UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21357
Franklin Limited Duration Income Trust
(Exact name of registrant as specified in charter)
One Franklin Parkway,
San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Craig S. Tyle,
One Franklin Parkway,
San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrants telephone number, including area code: (650) 312-2000
Date of fiscal year end: 3/31
Date of reporting period: 9/30/17
Item 1. | Reports to Stockholders. |
Semiannual Report
September 30, 2017 |
Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, were dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, were able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the worlds largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Not FDIC Insured | |
May Lose Value | |
No Bank Guarantee |
franklintempleton.com |
Not part of the semiannual report |
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Franklin Limited Duration Income Trust
1. Source: Bureau of Labor Statistics.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Funds Statement of Investments (SOI). The SOI begins on page 9.
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FRANKLIN LIMITED DURATION INCOME TRUST
2. Source: Morningstar.
3. Source: Credit Suisse Group.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Funds portfolio.
See www.franklintempletondataresources.com for additional data provider information.
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CFA® is a trademark owned by CFA Institute.
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FRANKLIN LIMITED DURATION INCOME TRUST
Performance Summary as of September 30, 2017
Total return reflects reinvestment of the Funds dividends and capital gain distributions, if any, and any unrealized gains or losses. Total returns do not reflect any sales charges paid at inception or brokerage commissions paid on secondary market purchases. The performance table does not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Your dividend income will vary depending on dividends or interest paid by securities in the Funds portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance1,2
Cumulative Total Return3 | Average Annual Total Return3 | |||||||
Based on NAV4
|
Based on market price5 |
Based on NAV4 |
Based on market price5 | |||||
6-Month | +2.62% | +5.85% | +2.62% | +5.85% | ||||
1-Year | +5.63% | +9.75% | +5.63% | +9.75% | ||||
5-Year | +25.16% | +17.17% | +4.59% | +3.22% | ||||
10-Year | +86.93% | +111.59% | +6.46% | +7.78% |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
Share Prices
Symbol: FTF
|
9/30/17 | 3/31/17 | Change | |||
Net Asset Value (NAV) |
$12.60 | $12.91 | -$0.31 | |||
Market Price (NYSE) |
$12.01 | $11.97 | +$0.04 |
Distributions (4/1/179/30/17)
Net Investment Income
|
||
$0.6437
|
All investments involve risks, including possible loss of principal. Interest rate movements and mortgage prepayments will affect the Funds share price and yield. Bond prices generally move in the opposite direction of interest rates. As prices of bonds in the Fund adjust to a rise in interest rates, the Funds share price may decline. Investments in lower rated bonds include higher risk of default and loss of principal. The Fund is actively managed but there is no guarantee that the managers investment decisions will produce the desired results.
1. Figures are for common shares. As of 9/30/17, the Fund had leverage in the amount of 34.16% of the Funds total portfolio. 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 Funds leverage may be offset by increased/decreased income from the Funds floating rate investments.
2. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 5/31/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
3. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. Assumes reinvestment of distributions based on net asset value.
5. Assumes reinvestment of distributions based on the dividend reinvestment and cash purchase plan.
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Important Notice to Shareholders
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FRANKLIN LIMITED DURATION INCOME TRUST
Six Months Ended | ||||||||||||||||||||||||
September 30, 2017 | Year Ended March 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Per common share operating performance |
||||||||||||||||||||||||
(for a common share outstanding throughout the period) |
|
|||||||||||||||||||||||
Net asset value, beginning of period |
$12.91 | $12.38 | $13.87 | $14.36 | $14.30 | $13.82 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Income from investment operations: |
||||||||||||||||||||||||
Net investment incomea |
0.33 | 0.62 | 0.72 | 0.73 | 0.80 | 0.90 | ||||||||||||||||||
Net realized and unrealized gains (losses) |
0.05 | 0.85 | (1.41) | (0.33) | 0.20 | 0.62 | ||||||||||||||||||
Dividends to preferred shareholders from net investment income |
(0.05 | ) | (0.07 | ) | (0.06 | ) | (0.06 | ) | (0.06 | ) | (0.05 | ) | ||||||||||||
|
|
|||||||||||||||||||||||
Total from investment operations |
|
0.33 |
|
1.40 | (0.75) | 0.34 | 0.94 | 1.47 | ||||||||||||||||
|
|
|||||||||||||||||||||||
Less distributions to common shareholders from: |
||||||||||||||||||||||||
Net investment income |
(0.64 | ) | (0.57 | ) | (0.74 | ) | (0.83 | ) | (0.88 | ) | (0.99 | ) | ||||||||||||
Tax return of capital |
| (0.36) | | | | | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total distributions |
|
(0.64 |
) |
(0.93 | ) | (0.74 | ) | (0.83 | ) | (0.88 | ) | (0.99 | ) | |||||||||||
|
|
|||||||||||||||||||||||
Repurchase of shares |
| 0.06 | | | | | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Net asset value, end of period |
|
$12.60 |
|
$12.91 | $12.38 | $13.87 | $14.36 | $14.30 | ||||||||||||||||
|
|
|||||||||||||||||||||||
Market value, end of periodb |
|
$12.01 |
|
$11.97 | $11.34 | $12.17 | $13.05 | $14.82 | ||||||||||||||||
|
|
|||||||||||||||||||||||
Total return (based on market value per share)c |
5.85% | 14.07% | (0.44)% | (0.35)% | (5.85)% | 13.41% | ||||||||||||||||||
Ratios to average net assets applicable to common sharesd,e |
||||||||||||||||||||||||
Expenses before waiver and payments by affiliates and expense reduction |
1.18% | 1.35% | 1.16% | 1.14% | 1.12% | 1.13% | ||||||||||||||||||
Expenses net of waiver and payments by affiliates and expense reduction |
1.16% | f | 1.32% | f | 1.16% | f,g | 1.14% | f,g | 1.12% | f,g | 1.13% | |||||||||||||
Net investment income |
5.06% | 4.83% | 5.52% | 5.14% | 5.65% | 6.44% | ||||||||||||||||||
Supplemental data |
||||||||||||||||||||||||
Net assets applicable to common shares, end of period (000s) |
$284,814 | $291,875 | $332,132 | $372,080 | $385,388 | $383,632 | ||||||||||||||||||
Portfolio turnover rate |
98.66% | 265.00% | 270.16% | 289.67% | 318.57% | 295.39% | ||||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollsh |
17.60% | 93.00% | 81.78% | 92.15% | 137.85% | 106.42% | ||||||||||||||||||
Asset coverage per preferred share |
$73,177 | $74,809 | $75,991 | $76,665 | $78,686 | $79,157 | ||||||||||||||||||
Liquidation preference per preferred share |
$25,000 | $25,000 | $25,000 | $25,000 | $25,000 | $25,000 |
aBased on average daily common shares outstanding.
bBased on the last sale on the NYSE MKT.
cTotal return is not annualized for periods less than one year.
dBased on income and expenses applicable to both common and preferred shares.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
