2,020,000
Royal Caribbean Cruises Ltd., senior note, 7.25%,
6/15/16 ........................................... United States 2,500,000 2,366,125
Starwood Hotels & Resorts Worldwide Inc., senior note,
6.75%, 5/15/18 .................................... United States 2,500,000 2,371,875
-------------
14,199,250
-------------
Semiannual Report | 13
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL
COUNTRY AMOUNT(b) VALUE
------------- ------------- -------------
CORPORATE BONDS (CONTINUED)
DIVERSIFIED FINANCIALS 2.7%
Citigroup Inc., senior note, 6.375%, 8/12/14 ......... United States 2,000,000 $ 2,070,786
(a) GMAC LLC, senior note, 144A,
7.25%, 3/02/11 .................................... United States 1,266,000 1,231,185
6.875%, 8/28/12 ................................... United States 1,899,000 1,766,070
JPMorgan Chase & Co., sub. note, 5.75%, 1/02/13 ...... United States 2,000,000 2,136,826
(d) Lehman Brothers Holdings Inc., senior note, 6.20%,
9/26/14 ........................................... United States 3,000,000 525,000
Merrill Lynch & Co. Inc., 5.45%, 2/05/13 ............. United States 1,500,000 1,557,036
-------------
9,286,903
-------------
ENERGY 9.1%
(a) Arch Coal Inc., senior note, 144A, 8.75%, 8/01/16 .... United States 400,000 414,000
Berry Petroleum Co., senior note, 10.25%, 6/01/14 .... United States 1,300,000 1,394,250
Bill Barrett Corp., senior note, 9.875%, 7/17/16 ..... United States 400,000 423,000
Chesapeake Energy Corp., senior note, 7.50%,
6/15/14 ........................................... United States 4,000,000 3,975,000
Compagnie Generale de Geophysique-Veritas,
senior note, 7.50%, 5/15/15 ....................... France 2,500,000 2,500,000
Concho Resources Inc., senior note, 8.625%,
10/01/17 .......................................... United States 700,000 721,000
El Paso Corp., senior note, 12.00%, 12/12/13 ......... United States 2,000,000 2,290,000
Mariner Energy Inc., senior note, 7.50%, 4/15/13 ..... United States 2,000,000 1,940,000
(a) MarkWest Energy Partners LP, senior note, 144A,
6.875%, 11/01/14 .................................. United States 700,000 658,000
Peabody Energy Corp., senior note, B, 6.875%,
3/15/13 ........................................... United States 2,000,000 2,030,000
(a) Petrohawk Energy Corp., senior note, 144A, 10.50%,
8/01/14 ........................................... United States 2,000,000 2,160,000
(a) Petroplus Finance Ltd., senior note, 144A, 6.75%,
5/01/14 ........................................... Switzerland 2,000,000 1,855,000
Plains Exploration & Production Co., senior note,
10.00%, 3/01/16 ................................... United States 2,000,000 2,165,000
Quicksilver Resources Inc., senior note, 9.125%,
8/15/19 ........................................... United States 2,000,000 1,997,500
(a) SandRidge Energy Inc., senior note, 144A, 8.00%,
6/01/18 ........................................... United States 2,500,000 2,418,750
Tesoro Corp., senior note, 6.625%, 11/01/15 .......... United States 2,000,000 1,860,000
The Williams Co. Inc., 8.125%, 3/15/12 ............... United States 2,000,000 2,175,444
-------------
30,976,944
-------------
FOOD & STAPLES RETAILING 1.3%
(a) Duane Reade Inc., senior secured note, 144A, 11.75%,
8/01/15 ........................................... United States 800,000 844,000
(a) Rite Aid Corp., senior secured note, 144A, 9.75%,
6/12/16 ........................................... United States 1,500,000 1,627,500
SUPERVALU Inc., senior note, 8.00%, 5/01/16 .......... United States 2,000,000 2,080,000
-------------
4,551,500
-------------
FOOD, BEVERAGE & TOBACCO 2.2%
(a) Alliance One International Inc., senior note, 144A,
10.00%, 7/15/16 ................................... United States 300,000 311,250
(a) Anheuser-Busch InBev NV, senior note, 144A, 7.20%,
1/15/14 ........................................... United States 2,000,000 2,254,626
(a) Dole Food Co. Inc, senior note, 144A, 13.875%,
3/15/14 ........................................... United States 1,500,000 1,766,250
(a) JBS USA LLC, senior note, 144A, 11.625%, 5/01/14 ..... United States 2,000,000 2,160,000
Tyson Foods Inc., senior note, 10.50%, 3/01/14 ....... United States 1,000,000 1,137,500
-------------
7,629,626
-------------
HEALTH CARE EQUIPMENT & SERVICES 5.5%
Coventry Health Care Inc., senior note, 5.875%,
1/15/12 ........................................... United States 2,000,000 1,980,752
14 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL
COUNTRY AMOUNT(b) VALUE
------------- ------------- -------------
CORPORATE BONDS (CONTINUED)
HEALTH CARE EQUIPMENT & SERVICES (CONTINUED)
DaVita Inc.,
senior note, 6.625%, 3/15/13 ...................... United States 900,000 $ 895,500
senior sub. note, 7.25%, 3/15/15 .................. United States 1,000,000 995,000
FMC Finance III SA, senior note, 6.875%, 7/15/17 ..... Germany 2,000,000 1,950,000
(a) Fresenius US Finance II, senior note, 144A, 9.00%,
7/15/15 ........................................... Germany 1,000,000 1,095,000
HCA Inc., senior secured note, 9.125%, 11/15/14 ...... United States 3,000,000 3,105,000
(a) Tenet Healthcare Corp., senior note, 144A,
9.00%, 05/01/15 ................................... United States 1,250,000 1,312,500
10.00%, 5/01/18 ................................... United States 1,250,000 1,384,375
(e) United Surgical Partners International Inc., senior
sub. note, PIK, 9.25%, 5/01/17 .................... United States 2,000,000 1,910,000
(c, e) US Oncology Holdings Inc., senior note, PIK, FRN,
6.904%, 3/15/12 ................................... United States 2,323,307 2,032,894
Vanguard Health Holding Co. II LLC, senior sub. note,
9.00%, 10/01/14 ................................... United States 2,000,000 2,050,000
-------------
18,711,021
-------------
INSURANCE 0.5%
(a) Metropolitan Life Global Funding I, senior secured
note, 144A, 5.125%, 4/10/13 ....................... United States 1,700,000 1,774,261
-------------
MATERIALS 6.0%
(a) Anglo American Capital PLC, senior note, 144A, 9.375%,
4/08/14 ........................................... United Kingdom 1,500,000 1,749,138
ArcelorMittal, senior note, 9.00%, 2/15/15 Luxembourg 2,000,000 2,302,488
Ball Corp., senior note, 7.125%, 9/01/16 ............. United States 500,000 512,500
(a) Clearwater Paper Corp., senior note, 144A, 10.625%,
6/15/16 ........................................... United States 1,800,000 1,955,250
(c) Freeport-McMoRan Copper & Gold Inc., senior note, FRN,
4.995%, 4/01/15 ................................... United States 1,000,000 1,003,280
Huntsman International LLC, senior sub. note, 7.875%,
11/15/14 .......................................... United States 2,000,000 1,870,000
(a) Ineos Group Holdings PLC, senior secured note, 144A,
8.50%, 2/15/16 .................................... United Kingdom 1,500,000 720,000
(a) MacDermid Inc., senior sub. note, 144A, 9.50%,
4/15/17 ........................................... United States 2,000,000 1,850,000
Nalco Co., senior sub. note, 8.875%, 11/15/13 ........ United States 2,000,000 2,065,000
(a) NewPage Corp., senior secured note, 144A, 11.375%,
12/31/14 .......................................... United States 800,000 790,000
Owens-Brockway Glass Container Inc., senior note,
7.375%, 5/15/16 ................................... United States 700,000 714,000
Solo Cup Co.,
(a) senior secured note, 144A, 10.50%, 11/01/13 ....... United States 500,000 535,000
senior sub. note, 8.50%, 2/15/14 .................. United States 900,000 864,000
Teck Resources Ltd., senior note, 9.75%, 5/15/14 ..... Canada 2,300,000 2,541,500
Weyerhaeuser Co., senior note, 7.375%, 10/01/19 ...... United States 1,200,000 1,199,145
-------------
20,671,301
-------------
MEDIA 6.3%
(a) Cablevision Systems Corp., senior note, 144A, 8.625%,
9/15/17 ........................................... United States 1,000,000 1,037,500
(d, f) CanWest Media Inc., senior sub. note, 8.00%,
9/15/12 ........................................... Canada 2,000,000 1,580,000
(d, f) CCH II LLC, senior note, 10.25%, 9/15/10 ............. United States 4,000,000 4,520,000
(a) CSC Holdings Inc., senior note, 144A, 8.50%,
4/15/14 ........................................... United States 1,000,000 1,055,000
(d, f) Dex Media West Finance, senior sub. note, 9.875%,
8/15/13 ........................................... United States 4,000,000 730,000
EchoStar DBS Corp., senior note, 6.375%, 10/01/11 .... United States 2,000,000 2,045,000
Semiannual Report | 15
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL
COUNTRY AMOUNT(b) VALUE
------------- ------------- -------------
CORPORATE BONDS (CONTINUED)
MEDIA (CONTINUED)
Lamar Media Corp., senior sub. note,
7.25%, 1/01/13 .................................... United States 1,000,000 $ 988,750
C, 6.625%, 8/15/15 ................................ United States 2,000,000 1,840,000
LIN Television Corp., senior sub. note, 6.50%,
5/15/13 ........................................... United States 2,000,000 1,820,000
Quebecor Media Inc., senior note, 7.75%, 3/15/16 ..... Canada 2,500,000 2,487,500
Radio One Inc., senior sub. note, B, 8.875%,
7/01/11 ........................................... United States 2,000,000 1,067,500
(a) UPC Holding BV, senior note, 144A, 9.875%, 4/15/18 ... Netherlands 400,000 422,000
(a) WMG Acquisition Corp., senior secured note, 144A,
9.50%, 6/15/16 .................................... United States 2,000,000 2,120,000
-------------
21,713,250
-------------
REAL ESTATE 1.8%
Duke Realty LP, senior note, 7.375%, 2/15/15 ......... United States 1,600,000 1,652,418
(a, g) FelCor Lodging Trust Inc., senior secured note,
144A, 10.00%, 10/01/14 ............................ United States 1,700,000 1,653,250
(f) Forest City Enterprises Inc., senior note, 7.625%,
6/01/15 ........................................... United States 1,000,000 815,000
Simon Property Group LP, senior note, 6.75%,
5/15/14 ........................................... United States 2,000,000 2,147,942
-------------
6,268,610
-------------
RETAILING 0.6%
Michaels Stores Inc., senior note, 10.00%, 11/01/14 .. United States 2,000,000 1,980,000
-------------
SOFTWARE & SERVICES 0.9%
SunGard Data Systems Inc., senior note,
9.125%, 8/15/13 ................................... United States 3,000,000 3,045,000
-------------
TECHNOLOGY HARDWARE & EQUIPMENT 0.8%
Jabil Circuit Inc., senior note, 7.75%, 7/15/16 ...... United States 1,000,000 1,020,000
Sanmina-SCI Corp.,
(a, c) senior note, 144A, FRN, 3.049%, 6/15/14 ........... United States 1,000,000 905,000
senior sub. note, 6.75%, 3/01/13 .................. United States 1,000,000 955,000
-------------
2,880,000
-------------
TELECOMMUNICATION SERVICES 4.6%
(a) CC Holdings GS V LLC, senior secured note, 144A,
7.75%, 5/01/17 .................................... United States 400,000 416,000
Crown Castle International Corp., senior note, 9.00%,
1/15/15 ........................................... United States 1,500,000 1,578,750
(a) Digicel Group Ltd., senior note, 144A, 8.875%,
1/15/15 ........................................... Jamaica 2,000,000 1,870,000
Intelsat Subsidiary Holding Co. Ltd., senior note,
8.50%, 1/15/13 .................................... Bermuda 2,500,000 2,543,750
(a) 144A, 8.875%, 1/15/15 ............................. Bermuda 500,000 508,750
MetroPCS Wireless Inc., senior note, 9.25%,
11/01/14 .......................................... United States 2,000,000 2,055,000
Millicom International Cellular SA, senior note,
10.00%, 12/01/13 .................................. Luxembourg 1,500,000 1,563,750
Qwest Communications International Inc., senior
note, B, 7.50%, 2/15/14 ........................... United States 2,000,000 1,985,000
(a) Qwest Corp., senior note, 144A, 8.375%, 5/01/16 ...... United States 400,000 416,000
(a) Wind Acquisition Finance SA, senior note, 144A,
10.75%, 12/01/15 .................................. Italy 2,500,000 2,762,500
-------------
15,699,500
-------------
TRANSPORTATION 0.3%
(a) Ceva Group PLC,
senior note, 144A, 10.00%, 9/01/14 ................ United Kingdom 100,000 89,500
(g) senior secured note, 144A, 11.625%, 10/01/16 ...... United Kingdom 300,000 291,381
16 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
COUNTRY PRINCIPAL AMOUNT(b) VALUE
------------- -------------------- -------------
CORPORATE BONDS (CONTINUED)
TRANSPORTATION (CONTINUED)
(a) Delta Air Lines Inc., senior secured note, 144A,
9.50%, 9/15/14 .................................... United States 600,000 $ 612,000
-------------
992,881
-------------
UTILITIES 3.3%
Ameren Corp., senior note, 8.875%, 5/15/14 ........... United States 2,000,000 2,250,673
Dynegy Holdings Inc., senior note, 7.50%, 6/01/15 .... United States 2,000,000 1,860,000
Mirant North America LLC, senior note, 7.375%,
12/31/13 .......................................... United States 2,000,000 2,000,000
NRG Energy Inc., senior note, 7.25%, 2/01/14 ......... United States 3,000,000 2,955,000
Texas Competitive Electric Holdings Co. LLC,
senior note, A, 10.25%, 11/01/15 .................. United States 3,000,000 2,175,000
-------------
11,240,673
-------------
TOTAL CORPORATE BONDS (COST $193,524,208) ............ 194,916,089
-------------
MORTGAGE-BACKED SECURITIES 26.8%
(c) FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) ADJUSTABLE
RATE 0.3%
FHLMC, 4.202%, 5/01/34 ............................... United States 1,009,227 1,049,230
-------------
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) FIXED
RATE 12.7%
(g) FHLMC Gold 15 Year, 4.50%, 6/01/23 - 10/01/24 ........ United States 2,180,668 2,259,273
(g) FHLMC Gold 15 Year, 5.00%, 10/01/24 .................. United States 3,265,000 3,426,722
FHLMC Gold 15 Year, 5.50%, 7/01/19 ................... United States 177,090 189,168
(g) FHLMC Gold 15 Year, 6.00%, 10/01/24 .................. United States 870,000 925,870
(g) FHLMC Gold 30 Year, 5.00%, 10/01/39 .................. United States 5,025,000 5,192,237
FHLMC Gold 30 Year, 5.50%, 1/01/38 - 6/01/38 ......... United States 1,626,726 1,706,582
(g) FHLMC Gold 30 Year, 5.50%, 10/01/39 .................. United States 5,900,000 6,175,642
FHLMC Gold 30 Year, 6.00%, 7/01/28 - 11/01/33 ........ United States 2,756,694 2,937,207
(g) FHLMC Gold 30 Year, 6.00%, 10/01/39 .................. United States 9,660,000 10,195,831
(g) FHLMC Gold 30 Year, 6.50%, 10/01/39 .................. United States 7,211,000 7,685,354
FHLMC Gold 30 Year, 7.00%, 9/01/27 ................... United States 655,816 722,990
FHLMC Gold 30 Year, 8.00%, 1/01/31 ................... United States 126,557 143,627
FHLMC Gold 30 Year, 8.50%, 7/01/31 ................... United States 1,437,154 1,652,199
-------------
43,212,702
-------------
(c) FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
ADJUSTABLE RATE 0.4%
FNMA, 3.213%, 7/01/34 ................................ United States 1,416,669 1,455,750
FNMA, 5.942%, 6/01/32 ................................ United States 50,054 53,206
-------------
1,508,956
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
FIXED RATE 10.9%
(g) FNMA 15 Year, 5.00%, 10/01/24 ........................ United States 1,170,000 1,226,855
FNMA 15 Year, 5.50%, 7/01/20 - 9/01/22 ............... United States 2,839,915 3,038,839
(g) FNMA 15 Year, 6.00%, 10/01/24 ........................ United States 1,650,000 1,757,507
FNMA 15 Year, 6.50%, 7/01/20 ......................... United States 147,319 156,262
FNMA 20 Year, 7.00%, 9/01/18 ......................... United States 221,093 245,526
(g) FNMA 30 Year, 4.50%, 10/01/39 ........................ United States 1,540,000 1,560,213
(g) FNMA 30 Year, 5.00%, 10/01/39 ........................ United States 10,105,000 10,438,152
(g) FNMA 30 Year, 5.50%, 10/01/39 ........................ United States 4,798,000 5,019,159
FNMA 30 Year, 6.00%, 4/01/33 ......................... United States 777,992 828,731
Semiannual Report | 17
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
COUNTRY PRINCIPAL AMOUNT(b) VALUE
------------- -------------------- -------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
FIXED RATE (CONTINUED)
(g) FNMA 30 Year, 6.00%, 10/01/39 ........................ United States 3,860,000 $ 4,072,902
FNMA 30 Year, 6.50%, 8/01/32 ......................... United States 1,041,411 1,124,572
(g) FNMA 30 Year, 6.50%, 10/01/39 ........................ United States 6,623,000 7,079,364
FNMA 30 Year, 8.00%, 10/01/29 ........................ United States 194,109 219,245
FNMA 30 Year, 8.50%, 8/01/26 ......................... United States 392,690 449,361
-------------
37,216,688
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
FIXED RATE 2.5%
(g) GNMA I SF 30 Year, 5.50%, 10/01/39 ................... United States 5,910,000 6,200,884
GNMA I SF 30 Year, 6.50%, 6/15/31 - 12/15/33 ......... United States 1,635,025 1,760,882
GNMA II SF 30 Year, 7.00%, 1/20/24 - 1/20/29 ......... United States 180,265 197,322
GNMA II SF 30 Year, 8.00%, 1/20/28 - 2/20/32 ......... United States 356,311 403,978
-------------
8,563,066
-------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $90,375,806) .. 91,550,642
-------------
ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED
SECURITIES 10.6%
BANKS 7.4%
Banc of America Commercial Mortgage Inc., 2005-3, A2,
4.501%, 7/10/43 ................................... United States 5,000,000 5,006,950
Citigroup Commercial Mortgage Trust,
(c) 2007-C6, AM, FRN, 5.888%, 6/10/17 ................. United States 320,000 229,448
2008-C7, A4, 6.299%, 12/10/49 ..................... United States 700,000 632,083
(c) Citigroup/Deutsche Bank Commercial Mortgage Trust,
2005-CD1,
A3, FRN, 5.40%, 7/15/44 ........................... United States 3,000,000 3,026,776
A4, FRN, 5.225%, 7/15/44 .......................... United States 400,000 395,146
Greenwich Capital Commercial Funding Corp.,
2004-GG1, A7, 5.317%, 6/10/36 ..................... United States 1,605,000 1,626,252
2005-GG5, A5, 5.224%, 4/10/37 ..................... United States 500,000 471,361