hSee Note 1(d) regarding mortgage dollar rolls.
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Semiannual Report | |
The accompanying notes are an integral part of these financial statements. |
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FRANKLIN LIMITED DURATION INCOME TRUST
Statement of Investments, September 30, 2017 (unaudited)
Country | Shares/ Warrants |
Value | ||||||||
Common Stocks and Other Equity Interests 0.9% |
||||||||||
Energy 0.9% |
||||||||||
a CHC Group LLC |
Cayman Islands | 15,520 | $ | 124,160 | ||||||
a Energy XXI Gulf Coast Inc. |
United States | 19,083 | 197,318 | |||||||
a Energy XXI Gulf Coast Inc., wts., 12/30/21 |
United States | 5,004 | 1,501 | |||||||
a Halcon Resources Corp. |
United States | 67,554 | 459,367 | |||||||
a Halcon Resources Corp., wts., 9/09/20 |
United States | 6,408 | 4,486 | |||||||
a Linn Energy Inc. |
United States | 17,897 | 646,976 | |||||||
a Midstates Petroleum Co. Inc. |
United States | 364 | 5,657 | |||||||
a,b Midstates Petroleum Co. Inc., wts., 4/21/20 |
United States | 2,579 | 289 | |||||||
a,b,c Nine Point Energy LLC |
United States | 18,477 | 221,719 | |||||||
a Penn Virginia Corp. |
United States | 3,117 | 124,618 | |||||||
a Samson Resources II LLC |
United States | 31,225 | 772,819 | |||||||
|
|
|||||||||
2,558,910 | ||||||||||
|
|
|||||||||
Materials 0.0% |
||||||||||
a Verso Corp., A |
United States | 4,163 | 21,190 | |||||||
a Verso Corp., wts., 7/25/23 |
United States | 438 | 4 | |||||||
|
|
|||||||||
21,194 | ||||||||||
|
|
|||||||||
Transportation 0.0% |
||||||||||
a CEVA Holdings LLC |
United States | 112 | 50,463 | |||||||
|
|
|||||||||
Total Common Stocks and Other Equity Interests |
||||||||||
(Cost $6,698,897) |
2,630,567 | |||||||||
|
|
|||||||||
Convertible Preferred Stocks 0.2% |
||||||||||
Energy 0.2% |
||||||||||
a,b,c Nine Point Energy Holdings Inc., cvt. pfd |
United States | 404 | 478,838 | |||||||
|
|
|||||||||
Transportation 0.0% |
||||||||||
a CEVA Holdings LLC, cvt. pfd., A-1 |
United States | 6 | 3,720 | |||||||
a CEVA Holdings LLC, cvt. pfd., A-2 |
United States | 243 | 109,238 | |||||||
|
|
|||||||||
112,958 | ||||||||||
|
|
|||||||||
Total Convertible Preferred Stocks (Cost $747,552) |
591,796 | |||||||||
|
|
|||||||||
Principal | ||||||||||
Amount | * | |||||||||
Convertible Bonds (Cost $1,476,542) 0.5% |
||||||||||
Energy 0.5% |
||||||||||
CHC Group LLC/CHC Finance Ltd., cvt., zero cpn., 10/01/20 |
Cayman Islands | 798,131 | 1,225,131 | |||||||
|
|
|||||||||
Corporate Bonds 51.1% |
||||||||||
Automobiles & Components 0.9% |
||||||||||
Fiat Chrysler Automobiles NV, senior note, 4.50%, 4/15/20 |
United Kingdom | 1,500,000 | 1,571,250 | |||||||
The Goodyear Tire & Rubber Co., |
||||||||||
senior bond, 5.00%, 5/31/26 |
United States | 700,000 | 732,375 | |||||||
senior note, 5.125%, 11/15/23 |
United States | 300,000 | 314,625 | |||||||
|
|
|||||||||
2,618,250 | ||||||||||
|
|
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FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
Corporate Bonds (continued) |
||||||||||
Banks 2.0% |
||||||||||
d Bank of America Corp., junior sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual |
United States | 1,500,000 | $ | 1,548,750 | ||||||
d Citigroup Inc., junior sub. bond, M, 6.30% to 5/15/24, FRN thereafter, Perpetual |
United States | 1,300,000 | 1,412,125 | |||||||
d JPMorgan Chase & Co., junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual |
United States | 1,500,000 | 1,629,375 | |||||||
Royal Bank of Scotland Group PLC, sub. note, 6.125%, 12/15/22 |
United Kingdom | 1,000,000 | 1,105,260 | |||||||
|
|
|||||||||
5,695,510 | ||||||||||
|
|
|||||||||
Capital Goods 2.1% |
||||||||||
CNH Industrial Capital LLC, senior note, 3.875%, 10/15/21 |
United States | 1,200,000 | 1,236,150 | |||||||
e H&E Equipment Services Inc., senior note, 144A, 5.625%, 9/01/25 |
United States | 500,000 | 528,750 | |||||||
e HD Supply Inc., senior note, 144A, 5.75%, 4/15/24 |
United States | 400,000 | 429,000 | |||||||
e Tennant Co., senior note, 144A, 5.625%, 5/01/25 |
United States | 800,000 | 834,000 | |||||||
e Terex Corp., senior note, 144A, 5.625%, 2/01/25 |
United States | 500,000 | 527,500 | |||||||
TransDigm Inc., senior sub. bond, 6.50%, 5/15/25 |
United States | 500,000 | 516,250 | |||||||
e Vertiv Group Corp., senior note, 144A, 9.25%, 10/15/24 |
United States | 1,600,000 | 1,808,000 | |||||||
|
|
|||||||||
5,879,650 | ||||||||||
|
|
|||||||||
Commercial & Professional Services 0.6% |
||||||||||
e,f Multi-Color Corp., senior note, 144A, 4.875%, 11/01/25 |
United States | 900,000 | 913,500 | |||||||
United Rentals North America Inc., senior bond, 5.875%, 9/15/26 |
United States | 600,000 | 654,000 | |||||||
|
|
|||||||||
1,567,500 | ||||||||||
|
|
|||||||||
Consumer Durables & Apparel 1.7% |
||||||||||
Beazer Homes USA Inc., senior note, 8.75%, 3/15/22 |
United States | 1,300,000 | 1,443,000 | |||||||
e Hanesbrands Inc., senior note, 144A, 4.625%, 5/15/24 |
United States | 1,100,000 | 1,150,875 | |||||||
KB Home, senior note, 7.00%, 12/15/21 |
United States | 1,100,000 | 1,238,875 | |||||||
e Taylor Morrison Communities Inc./Taylor Morrison Holdings II Inc., senior note, 144A, 5.875%, 4/15/23 |
United States | 1,000,000 | 1,065,000 | |||||||
|
|
|||||||||
4,897,750 | ||||||||||
|
|
|||||||||
Consumer Services 3.8% |
||||||||||
e 1011778 BC ULC/New Red Finance Inc., senior secured note, first lien, 144A, 4.25%, 5/15/24 |
Canada | 800,000 | 805,000 | |||||||
e 24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22 |
United States | 1,000,000 | 932,500 | |||||||
e Ascend Learning LLC, senior note, 144A, 6.875%, 8/01/25 |
United States | 500,000 | 528,750 | |||||||
e International Game Technology PLC, senior note, 144A, 5.625%, 2/15/20 |
United States | 1,500,000 | 1,591,875 | |||||||
e Jack Ohio Finance LLC/Jack Ohio Finance 1 Corp., senior secured note, first lien, 144A, 6.75%, 11/15/21 |
United States | 1,400,000 | 1,471,750 | |||||||
e KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, senior note, 144A, 5.00%, 6/01/24 |
United States | 1,400,000 | 1,478,750 | |||||||
MGM Resorts International, senior note, 8.625%, 2/01/19 |
United States | 1,000,000 | 1,082,500 | |||||||
e Silversea Cruise Finance Ltd., senior secured note, first lien, 144A, 7.25%, 2/01/25 |
United States | 600,000 | 645,000 | |||||||
e Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25 |
United States | 900,000 | 939,375 | |||||||
e Wynn Macau Ltd., senior note, 144A, 4.875%, 10/01/24 |
Macau | 1,200,000 | 1,219,242 | |||||||
|
|
|||||||||
10,694,742 | ||||||||||
|
|
|||||||||
Diversified Financials 1.8% |
||||||||||
Aircastle Ltd., senior note, 4.125%, 5/01/24 |
United States | 700,000 | 726,250 | |||||||
e FirstCash Inc., senior note, 144A, 5.375%, 6/01/24 |
United States | 900,000 | 942,750 | |||||||
e Lincoln Finance Ltd., senior secured note, 144A, 7.375%, 4/15/21 |
Netherlands | 1,000,000 | 1,056,250 |
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FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
Corporate Bonds (continued) |
||||||||||
Diversified Financials (continued) |
||||||||||
Navient Corp., |
||||||||||
senior note, 5.00%, 10/26/20 |
United States | 300,000 | $ | 309,375 | ||||||
senior note, 5.875%, 3/25/21 |
United States | 200,000 | 211,250 | |||||||
senior note, 6.625%, 7/26/21 |
United States | 700,000 | 750,750 | |||||||
senior note, 7.25%, 9/25/23 |