GS Mortgage Securities Corp. II, 2003-C1, A3, 4.608%,
1/10/40 ........................................... United States 400,000 398,421
LB-UBS Commercial Mortgage Trust,
(c) 2002-C2, A4, FRN, 5.594%, 6/15/31 ................. United States 2,000,000 2,087,898
2005-C1, A2, 4.31%, 2/15/30 ....................... United States 1,181,156 1,183,791
2005-C5, A4, 4.954%, 9/15/30 ...................... United States 6,000,000 5,828,078
2006-C1, A4, 5.156%, 2/15/31 ...................... United States 2,800,000 2,640,548
(c) Merrill Lynch Mortgage Investors Trust, 2003-OPT1, B2,
FRN, 2.996%, 7/25/34 .............................. United States 153,707 12,172
(c) Morgan Stanley ABS Capital I Inc. Trust,
2003-HE3, B1, FRN, 3.546%, 10/25/33 ............... United States 715,618 145,534
2003-NC10, B1, FRN, 5.196%, 10/25/33 .............. United States 593,237 71,468
(a, c) Schiller Park CLO Ltd., 2007-1A, A2, 144A, FRN,
0.744%, 4/25/21 ................................... United States 1,700,000 1,422,016
-------------
25,177,942
-------------
DIVERSIFIED FINANCIALS 3.2%
(c) Advanta Business Card Master Trust, 2007-A4, A4, FRN,
0.276%, 4/22/13 ................................... United States 965,229 936,534
(c) Argent Securities Inc., 2003-W5, M4, FRN, 3.996%,
10/25/33 .......................................... United States 1,104,968 349,637
18 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
COUNTRY PRINCIPAL AMOUNT(b) VALUE
------------- -------------------- -------------
ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED
SECURITIES (CONTINUED)
DIVERSIFIED FINANCIALS (CONTINUED)
(c) Chase Funding Mortgage Loan Asset-Backed Certificates,
2004-2, 2A2,
FRN, 0.746%, 2/25/35 ................................. United States 1,405,211 $ 969,573
(c) GSAMP Trust, 2003-AHL, B1, FRN, 4.246%, 10/25/33 ..... United States 1,243,595 282,984
JPMorgan Chase Commercial Mortgage Securities Corp.,
2005-LDP2, AM, 4.78%, 7/15/42 ..................... United States 200,000 169,218
(c) 2005-LDP5, A4, FRN, 5.179%, 12/15/44 .............. United States 1,000,000 981,694
(c) MBNA Credit Card Master Note Trust, 2005-A11, A11,
FRN, 0.283%, 5/15/13 .............................. United States 4,000,000 3,968,462
(c) MBNA Master Credit Card Trust II, 1997-B, A, FRN,
0.403%, 8/15/14 ................................... United States 3,000,000 2,936,906
(c) Morgan Stanley Dean Witter Capital I, 2003-NC3, B1,
FRN, 4.746%, 3/25/33 .............................. United States 611,179 43,598
(c, h) New Century Home Equity Loan Trust, 2003-2, M3, FRN,
5.796%, 1/25/33 ................................... United States 664,128 23,945
(c) Option One Mortgage Loan Trust, 2003-6, M5, FRN,
3.546%, 11/25/33 .................................. United States 865,719 261,727
(c) Specialty Underwriting & Residential Finance,
2003-BC4, B2, FRN, 2.746%, 11/25/34 ............... United States 295,987 93,627
(c) Structured Asset Investment Loan Trust,
2003-BC2, M3, FRN, 5.121%, 4/25/33 ................ United States 13,987 597
2003-BC13, M4, FRN, 4.371%, 11/25/33 .............. United States 246,600 147,167
-------------
11,165,669
-------------
TOTAL ASSET-BACKED SECURITIES AND COMMERCIAL
MORTGAGE-BACKED SECURITIES (COST $40,685,833) ..... 36,343,611
-------------
(c, i) SENIOR FLOATING RATE INTERESTS 47.9%
AUTOMOBILES & COMPONENTS 1.0%
Federal-Mogul Corp., Term Loan B, 2.178% - 2.198%,
12/27/14 .......................................... United States 2,100,435 1,613,834
United Components Inc., Term Loan D, 2.72%, 6/29/12 .. United States 2,000,000 1,855,000
-------------
3,468,834
-------------
CAPITAL GOODS 5.0%
Baldor Electric Co., Term Loan B, 5.25%, 1/31/14 ..... United States 575,300 575,480
BE Aerospace Inc., Term Loan B, 5.75%, 7/28/14 ....... United States 1,488,712 1,497,086
Goodman Global Holdings Co. Inc., Term Loan B, 6.25%,
2/13/14 ........................................... United States 2,084,500 2,084,500
Manitowoc Co. Inc., Term Loan B, 7.50%, 11/06/14 ..... United States 1,786,500 1,712,807
Oshkosh Truck Corp.,
Term Loan A, 6.60%, 12/06/11 ...................... United States 897,752 896,630
Term Loan B, 6.33% - 6.60%, 12/06/13 .............. United States 1,484,198 1,485,946
RBS Global Inc. (Rexnord),
Incremental Tranche B-2, 2.50%, 7/22/13 ........... United States 994,885 955,090
Tranche B-1 Term B Loan, 2.75% - 3.063%, 7/22/13 .. United States 3,000,000 2,898,750
Sensus Metering Systems Inc., Term Loan B-3, 7.00%,
6/17/13 ........................................... United States 1,061,555 1,065,535
Spirit Aerosystems Inc. (Onex Wind Finance LP),
Term B-1 Loan, 2.255%, 12/31/11 ................... United States 1,247,375 1,214,631
Semiannual Report | 19
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
COUNTRY PRINCIPAL AMOUNT(b) VALUE
------------- -------------------- -------------
(c, i) SENIOR FLOATING RATE INTERESTS (CONTINUED)
CAPITAL GOODS (CONTINUED)
TriMas Co. LLC,
Term Loan B, 2.496% - 2.752%, 8/02/13 ............. United States 1,539,048 $ 1,379,372
Tranche B-1 L/C, 2.52%, 8/02/11 ................... United States 366,149 328,161
URS Corp., Term Loan B, 2.533% - 2.845%, 5/15/13 ..... United States 999,871 995,704
-------------
17,089,692
-------------
COMMERCIAL & PROFESSIONAL SERVICES 2.4%
ARAMARK Corp.,
Synthetic L/C, 2.336%, 1/26/14 .................... United States 271,357 253,591
Term Loan B, 2.121% - 2.158%, 1/26/14 ............. United States 4,135,666 3,864,896
JohnsonDiversey Inc.,
Delay Draw, 2.483%, 12/16/10 ...................... United States 256,631 251,498
Term Loan B, 2.483%, 12/16/11 ..................... United States 733,386 718,718
Nielsen Finance LLC (VNU Inc.), Class A Term Loan,
2.249%, 8/09/13 ................................... United States 2,726,356 2,555,391
West Corp.,
Term Loan B-2, 2.621% - 2.624%, 10/24/13 .......... United States 180,435 170,930
Term Loan B-4, 4.121% - 4.124%, 7/15/16 ........... United States 262,091 259,098
-------------
8,074,122
-------------
CONSUMER DURABLES & APPAREL 1.1%
Jarden Corp.,
Term Loan B2, 2.033%, 1/24/12 ..................... United States 1,078,657 1,049,892
Term Loan B4, 3.533%, 1/26/15 ..................... United States 1,228,076 1,223,900
Jostens IH Corp. (Visant Holding Corp.), Term Loan C,
2.322%, 10/04/11 .................................. United States 1,350,000 1,343,251
-------------
3,617,043
-------------
CONSUMER SERVICES 4.8%
Affinion Group Inc., Term Loan B, 2.746%, 10/17/12 ... United States 2,970,687 2,859,286
Education Management LLC, Term Loan C, 2.063%,
6/01/13 ........................................... United States 2,421,048 2,309,411
Laureate Education Inc.,
Closing Date Term Loan, 3.754%, 8/18/14 ........... United States 1,989,445 1,806,251
Delayed Draw Term Loan, 3.754%, 8/18/14 ........... United States 297,751 270,333
Term Loan B, 7.25%, 9/25/14 ....................... United States 1,100,000 1,097,602
Penn National Gaming Inc., Term Loan B, 2.00% - 2.21%,
10/03/12 .......................................... United States 2,574,499 2,501,287
VML U.S. Finance LLC (Venetian Macau),
Delayed Draw, 5.79%, 5/25/12 ...................... Macau 1,160,833 1,112,405
New Project Term Loans, 5.79%, 5/25/13 ............ Macau 2,962,889 2,839,280
Term Loan B, 5.79%, 5/25/13 ....................... Macau 1,695,185 1,624,464
-------------
16,420,319
-------------
ENERGY 0.4%
Dresser Inc., Term Loan B, 2.679%, 5/04/14 ........... United States 1,552,923 1,460,395
-------------
FOOD & STAPLES RETAILING 0.6%
Rite Aid Corp., Tranche 3 Term Loan, 6.00%, 6/04/14 .. United States 1,994,604 1,903,850
-------------
20 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
COUNTRY PRINCIPAL AMOUNT(b) VALUE
------------- -------------------- -------------
(c, i) SENIOR FLOATING RATE INTERESTS (CONTINUED)
FOOD, BEVERAGE & TOBACCO 0.8%
Dean Foods Co., Term Loan B, 1.625% - 1.665%,
4/02/14 ........................................... United States 1,739,457 $ 1,638,896
Wm. Wrigley Jr. Co., Term Loan B, 6.50%, 10/06/14 .... United States 866,250 881,301
-------------
2,520,197
-------------
HEALTH CARE EQUIPMENT & SERVICES 6.6%
Bausch and Lomb Inc.,
Delayed Draw Term Loan, 3.496% - 3.533%, 4/28/15 .. United States 323,150 309,370
Parent Term Loan, 3.533%, 4/28/15 ................. United States 1,330,702 1,273,958
Community Health Systems Inc.,
Delayed Draw Term Loan, 2.496%, 7/25/14 ........... United States 122,735 115,586
Term Loan, 2.496% - 2.622%, 7/25/14 ............... United States 2,405,040 2,264,947
DaVita Inc., Term Loan B-1, 1.75% - 2.10%, 10/05/12 .. United States 3,717,434 3,599,521
DJO Finance LLC, Term Loan B, 3.246% - 3.283%,
5/20/14 ........................................... United States 1,706,938 1,649,329
Fresenius Medical Care Holdings Inc., Term Loan B,
1.658% - 1.885%, 3/31/13 .......................... Germany 1,485,226 1,435,719
Fresenius SE (APP), Term Loan B2, 6.75%, 9/10/14 ..... Germany 277,984 281,667
Fresenius SE (New Finco1), Term Loan B, 6.75%,
9/10/14 ........................................... Germany 516,016 522,853
HCA Inc., Term Loan B-1, 2.533%, 11/18/13 ............ United States 4,074,731 3,851,387
Iasis Healthcare LLC,
Delayed Draw Term Loan, 2.246%, 3/14/14 ........... United States 474,174 448,391
Initial Term Loan, 2.246%, 3/14/14 ................ United States 1,370,183 1,295,680
Synthetic L/C, 2.293%, 3/14/14 .................... United States 128,047 121,085
LifePoint Hospitals Inc., Term Loan B, 2.015%,
4/15/12 ........................................... United States 1,980,324 1,932,053
Psychiatric Solutions Inc., Term Loan, 1.996% -
2.073%, 7/01/12 ................................... United States 917,242 887,718
Team Finance LLC, Term Loan B, 2.285% - 2.407%,
11/23/12 .......................................... United States 989,704 942,693
Vanguard Health Holding Co. II LLC, Replacement Term
Loan, 2.496%, 9/23/11 ............................. United States 1,564,358 1,533,560
-------------
22,465,517
-------------
INSURANCE 0.5%
Conseco Inc., Term Loan, 6.50%, 10/10/13 ............. United States 2,147,280 1,696,351
-------------
MATERIALS 6.8%
Anchor Glass Container Corp., Term Loan, 6.75%,
6/20/14 ........................................... United States 1,429,201 1,425,032
Ashland Inc., Term Loan B, 7.65%, 5/13/14 ............ United States 326,607 334,432
Celanese U.S. Holdings LLC, Dollar Term Loan, 2.345%,
4/02/14 ........................................... United States 2,947,161 2,799,434
Domtar Corp., Term Loan, 1.619%, 3/07/14 ............. United States 990,228 946,906
Georgia-Pacific LLC,
Additional Term Loan, 2.283% - 2.464%, 12/20/12 ... United States 865,410 835,121
Term Loan B, 2.283% - 2.464%, 12/20/12 ............ United States 828,787 799,779
Term Loan C, 3.533% - 3.714%, 12/23/14 ............ United States 932,992 931,049
Graham Packaging Co. LP, Term Loan C, 6.75%,
4/05/14 ........................................... United States 997,494 999,832
Hexion Specialty Chemicals BV, Term Loan C-2, 2.563%,
5/03/13 ........................................... Netherlands 692,542 580,251
Hexion Specialty Chemicals Inc., Term Loan C-1,
2.875%, 5/03/13 ................................... United States 3,196,320 2,678,059
Huntsman International LLC, Term Loan B, 1.996%,
4/21/14 ........................................... United States 2,283,616 2,114,914
Nalco Co., Term Loan, 6.50%, 5/13/16 ................. United States 997,500 1,018,073
Semiannual Report | 21
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
COUNTRY PRINCIPAL AMOUNT(b) VALUE
------------- -------------------- -------------
(c, i) SENIOR FLOATING RATE INTERESTS (CONTINUED)
MATERIALS (CONTINUED)
Oxbow Carbon LLC,
Delayed Draw Term Loan, 2.283%, 5/08/14 ........... United States 277,030 $ 260,986
Term Loan B, 2.246% - 3.75%, 5/08/14 .............. United States 2,900,140 2,732,173
Rockwood Specialties Group Inc., Term Loan H, 6.00%,
5/15/14 ........................................... United States 1,797,500 1,819,744
Univar Inc., Opco Tranche B Term Loan, 3.246%,
10/10/14 .......................................... United States 3,206,817 3,012,805
-------------
23,288,590
-------------
MEDIA 8.5%
CSC Holdings Inc.(Cablevision), Incremental Term
Loan B-2, 2.049%, 3/29/16 ......................... United States 772,000 759,841
Dex Media West LLC, Term Loan B, 7.00%, 10/24/14 ..... United States 3,891,620 3,346,793
DIRECTV Holdings LLC, Term Loan B, 1.746%, 4/13/13 ... United States 997,396 981,900
Discovery Communications Inc.,
Term Loan B, 2.283%, 5/14/14 ...................... United States 498,724 486,257
Term Loan C, 5.25%, 5/14/14 ....................... United States 895,500 912,962
Entravision Communications Corp., Term Loan B, 5.85%,
3/29/13 ........................................... United States 1,249,383 1,176,763
Gray Television Inc., Term Loan B, 3.76%, 12/31/14 ... United States 1,546,898 1,276,191
Insight Midwest Holdings, Term Loan B, 2.26%,
4/02/14 ........................................... United States 2,160,000 2,063,571
MCC Iowa,
Term Loan E, 6.50%, 1/03/16 ....................... United States 888,750 896,249
Tranche D-1 Term Loan, 2.00%, 1/31/15 ............. United States 493,446 460,549
Tranche D-2 Term Loan, 2.00%, 1/31/15 ............. United States 57,378 53,552
Mission Broadcasting Inc., Term Loan B, 2.033%,
10/01/12 .......................................... United States 875,882 764,208
Newsday LLC, Floating Rate Term Loan, 6.009%,
8/01/13 ........................................... United States 2,400,000 2,370,000
Nexstar Broadcasting Inc., Term Loan B, 2.238%,
10/01/12 .......................................... United States 828,208 722,612
(g) Regal Cinemas Corp., Term Loan, 4.033%, 10/27/13 ..... United States 2,586,668 2,581,616
(d) Tribune Co.,
Term Loan B, 5.25%, 5/16/14 ....................... United States 3,950,000 1,986,111
Term Loan X, 5.00%, 2/20/49 ....................... United States 1,375,714 678,685
Tribune Receivables LLC, Term Loan (DIP), 9.00%,
4/10/10 ........................................... United States 125,000 126,094
Univision Communications Inc., Initial Term Loan,
2.533%, 9/29/14 ................................... United States 3,000,000 2,548,125
UPC Financing Partnership,
Term Loan N, 2.011%, 12/31/14 ..................... Netherlands 2,897,847 2,723,976
Term Loan T, 3.761%, 12/31/16 ..................... Netherlands 2,272,153 2,194,900
-------------
29,110,955
-------------
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 0.2%
Life Technologies Corp., Term Loan B, 5.25%,
11/21/15 .......................................... United States 634,000 639,278
-------------
REAL ESTATE 0.2%
CB Richard Ellis Services Inc., Term Loan B, 6.00%,
12/20/13 .......................................... United States 804,025 784,427
-------------
RETAILING 0.3%
Dollar General Corp., Tranche B-1 Term Loan, 2.991% -
3.238%, 7/07/14 ................................... United States 997,500 975,849
-------------
SOFTWARE & SERVICES 3.4%
Affiliated Computer Services Inc.,
Additional Term Loan, 2.246%, 3/20/13 ............. United States 1,746,000 1,741,090
Term Loan B, 2.246%, 3/20/13 ...................... United States 482,500 481,143
22 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
COUNTRY PRINCIPAL AMOUNT(b) VALUE
------------- -------------------- -------------
(c, i) SENIOR FLOATING RATE INTERESTS (CONTINUED)
SOFTWARE & SERVICES (CONTINUED)
Emdeon Business Services LLC, First Lien Term Loan,
2.29%, 11/16/13 ................................... United States 2,024,647 $ 1,951,254
First Data Corp., Term Loan B-2, 3.033% - 3.036%,
9/24/14 ........................................... United States 2,446,297 2,112,282
Metavante Corp., Term Loan B, 2.233%, 11/01/14 ....... United States 1,480,504 1,478,641
Rovi Corp., Term Loan B, 6.00%, 5/02/13 .............. United States 584,655 586,116
SunGard Data Systems Inc.,
Tranche A U.S. Term Loan, 2.004%, 2/28/14 ......... United States 119,241 112,385
Tranche B, U.S. TL, 3.948% - 4.089%, 2/28/16 ...... United States 3,353,053 3,267,131
-------------
11,730,042
-------------
TECHNOLOGY HARDWARE & EQUIPMENT 1.3%
CommScope Inc., Term Loan B, 2.746% - 2.783%,
12/26/14 .......................................... United States 982,849 963,806
Flextronics International USA Inc.,
Term Loan A, 2.499% - 2.847%, 10/01/14 ............ United States 1,827,000 1,650,771
Term Loan A-1, 2.759%, 10/01/14 ................... United States 525,000 474,360
Itron Inc., Dollar Term Loan, 4.00%, 4/18/14 ......... United States 1,374,425 1,373,558
-------------
4,462,495
-------------
TELECOMMUNICATION SERVICES 2.3%
GCI Holdings Inc., Add-On Term Loan, 4.50%, 8/31/12 .. United States 2,363,680 2,316,407
Intelsat Corp. (Panamsat),
Tranche B-2-A, 2.753%, 1/03/14 .................... United States 1,274,963 1,215,797
Tranche B-2-B, 2.753%, 1/03/14 .................... United States 1,274,575 1,215,427
Tranche B-2-C, 2.753%, 1/03/14 .................... United States 1,274,575 1,215,427
Windstream Corp., Tranche B-1, 1.75% - 2.02%,
7/17/13 ........................................... United States 2,002,472 1,955,091
-------------
7,918,149
-------------
UTILITIES 1.7%
Dynegy Holdings Inc.,
Term L/C Facility, 4.00%, 4/02/13 ................. United States 1,797,879 1,735,516
Term Loan B, 4.00%, 4/02/13 ....................... United States 24,117 23,281
NRG Energy Inc.,
Credit Link, 0.183%, 2/01/13 ...................... United States 819,782 780,160
Term Loan, 1.996% - 2.033%, 2/01/13 ............... United States 1,524,429 1,450,748
Texas Competitive Electric Holdings Co. LLC,
Term Loan B-2, 3.754% - 3.783%, 10/10/14 .......... United States 2,445,051 1,941,981
-------------
5,931,686
-------------
TOTAL SENIOR FLOATING RATE INTERESTS
(COST $165,692,576) ............................... 163,557,791
-------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 3.2%
(c, j) Government of Argentina, senior bond, FRN, 0.943%,
8/03/12 ........................................... Argentina 3,950,000 1,200,800