United States | 1,100,000 | 1,200,375 | |||||||
|
|
|||||||||
5,197,000 | ||||||||||
|
|
|||||||||
Energy 6.2% |
||||||||||
g BreitBurn Energy Partners LP/BreitBurn Finance Corp., senior bond, 7.875%, 4/15/22 |
United States | 500,000 | 23,750 | |||||||
California Resources Corp., |
||||||||||
e secured note, second lien, 144A, 8.00%, 12/15/22 |
United States | 924,000 | 604,065 | |||||||
senior note, 5.50%, 9/15/21 |
United States | 37,000 | 20,905 | |||||||
Calumet Specialty Products Partners LP/Calumet Finance Corp., |
||||||||||
senior note, 7.75%, 4/15/23 |
United States | 1,000,000 | 980,000 | |||||||
e senior note, 144A, 11.50%, 1/15/21 |
United States | 500,000 | 581,875 | |||||||
Cheniere Corpus Christi Holdings LLC, |
||||||||||
senior note, first lien, 7.00%, 6/30/24 |
United States | 700,000 | 798,875 | |||||||
senior secured note, first lien, 5.875%, 3/31/25 |
United States | 600,000 | 648,000 | |||||||
e Cheniere Energy Partners LP, senior note, 144A, 5.25%, 10/01/25 |
United States | 1,000,000 | 1,025,000 | |||||||
CONSOL Energy Inc., |
||||||||||
senior note, 5.875%, 4/15/22 |
United States | 500,000 | 507,500 | |||||||
senior note, 8.00%, 4/01/23 |
United States | 700,000 | 747,292 | |||||||
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp., senior note, 6.25%, 4/01/23 |
United States | 1,500,000 | 1,554,375 | |||||||
CSI Compressco LP/CSI Compressco Finance Inc., senior note, 7.25%, 8/15/22 |
United States | 400,000 | 372,000 | |||||||
Energy Transfer Equity LP, senior note, first lien, 7.50%, 10/15/20 |
United States | 1,500,000 | 1,696,875 | |||||||
e,h EnQuest PLC, senior note, 144A, PIK, 8.00%, 10/15/23 |
United Kingdom | 1,071,463 | 730,112 | |||||||
Ferrellgas LP/Ferrellgas Finance Corp., senior note, 6.75%, 6/15/23 |
United States | 800,000 | 774,000 | |||||||
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, 2/15/21 |
United States | 900,000 | 924,750 | |||||||
e Murray Energy Corp., secured note, second lien, 144A, 11.25%, 4/15/21 |
United States | 800,000 | 481,000 | |||||||
QEP Resources Inc., senior bond, 5.25%, 5/01/23 |
United States | 500,000 | 488,600 | |||||||
Sanchez Energy Corp., |
||||||||||
senior note, 7.75%, 6/15/21 |
United States | 900,000 | 857,250 | |||||||
senior note, 6.125%, 1/15/23 |
United States | 300,000 | 259,500 | |||||||
Weatherford International Ltd., |
||||||||||
senior note, 5.125%, 9/15/20 |
United States | 400,000 | 396,276 | |||||||
senior note, 7.75%, 6/15/21 |
United States | 1,000,000 | 1,043,750 | |||||||
senior note, 4.50%, 4/15/22 |
United States | 400,000 | 374,000 | |||||||
WPX Energy Inc., senior note, 7.50%, 8/01/20 |
United States | 1,500,000 | 1,638,750 | |||||||
|
|
|||||||||
17,528,500 | ||||||||||
|
|
|||||||||
Food, Beverage & Tobacco 1.5% |
||||||||||
Constellation Brands Inc., |
||||||||||
senior note, 3.875%, 11/15/19 |
United States | 900,000 | 934,342 | |||||||
senior note, 4.75%, 12/01/25 |
United States | 200,000 | 218,652 |
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Semiannual Report |
11 |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
Corporate Bonds (continued) |
||||||||||
Food, Beverage & Tobacco (continued) |
||||||||||
e Cott Holdings Inc., senior note, 144A, 5.50%, 4/01/25 |
Canada | 1,500,000 | $ | 1,564,500 | ||||||
e Lamb Weston Holdings Inc., senior note, 144A, 4.625%, 11/01/24 |
United States | 1,100,000 | 1,152,250 | |||||||
e Post Holdings Inc., |
||||||||||
senior note, 144A, 6.00%, 12/15/22 |
United States | 100,000 | 105,125 | |||||||
senior note, 144A, 5.50%, 3/01/25 |
United States | 400,000 | 416,000 | |||||||
|
|
|||||||||
4,390,869 | ||||||||||
|
|
|||||||||
Health Care Equipment & Services 2.9% |
||||||||||