Government of Malaysia,
3.756%, 4/28/11 ................................... Malaysia 5,860,000 MYR 1,730,075
3.833%, 9/28/11 ................................... Malaysia 6,800,000 MYR 2,014,099
Government of Mexico, M 20, 10.00%, 12/05/24 ......... Mexico 341,000(k) MXN 2,920,652
Government of Sweden, 5.25%, 3/15/11 ................. Sweden 19,400,000 SEK 2,959,622
-------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES
(COST $10,956,249) ................................ 10,825,248
-------------
Semiannual Report | 23
Franklin Templeton
Limited Duration Income Trust
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
COUNTRY SHARES VALUE
------------- -------------------- -------------
TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS
(COST $501,472,522) ............................... $ 497,583,049
-------------
SHORT TERM INVESTMENTS (COST $8,368,302) 2.4%
MONEY MARKET FUNDS 2.4%
(l) Institutional Fiduciary Trust Money Market Portfolio,
0.00% ............................................. United States 8,368,302 8,368,302
-------------
TOTAL INVESTMENTS (COST $509,840,824) 148.0% ......... 505,951,351
PREFERRED SHARES (26.3)% ............................. (90,000,000)
OTHER ASSETS, LESS LIABILITIES (21.7)% ............... (74,218,913)
-------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0% ........ $ 341,732,438
=============
(a) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under the
Securities Act of 1933. These securities have been deemed liquid under
guidelines approved by the Fund's Board of Trustees. At September 30, 2009,
the aggregate value of these securities was $57,790,470, representing
16.91% of net assets.
(b) The principal amount is stated in U.S. dollars unless otherwise indicated.
(c) The coupon rate shown represents the rate at period end.
(d) See Note 9 regarding defaulted securities.
(e) Income may be received in additional securities and/or cash.
(f) See Note 11 regarding other considerations.
(g) A portion or all of the security purchased on a when-issued, delayed
delivery or TBA basis. See Note 1(c).
(h) The bond pays interest and/or principal based upon the issuer's ability to
pay, which may be less than the stated interest rate or principal paydown.
(i) See Note 1(f) regarding senior floating rate interests.
(j) The principal amount is stated in original face, and scheduled paydowns are
reflected in the market price on ex-date.
(k) Principal amount is stated in 100 Mexican Peso Units.
(l) See Note 8 regarding investments in the Institutional Fiduciary Trust Money
Market Portfolio. The rate shown is the annualized seven-day yield at
period end.
At September 30, 2009, the Fund had the following forward exchange contracts
outstanding. See Note 1(d).
CONTRACT SETTLEMENT UNREALIZED UNREALIZED
CURRENCY COUNTERPARTY TYPE QUANTITY AMOUNT DATE APPRECIATION DEPRECIATION
-------- ------------ ---- ---------- ---------- ---------- ------------ ------------
Euro ......................... DBAB Sell 2,080,000 $2,982,720 9/01/10 $ -- $(58,810)
Mexican Peso ................. DBAB Sell 19,690,812 1,412,439 9/01/10 23,251 --
------- --------
Unrealized appreciation (depreciation) ................................................. 23,251 (58,810)
------- --------
Net unrealized appreciation (depreciation) .......................................... $(35,559)
========
See Abbreviations on page 37.
The accompanying notes are an integral part of these financial statements.
24 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2009 (unaudited)
Assets:
Investments in securities:
Cost - Unaffiliated issuers .............................................. $501,472,522
Cost - Sweep Money Fund (Note 8) ......................................... 8,368,302
------------
Total cost of investments ................................................ $509,840,824
============
Value - Unaffiliated issuers ............................................. $497,583,049
Value - Sweep Money Fund (Note 8) ........................................ 8,368,302
------------
Total value of investments ............................................... 505,951,351
Cash ........................................................................ 4,572,654
Receivables:
Investment securities sold ............................................... 4,488,892
Interest ................................................................. 4,731,343
Unrealized appreciation on forward exchange contracts ....................... 23,251
------------
Total assets .......................................................... 519,767,491
------------
Liabilities:
Payables:
Investment securities purchased .......................................... 85,463,643
Affiliates ............................................................... 279,820
Distributions to common shareholders ..................................... 2,034,807
Unrealized depreciation on forward exchange contracts ....................... 58,810
Accrued expenses and other liabilities ...................................... 197,973
------------
Total liabilities ..................................................... 88,035,053
------------
Preferred shares at redemption value [$25,000 liquidation preference
per share (3,600 shares outstanding)] .................................... 90,000,000
------------
Net assets applicable to common shares ................................ $341,732,438
============
Net assets applicable to common shares consist of:
Paid-in capital ............................................................. $380,500,793
Distributions in excess of net investment income ............................ (3,738,914)
Net unrealized appreciation (depreciation) .................................. (3,924,418)
Accumulated net realized gain (loss) ........................................ (31,105,023)
------------
Net assets applicable to common shares ................................ $341,732,438
============
Common shares outstanding ................................................... 26,773,772
============
Net asset value per common share ............................................ $ 12.76
============
The accompanying notes are an integral part of these financial statements.
Semiannual Report | 25
Franklin Templeton
Limited Duration Income Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended September 30, 2009 (unaudited)
Investment income:
Dividends--Sweep Money Fund (Note 8) ........................................ $ 392
Interest .................................................................... 13,779,336
-----------
Total investment income ............................................... 13,779,728
-----------
Expenses:
Management fees (Note 4) .................................................... 1,148,513
Administrative fees (Note 4) ................................................ 462,345
Transfer agent fees ......................................................... 16,817
Custodian fees (Note 5) ..................................................... 4,862
Reports to shareholders ..................................................... 27,139
Professional fees ........................................................... 41,952
Trustees' fees and expenses ................................................. 10,987
Auction agent fees and expenses ............................................. 88,353
Other ....................................................................... 36,930
-----------
Total expenses ........................................................ 1,837,898
Expense reductions (Note 5) ........................................... (267)
-----------
Net expenses ....................................................... 1,837,631
-----------
Net investment income ........................................... 11,942,097
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments .............................................................. (1,040,401)
Foreign currency transactions ............................................ 1,171,413
-----------
Net realized gain (loss) ........................................ 131,012
-----------
Net change in unrealized appreciation (depreciation) on:
Investments .............................................................. 72,077,920
Translation of other assets and liabilities denominated in
foreign currencies .................................................... (1,185,450)
-----------
Net change in unrealized appreciation (depreciation) ............ 70,892,470
-----------
Net realized and unrealized gain (loss) ..................................... 71,023,482
-----------
Net increase (decrease) in net assets resulting from operations ............. 82,965,579
Distributions to preferred shareholders from net investment income .......... (702,804)
-----------
Net increase (decrease) in net assets applicable to common shares
resulting from operations ................................................ $82,262,775
===========
The accompanying notes are an integral part of these financial statements.
26 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
SEPTEMBER 30, 2009 YEAR ENDED
(UNAUDITED) MARCH 31, 2009
------------------ --------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................ $ 11,942,097 $ 24,951,361
Net realized gain (loss) from investments and foreign currency transactions .......... 131,012 (21,083,127)
Net change in unrealized appreciation (depreciation) on investments and translation of
other assets and liabilities denominated in foreign currencies .................... 70,892,470 (47,704,440)
Distributions to preferred shareholders from net investment income ................... (702,804) (3,649,273)
------------ ------------
Net increase (decrease) in net assets applicable to common shares resulting from
operations ..................................................................... 82,262,775 (47,485,479)
------------ ------------
Distributions to common shareholders from net investment income ......................... (12,208,840) (24,846,060)
------------ ------------
Net increase (decrease) in net assets ............................................. 70,053,935 (72,331,539)
Net assets applicable to common shares:
Beginning of period ..................................................................... 271,678,503 344,010,042
------------ ------------
End of period ........................................................................... $341,732,438 $271,678,503
------------ ------------
Distributions in excess of net investment income included in net assets:
End of period ........................................................................... $ (3,738,914) $ (2,769,367)
============ ============
The accompanying notes are an integral part of these financial statements.
Semiannual Report | 27
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Limited Duration Income Trust (Fund) is registered under the
Investment Company Act of 1940, as amended, (1940 Act) as a closed-end
investment company.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Equity and other securities listed on a securities exchange or on the NASDAQ
National Market System are valued at the last quoted sale price or the official
closing price of the day, respectively. Over-the-counter securities and listed
securities for which there is no reported sale are valued within the range of
the most recent quoted bid and ask prices. Securities that trade in multiple
markets or on multiple exchanges are valued according to the broadest and most
representative market. Certain equity securities are valued based upon
fundamental characteristics or relationships to similar securities. Investments
in open-end mutual funds are valued at the closing net asset value.
Corporate debt securities, government securities, mortgage backed securities,
asset-backed securities, collateralized debt obligations and other debt
securities generally trade in the over-the-counter market rather than on a
securities exchange. The Fund may utilize independent pricing services,
quotations from bond dealers, and information with respect to bond and note
transactions, to assist in determining a current market value for each security.
The Fund's pricing services may use valuation models or matrix pricing which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers, or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, option adjusted spread models, prepayment projections, interest
rate spreads and yield curves, to determine current value. Debt securities
denominated in a foreign currency are converted into their U.S. dollar
equivalent at the foreign exchange rate in effect at the close of the NYSE on
the date that the values of the foreign debt securities are determined.
Senior secured corporate loans with floating or variable interest rates
generally trade in the over-the-counter market rather than on a securities
exchange. The Fund may utilize independent pricing services, quotations from
loan dealers and other financial institutions, and information with respect to
bond and note transactions, to assist in determining a current market value for
each security. The Fund's pricing services use independent market quotations
from loan dealers or financial institutions and may incorporate valuation
methodologies that consider multiple bond characteristics such as dealer quotes,
issuer type, coupon, maturity, weighted average maturity, interest rate spreads
and yield curves, cash flow and credit risk/quality analysis, to determine
current value.
28 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. SECURITY VALUATION (CONTINUED)
The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis based upon the underlying investment book value,
anticipated future cash flows, market changes in comparable or similar
securities, matrix pricing, discounts from market prices of similar securities,
or discounts applied due to the nature and duration of restrictions on the
disposition of the securities. Due to the inherent uncertainty of valuations of
such securities, the fair values may differ significantly from the values that
would have been used had a ready market for such investments existed.
Occasionally, events occur between the time at which trading in a security is
completed and the close of the NYSE that might call into question the
availability (including the reliability) of the value of a portfolio security
held by the Fund. If such an event occurs, the securities may be valued using
fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Fund's Board of
Trustees.
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Trustees.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments on the
Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
Semiannual Report | 29
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. SECURITIES PURCHASED ON A WHEN-ISSUED, DELAYED DELIVERY AND TBA BASIS
The Fund may purchase securities on a when-issued, delayed delivery and
to-be-announced (TBA) basis, with payment and delivery scheduled for a future
date. These transactions are subject to market fluctuations and are subject to
the risk that the value at delivery may be more or less than the trade date
purchase price. Although the Fund will generally purchase these securities with
the intention of holding the securities, it may sell the securities before the
settlement date. Sufficient assets have been segregated for these securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS
The Fund may invest in derivative financial instruments (derivatives) in order
to manage risk or gain exposure to various other investments or markets.
Derivatives are financial contracts based on an underlying or notional amount,
require no initial investment or an initial net investment that is smaller than
would normally be required to have a similar response to changes in market
factors, and require or permit net settlement. Derivatives may contain various
risks including the potential inability of the counterparty to fulfill their
obligations under the terms of the contract, the potential for an illiquid
secondary market, and the potential for market movements which may expose the
Fund to gains or losses in excess of the amounts shown on the Statement of
Assets and Liabilities.
Derivatives are marked to market daily based upon quotations from market makers
or the Fund's independent pricing services and the Fund's net benefit or
obligation under the contract, as measured by the fair market value of the
contract, is included in net assets. Realized gain and loss and unrealized
appreciation and depreciation on these contracts for the period are included in
the Statement of Operations.
The Fund enters into forward exchange contracts in order to hedge against
fluctuations in foreign exchange rates or to gain exposure to certain foreign
currencies. A forward exchange contract is an agreement between the Fund and a
counterparty to buy or sell a foreign currency for a specific exchange rate on a
future date.
See Note 10 regarding other derivative information.
E. MORTGAGE DOLLAR ROLLS
The Fund may enter into mortgage dollar rolls, typically on a TBA basis.
Mortgage dollar rolls are agreements between the Fund and a financial
institution to simultaneously sell and repurchase mortgage-backed securities at
a future date. Gains or losses are realized on the initial sale, and the
difference between the repurchase price and the sale price is recorded as an
unrealized gain or loss to the fund upon entering into the mortgage dollar roll.
In addition, the Fund may invest the cash proceeds that are received from the
initial sale. During the period between the
30 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. MORTGAGE DOLLAR ROLLS (CONTINUED)
sale and repurchase, the Fund is not entitled to principal and interest paid on
the mortgage backed securities. The risks of mortgage dollar roll transactions
include the potential inability of the counterparty to fulfill its obligations.
The Fund is investing in mortgage dollar rolls as an alternate form of leverage.
As a result, the mortgage dollar rolls are considered indebtedness or a "senior
security" for purposes of the asset coverage requirements under the 1940 Act.
F. SENIOR FLOATING RATE INTERESTS
Senior secured corporate loans pay interest at rates which are periodically
reset by reference to a base lending rate plus a spread. These base lending
rates are generally the prime rate offered by a designated U.S. bank or the
London InterBank Offered Rate (LIBOR). Senior secured corporate loans often
require prepayment of principal from excess cash flows or at the discretion of
the borrower. As a result, actual maturity may be substantially less than the
stated maturity.
Senior secured corporate loans in which the Fund invests are generally readily
marketable, but may be subject to some restrictions on resale.
G. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of September 30, 2009, and has
determined that no provision for income tax is required in the Fund's financial
statements.
H. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Facility fees are recognized as income over the expected term of the
loan. Dividend income is recorded on the ex-dividend date. Distributions to
shareholders are recorded on the ex-dividend date and are determined according
to income tax regulations (tax basis). Distributable earnings determined on a
tax basis may differ from earnings recorded in accordance with accounting
principles generally accepted in the United States of America. These differences
may be permanent or temporary. Permanent differences are reclassified among
capital accounts to reflect their tax character. These reclassifications have no
impact
Semiannual Report | 31
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
on net assets or the results of operations. Temporary differences are not
reclassified, as they may reverse in subsequent periods.
I. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
J. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. Currently, the Fund expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At September 30, 2009, there were 28,290,000 common shares authorized (without
par value). During the period ended September 30, 2009 and the year ended March
31, 2009 there were no shares issued; all reinvested distributions were
satisfied with previously issued shares purchased in the open market.
3. AUCTION RATE PREFERRED SHARES
On November 7, 2003 the Fund issued 2,534 Preferred Shares Series M, 2,533
Preferred Shares Series W and 2,533 Preferred Shares Series F, each with a
$25,000 liquidation preference per share totaling $190,000,000. During the year
ended March 31, 2009, there was a pro rata preferred redemption of each series
totaling 4,000 shares and $100,000,000 leaving 1,200 Preferred Shares Series M,
1,200 Preferred Shares Series W and 1,200 Preferred Shares Series F, each with a
$25,000 liquidation preference totaling $90,000,000. Dividends to preferred
shareholders are cumulative and are declared weekly, at rates established
through an auction process. The weekly auctions for Series M, W and F have all
failed during the period ended September 30, 2009; consequently, the dividend
rate paid on the Preferred Shares has moved to the maximum rate as
32 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. AUCTION RATE PREFERRED SHARES (CONTINUED)
defined in the prospectus. During the period ended September 30, 2009, the
dividends on Preferred Shares ranged from 1.49% to 1.66%.