e,f Avantor Inc., senior secured note, first lien, 144A, 6.00%, 10/01/24 |
United States | 600,000 | 615,000 | |||||||
CHS/Community Health Systems Inc., |
||||||||||
senior note, 7.125%, 7/15/20 |
United States | 900,000 | 815,625 | |||||||
senior secured note, first lien, 6.25%, 3/31/23 |
United States | 700,000 | 693,875 | |||||||
e Envision Healthcare Corp., senior note, 144A, 6.25%, 12/01/24 |
United States | 500,000 | 538,125 | |||||||
HCA Inc., |
||||||||||
senior bond, 5.875%, 5/01/23 |
United States | 900,000 | 981,000 | |||||||
senior note, 7.50%, 2/15/22 |
United States | 500,000 | 574,845 | |||||||
senior secured bond, first lien, 5.875%, 3/15/22 |
United States | 1,000,000 | 1,110,000 | |||||||
e MPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24 |
United States | 1,300,000 | 1,400,750 | |||||||
Tenet Healthcare Corp., |
||||||||||
senior note, 5.50%, 3/01/19 |
United States | 900,000 | 921,375 | |||||||
senior secured note, first lien, 6.00%, 10/01/20 |
United States | 500,000 | 534,105 | |||||||
|
|
|||||||||
8,184,700 | ||||||||||
|
|
|||||||||
Materials 8.1% |
||||||||||
h ARD Finance SA, secured note, PIK, 7.125%, 9/15/23 |
Luxembourg | 600,000 | 642,750 | |||||||
e Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., |
||||||||||
senior note, 144A, 4.25%, 9/15/22 |
Luxembourg | 300,000 | 308,250 | |||||||
senior note, 144A, 6.00%, 2/15/25 |
Luxembourg | 500,000 | 530,625 | |||||||
e BlueScope Steel Ltd./BlueScope Steel Finance, senior note, 144A, 6.50%, 5/15/21 |
Australia | 1,500,000 | 1,572,502 | |||||||
e BWAY Holding Co., secured note, 144A, 5.50%, 4/15/24 |
United States | 1,500,000 | 1,569,375 | |||||||
e Cemex SAB de CV, senior secured bond, 144A, 7.75%, 4/16/26 |
Mexico | 400,000 | 460,218 | |||||||
The Chemours Co., senior note, 6.625%, 5/15/23 |
United States | 1,500,000 | 1,603,125 | |||||||
e CVR Partners LP/CVR Nitrogen Finance Corp., secured note, second lien, 144A, 9.25%, 6/15/23 |
United States | 500,000 | 534,375 | |||||||
e Eldorado Gold Corp., senior note, 144A, 6.125%, 12/15/20 |
Canada | 800,000 | 817,000 | |||||||
e First Quantum Minerals Ltd., |
||||||||||
senior note, 144A, 7.00%, 2/15/21 |
Zambia | 961,000 | 993,434 | |||||||
senior note, 144A, 7.25%, 4/01/23 |
Zambia | 500,000 | 516,250 | |||||||
e FMG Resources (August 2006) Pty. Ltd., senior note, 144A, 4.75%, 5/15/22 |
Australia | 700,000 | 710,325 | |||||||
e Grinding Media Inc./MC Grinding Media Canada Inc., senior secured note, 144A, 7.375%, 12/15/23 |
United States | 800,000 | 870,000 | |||||||
e HudBay Minerals Inc., senior note, 144A, 7.25%, 1/15/23 |
Canada | 400,000 | 428,000 | |||||||
e New Gold Inc., senior note, 144A, 6.375%, 5/15/25 |
Canada | 600,000 | 636,000 | |||||||
e Novelis Corp., senior note, 144A, 6.25%, 8/15/24 |
United States | 1,300,000 | 1,358,760 | |||||||
e Owens-Brockway Glass Container Inc., |
||||||||||
senior note, 144A, 5.00%, 1/15/22 |
United States | 900,000 | 956,250 | |||||||
senior note, 144A, 5.875%, 8/15/23 |
United States | 400,000 | 442,750 | |||||||
e Petra Diamonds U.S. Treasury PLC, secured note, second lien, 144A, 7.25%, 5/01/22 |
South Africa | 700,000 | 715,750 | |||||||
e Platform Specialty Products Corp., |
||||||||||
senior note, 144A, 10.375%, 5/01/21 |
United States | 100,000 | 109,250 | |||||||
senior note, 144A, 6.50%, 2/01/22 |
United States | 600,000 | 623,250 |
12 |
Semiannual Report |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
Corporate Bonds (continued) |
||||||||||
Materials (continued) |
||||||||||
e Rain CII Carbon LLC/CII Carbon Corp., secured note, second lien, 144A, 8.25%, 1/15/21 |
United States | 600,000 | $ | 623,250 | ||||||
e Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA, |
||||||||||