The Fund is required to maintain, on a weekly basis, a specified discounted
value of its portfolio in compliance with guidelines established by Fitch
Ratings and Moody's Investor Services Inc., and is required to maintain asset
coverage for the Preferred Shares of at least 200%.
The Preferred Shares are redeemable by the Fund at any time and are subject to
mandatory redemption if the asset coverage or discounted value requirements are
not met. During the period ended September 30, 2009, all requirements were met.
4. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. 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
The Fund pays an investment management fee and administrative fee to Advisers
and FT Services of 0.50% and 0.20%, respectively, per year of the average daily
managed assets. Managed assets are defined as the Fund's gross asset value minus
the sum of accrued liabilities, other than the liquidation value of the
Preferred Shares and other financial leverage.
5. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended September 30, 2009, the
custodian fees were reduced as noted in the Statement of Operations.
Semiannual Report | 33
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At March 31, 2009, the capital loss carryforwards were as
follows:
Capital loss carryforwards expiring in:
2014 ............................... $ 682,502
2015 ............................... 895,575
2016 ............................... 726,440
2017 ............................... 11,687,026
-----------
$13,991,543
===========
For tax purposes, realized capital losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At March 31, 2009, the Fund deferred realized capital losses of
$17,185,747.
At September 30, 2009, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments .......................... $510,937,478
============
Unrealized appreciation ...................... $ 19,936,569
Unrealized depreciation ...................... (24,922,696)
------------
Net unrealized appreciation (depreciation) ... $ (4,986,127)
============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities, foreign currency
transactions, mortgage dollar rolls, paydown losses, payments-in-kind, and bond
discounts and premiums.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, mortgage dollar rolls, paydown losses, payments-in-kind, and bond
discounts and premiums.
7. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
period ended September 30, 2009, aggregated $489,900,898 and $471,222,562,
respectively.
8. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Institutional Fiduciary Trust Money Market Portfolio
(Sweep Money Fund), an open-end investment company managed by Advisers.
Management fees paid by the Fund are reduced on assets invested in the Sweep
Money Fund, in an amount not to exceed the management and administrative fees
paid by the Sweep Money Fund.
34 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. CREDIT RISK AND DEFAULTED SECURITIES
At September 30, 2009, the Fund had 64.72% of its portfolio invested in high
yield, senior secured floating rate notes, or other securities rated below
investment grade. 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.
The Fund held defaulted securities and/or other securities for which the income
has been deemed uncollectible. At September 30, 2009, the aggregate value of
these securities was $10,019,796, representing 1.98% of the Fund's portfolio.
The Fund discontinues accruing income on securities for which income has been
deemed uncollectible and provides an estimate for losses on interest receivable.
The securities have been identified on the accompanying Statement of
Investments.
10. OTHER DERIVATIVE INFORMATION
At September 30, 2009, the Fund has invested in derivative contracts which are
reflected on the Statement of Assets and Liabilities as follows:
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------- -------------------------
STATEMENT OF STATEMENT OF
DERIVATIVE CONTRACTS ASSETS AND ASSETS AND
NOT ACCOUNTED FOR AS LIABILITIES FAIR VALUE LIABILITIES FAIR VALUE
HEDGING INSTRUMENTS LOCATION AMOUNT LOCATION AMOUNT
-------------------- ------------ ---------- ------------ ----------
Unrealized Unrealized
appreciation depreciation
on forward on forward
Foreign exchange exchange exchange
contracts contracts $23,251 contracts $58,810
For the period ended September 30, 2009, the effect of derivative contracts on
the Fund's Statement of Operations was as follows:
REALIZED GAIN UNREALIZED AVERAGE
(LOSS) APPRECIATION NOTIONAL
FOR THE PERIOD (DEPRECIATION) AMOUNT
DERIVATIVE CONTRACTS STATEMENT OF ENDED FOR THE PERIOD ENDED OUTSTANDING
NOT ACCOUNTED FOR AS OPERATIONS SEPTEMBER 30, SEPTEMBER 30, DURING THE
HEDGING INSTRUMENTS LOCATIONS 2009 2009 PERIOD(a)
-------------------- ------------------------ -------------- -------------------- -----------
Net realized gain (loss)
from foreign currency
transactions / Net
change in unrealized
appreciation
Foreign exchange (depreciation) on
contracts investments $1,159,980 $(1,185,216) $8,699,625
(a) Notional amount represents the U.S. dollar equivalent based on the foreign
exchange rate at the time of contract entry.
See Note 1(d) regarding derivative financial instruments.
Semiannual Report | 35
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. OTHER CONSIDERATIONS
From time to time, officers, directors or employees of the Fund's Investment
Manager may have discussions or enter into agreements with issuers, underwriters
or creditors' committees which, pursuant to the Fund's policies and requirements
of applicable securities laws, could prevent the Fund from trading in the
securities of such company for limited or extended periods of time.
12. FAIR VALUE MEASUREMENTS
The Fund follows a fair value hierarchy that distinguishes between market data
obtained from independent sources (observable inputs) and the Fund's own market
assumptions (unobservable inputs). These inputs are used in determining the
value of the Fund's investments and are summarized in the following fair value
hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
The following is a summary of the inputs used as of September 30, 2009, in
valuing the Fund's assets and liabilities carried at fair value:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
---------- ------------ ------- ------------
ASSETS:
Investments in Securities:
Equity Investments $ -- $ 389,668 $-- $ 389,668
Corporate Bonds -- 194,916,089 -- 194,916,089
Mortgage-Backed Securities -- 91,550,642 -- 91,550,642
Asset-Backed Securities and Commercial
Mortgage-Backed Securities -- 36,343,611 -- 36,343,611
Senior Floating Rate Interests -- 163,557,791 -- 163,557,791
Foreign Government and Agency Securities -- 10,825,248 -- 10,825,248
Short Term Investments 8,368,302 -- -- 8,368,302
---------- ------------ --- ------------
Total Investments in Securities(a) $8,368,302 $497,583,049 $-- $505,951,351
========== ============ === ============
Forward Exchange Contracts -- 23,251 -- 23,251
LIABILITIES:
Forward Exchange Contracts -- 58,810 -- 58,810
(a) For detailed industry descriptions, see the accompanying Statement of
Investments.
36 | Semiannual Report
Franklin Templeton
Limited Duration Income Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
13. SUBSEQUENT EVENTS
The Fund has evaluated subsequent events through November 17, 2009, the issuance
date of the financial statements and determined that no events have occurred
that require disclosure.
ABBREVIATIONS
COUNTERPARTY
DBAB - Deutsche Bank AG
CURRENCY
MXN - Mexican Peso
MYR - Malaysian Ringgit
SEK - Swedish Krona
SELECTED PORTFOLIO
CLO - Collateralized Loan Obligation
DIP - Debtor-In-Possession
FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note
GNMA - Government National Mortgage Association
L/C - Letter of Credit
PIK - Payment-In-Kind
SF - Single Family
Semiannual Report | 37
Franklin Templeton
Limited Duration Income Trust
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund's investment manager has established Proxy Voting Policies and
Procedures (Policies) that the Fund uses to determine how to vote proxies
relating to portfolio securities. Shareholders may view the Fund's complete
Policies online at franklintempleton.com. Alternatively, shareholders may
request copies of the Policies free of charge by calling the Proxy Group collect
at (954) 527-7678 or by sending a written request to: Franklin Templeton
Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the Fund's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling (800)
SEC-0330.
CERTIFICATIONS
The Fund's Chief Executive Officer - Finance and Administration is required by
NYSE Amex's Listing Standards to file annually with the Exchange a certification
that she is not aware of any violation by the Fund of the Exchange's Corporate
Governance Standards applicable to the Fund. The Fund has filed such
certification.
In addition, the Fund's Chief Executive Officer - Finance and Administration and
Chief Financial Officer and Chief Accounting Officer are required by the rules
of the U.S. Securities and Exchange Commission to provide certain certifications
with respect to the Fund's Form N-CSR and Form N-CSRS (which include the Fund's
annual and semiannual reports to shareholders) that are filed semiannually with
the Commission. The Fund has filed such certifications with its Form N-CSR for
the year ended March 31, 2009. Additionally, the Fund expects to file, on or
about November 30, 2009, such certifications with its Form N-CSRS for the six
months ended September 30, 2009.
38 | Semiannual Report
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Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(800) 342-5236 OR VISIT franklintempleton.com. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund
Mutual Recovery Fund(2)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(3)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(3)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(3)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(4)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(5)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(6)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(6)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust(8)
(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2.) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25% of
the outstanding number of shares. Investors may tender all or a portion of
their shares during the tender period.
(3.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(4.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(5.) The fund invests primarily in insured municipal securities.
(6.) These funds are available in four or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and money market portfolios.
(7.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/17/09.
(8.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
04/09 Not part of the semiannual report
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
SEMIANNUAL REPORT
FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST
INVESTMENT MANAGER
Franklin Advisers, Inc.
(800) DIAL BEN(R)
TRANSFER AGENT
PNC Global Investment Servicing
P.O. Box 43027
Providence, RI 02940-3027
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
FTF S2009 11/09
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 audit committee financial expert is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Members of the Audit Committee are: Robert F. Carlson, Frank W.T. LaHaye,
Frank A. Olson and John B. Wilson.
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 Fund's manager
Franklin Advisers, Inc. in accordance with the Proxy Voting Policies and
Procedures (Policies) adopted by the manager.
The manager has delegated its administrative duties with respect to the voting
of proxies to the Proxy Group within Franklin Templeton Companies, LLC (Proxy
Group), an affiliate and wholly owned subsidiary of Franklin Resources, Inc. All
proxies received by the Proxy Group will be voted based upon the manager's
instructions and/or policies.
To assist it in analyzing proxies, the manager subscribes to RiskMetrics Group
(RiskMetrics), an unaffiliated third-party corporate governance research service
that provides in-depth analyses of shareholder meeting agendas, vote
recommendations, recordkeeping and vote disclosure services. In addition, the
manager subscribes to Glass, Lewis & Co., LLC (Glass Lewis), an unaffiliated
third-party analytical research firm, to receive analyses and vote
recommendations on the shareholder meetings of publicly held U.S. companies.
Although RiskMetrics' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from RiskMetrics, Glass Lewis or any other third party to be
determinative of the manager's ultimate decision. As a matter of policy, the
officers, directors/trustees and employees of the manager and the Proxy Group
will not be influenced by outside sources whose interests conflict with the
interests of the Fund and its shareholders. Efforts are made to resolve all
conflicts in the interests of the manager's 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 defer to the voting recommendation of
RiskMetrics, Glass Lewis or those of another independent third-party provider of
proxy services; or send the proxy directly to the Fund with the manager's
recommendation regarding the vote for approval. If the conflict is not resolved
by the Fund, the Proxy Group may refer the matter, along with the recommended
course of action by the manager, if any, to an interdepartmental Proxy Review
Committee (which may include portfolio managers and/or research analysts
employed by the manager), for evaluation and voting instructions. The Proxy
Review Committee may defer to the voting recommendation of RiskMetrics, Glass
Lewis or those of another independent third-party provider of proxy services; or
send the proxy directly to the Fund. Where the Proxy Group or the Proxy Review
Committee refers a matter to the Fund, it may rely upon the instructions of a
representative of the Fund, such as the board or a committee of the board.
Where a material conflict of interest has been identified, but the items on
which the manager's vote recommendations differ from Glass Lewis, RiskMetrics,
or another independent third-party provider of proxy services relate
specifically to (1) shareholder proposals regarding social or environmental
issues or political contributions, (2) "Other Business" without describing the
matters that might be considered, or (3) items the manager wishes to vote in
opposition to the recommendations of an issuer's management, the Proxy Group may
defer to the vote recommendations of the manager rather than sending the proxy
directly to the Fund for approval.
To avoid certain potential conflicts of interest, the manager will employ echo
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)(E), (F), or (G) of
the 1940 Act, or pursuant to an SEC exemptive order; (2) when the Fund invests
uninvested cash in affiliated money market funds pursuant to an SEC exemptive
order ("cash sweep arrangement"); or (3) when required pursuant to the Fund's
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 Fund's shares.
The recommendation of management on any issue is a factor that the manager
considers in determining how proxies should be voted. However, the manager does
not consider recommendations from management to be determinative of the
manager's ultimate decision. As a matter of practice, the votes with respect to
most issues are cast in accordance with the position of the company's
management. Each issue, however, is considered on its own merits, and the
manager will not support the position of the company's management in any
situation where it deems that the ratification of management's position would
adversely affect the investment merits of owning that company's shares.
MANAGER'S PROXY VOTING POLICIES AND PRINCIPLES The manager has adopted general
proxy voting guidelines, which are summarized below. These guidelines are not an
exhaustive list of all the issues that may arise and the manager cannot
anticipate all future situations. In all cases, each proxy will be considered
based on the relevant facts and circumstances.
BOARD OF DIRECTORS. The manager supports an independent board of directors, and
prefers that key committees such as audit, nominating, and compensation
committees be comprised of independent directors. The manager will generally
vote against management efforts to classify a board and will generally support
proposals to declassify the board of directors. The manager may withhold votes
from directors who have attended less than 75% of meetings without a valid
reason. While generally in favor of separating Chairman and CEO positions, the
manager will review this issue as well as proposals to restore or provide for
cumulative voting on a case-by-case basis, taking into consideration factors
such as the company's corporate governance guidelines or provisions and
performance.
RATIFICATION OF AUDITORS OF PORTFOLIO COMPANIES. The manager will closely
scrutinize the role and performance of auditors. On a case-by-case basis, the
manager will examine proposals relating to non-audit relationships and non-audit
fees. The manager will also consider, on a case-by-case basis, proposals to
rotate auditors, and will vote against the ratification of auditors when there
is clear and compelling evidence of accounting irregularities or negligence.
MANAGEMENT AND DIRECTOR COMPENSATION. A company's equity-based compensation plan
should be in alignment with the shareholders' long-term interests. The manager
believes that executive compensation should be directly linked to the
performance of the company. The manager evaluates plans on a case-by-case basis
by considering several factors to determine whether the plan is fair and
reasonable, including the RiskMetrics quantitative model utilized to assess such
plans and/or the Glass Lewis evaluation of the plans. The manager will generally
oppose plans that have the potential to be excessively dilutive, and will almost
always oppose plans that are structured to allow the repricing of underwater
options, or plans that have an automatic share replenishment "evergreen"
feature. The manager will generally support employee stock option plans in which
the purchase price is at least 85% of fair market value, and when potential
dilution is 10% or less.
Severance compensation arrangements will be reviewed on a case-by-case basis,
although the manager will generally oppose "golden parachutes" that are
considered to be excessive. The manager will normally support proposals that
require a percentage of directors' compensation to be in the form of common
stock, as it aligns their interests with those of shareholders.
ANTI-TAKEOVER MECHANISMS AND RELATED ISSUES. The manager generally opposes
anti-takeover measures since they tend to reduce shareholder rights. However, as
with all proxy issues, the manager conducts an independent review of each
anti-takeover proposal. On occasion, the manager may vote with management when
the research analyst has concluded that the proposal is not onerous and would
not harm the Fund or its shareholders' interests. The manager generally supports
proposals that require shareholder rights' plans ("poison pills") to be subject
to a shareholder vote and will closely evaluate such plans on a case-by-case
basis to determine whether or not they warrant support. In addition, the manager
will generally vote against any proposal to issue stock that has unequal or
subordinate voting rights. The manager generally opposes any supermajority
voting requirements as well as the payment of "greenmail." The manager generally
supports "fair price" provisions and confidential voting.
CHANGES TO CAPITAL STRUCTURE. The manager realizes that a company's 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 manager will review, on a case-by-case basis,
proposals by companies to increase authorized shares and the purpose for the
increase. The manager will generally not vote in favor of dual-class capital
structures to increase the number of authorized shares where that class of stock
would have superior voting rights. The manager will generally vote in favor of
the issuance of preferred stock in cases where the company specifies the voting,
dividend, conversion and other rights of such stock and the terms of the
preferred stock issuance are deemed reasonable.
MERGERS AND CORPORATE RESTRUCTURING. Mergers and acquisitions will be subject to
careful review by the research analyst to determine whether they would be
beneficial to shareholders. The manager will analyze various economic and
strategic factors in making the final decision on a merger or acquisition.
Corporate restructuring proposals are also subject to a thorough examination on
a case-by-case basis.
SOCIAL AND CORPORATE POLICY ISSUES. The manager will generally give management
discretion with regard to social, environmental and ethical issues, although the
manager may vote in favor of those that are believed to have significant
economic benefits or implications for the Fund and its shareholders.
GLOBAL CORPORATE GOVERNANCE. Many of the tenets discussed above are applied to
the manager's proxy voting decisions for international investments. However, the
manager must be flexible in these instances and must be mindful of the varied
market practices of each region.
The manager will attempt to process every proxy it receives for all domestic and
foreign issuers. However, there may be situations in which the manager cannot
process proxies, for example, where a meeting notice was received too late, or
sell orders preclude the ability to vote. If a security is on loan, the manager
may determine that it is not in the best interests of the Fund to recall the
security for voting purposes. Also, the manager may abstain from voting under
certain circumstances or vote against items such as "Other Business" when the
manager is not given adequate information from the company.
Shareholders may view the complete Policies 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, 500 East Broward Boulevard, Suite 1500,
Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Fund's 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 Registrant's 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 ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes
in the Registrant's internal controls or in other factors that could
significantly affect the internal controls subsequent to the date of their
evaluation in connection with the preparation of this Shareholder Report on Form
N-CSR.
ITEM 12. EXHIBITS.
(A)(1) Code of Ethics
(A) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Laura F. Fergerson, 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
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN TEMPLETON LIMITED DURATION INCOME TRUST
By /s/LAURA F. FERGERSON
----------------------------
Laura F. Fergerson
Chief Executive Officer -
Finance and Administration
Date November 25, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/LAURA F. FERGERSON
----------------------------
Laura F. Fergerson
Chief Executive Officer -
Finance and Administration
Date November 25, 2009
By /s/GASTON GARDEY
------------------------------
Gaston Gardey
Chief Financial Officer and
Chief Accounting Officer
Date November 25, 2009