senior note, 144A, 7.00%, 7/15/24 |
United States | 100,000 | 106,688 | |||||||
senior secured note, first lien, 144A, 5.125%, 7/15/23 |
United States | 400,000 | 417,940 | |||||||
i senior secured note, first lien, 144A, FRN, 4.804%, (3-month USD LIBOR + 3.50%), 7/15/21 |
United States | 400,000 | 409,000 | |||||||
e Sealed Air Corp., |
||||||||||
senior bond, 144A, 5.125%, 12/01/24 |
United States | 500,000 | 540,625 | |||||||
senior bond, 144A, 5.50%, 9/15/25 |
United States | 600,000 | 661,500 | |||||||
Steel Dynamics Inc., senior note, 5.125%, 10/01/21 |
United States | 1,500,000 | 1,546,875 | |||||||
Summit Materials LLC/Summit Materials Finance Corp., senior note, 8.50%, 4/15/22 |
United States | 1,200,000 | 1,356,000 | |||||||
e SunCoke Energy Partners
LP/SunCoke Energy Partners Finance Corp., |
United States | 1,100,000 | 1,141,250 | |||||||
|
|
|||||||||
23,201,367 | ||||||||||
|
|
|||||||||
Media 4.6% |
||||||||||
e Altice U.S. Finance I Corp., senior secured bond, 144A, 5.50%, 5/15/26 |
United States | 1,000,000 | 1,057,500 | |||||||
AMC Networks Inc., senior note, 5.00%, 4/01/24 |
United States | 1,000,000 | 1,035,000 | |||||||
CCO Holdings LLC/CCO Holdings Capital Corp., |
||||||||||
senior bond, 5.25%, 9/30/22 |
United States | 1,500,000 | 1,548,750 | |||||||
e senior note, 144A, 5.125%, 5/01/23 |
United States | 500,000 | 521,875 | |||||||
Clear Channel Worldwide Holdings Inc., |
||||||||||
senior note, 6.50%, 11/15/22 |
United States | 700,000 | 724,500 | |||||||
senior sub. note, 7.625%, 3/15/20 |
United States | 800,000 | 793,000 | |||||||
CSC Holdings LLC, |
||||||||||
senior note, 6.75%, 11/15/21 |
United States | 1,000,000 | 1,107,500 | |||||||
senior note, 5.25%, 6/01/24 |
United States | 500,000 | 506,875 | |||||||
iHeartCommunications Inc., senior secured bond, first lien, 9.00%, 3/01/21 |
United States | 1,500,000 | 1,073,438 | |||||||
e Nexstar Broadcasting Inc., senior note, 144A, 5.625%, 8/01/24 |
United States | 500,000 | 518,750 | |||||||
e Radio One Inc., senior sub. note, 144A, 9.25%, 2/15/20 |
United States | 600,000 | 571,500 | |||||||
e Virgin Media Secured Finance PLC, |
||||||||||
senior secured bond, first lien, 144A, 5.50%, 1/15/25 |
United Kingdom | 1,100,000 | 1,153,625 | |||||||
senior secured bond, first lien, 144A, 5.50%, 8/15/26 |
United Kingdom | 400,000 | 422,500 | |||||||
e WMG Acquisition Corp., |
||||||||||
secured note, first lien, 144A, 5.00%, 8/01/23 |
United States | 100,000 | 103,625 | |||||||
senior note, 144A, 5.625%, 4/15/22 |
United States | 1,806,000 | 1,885,012 | |||||||
|
|
|||||||||
13,023,450 | ||||||||||
|
|
|||||||||
Pharmaceuticals, Biotechnology & Life Sciences 2.2% |
||||||||||
e Concordia International Corp., |
||||||||||
senior note, 144A, 7.00%, 4/15/23 |
Canada | 900,000 | 157,500 | |||||||
senior secured note, first lien, 144A, 9.00%, 4/01/22 |
Canada | 500,000 | 392,500 | |||||||
e Endo DAC/Endo Finance LLC/Endo Finco Inc., |
||||||||||
senior bond, 144A, 6.00%, 2/01/25 |
United States | 1,000,000 | 815,000 | |||||||
senior note, 144A, 6.00%, 7/15/23 |
United States | 500,000 | 415,000 | |||||||
Horizon Pharma Inc., senior note, 6.625%, 5/01/23 |
United States | 1,200,000 | 1,176,000 | |||||||
e Jaguar Holding Co. II/Pharmaceutical Product Development LLC, senior note, 144A, 6.375%, 8/01/23 |
United States | 1,200,000 | 1,258,500 |
franklintempleton.com |
Semiannual Report |
13 |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
Corporate Bonds (continued) |
||||||||||
Pharmaceuticals, Biotechnology & Life Sciences (continued) |
||||||||||
eValeant Pharmaceuticals International Inc., |
||||||||||
first lien, 144A, 6.50%, 3/15/22 |
United States | 200,000 | $ | 211,500 | ||||||
senior note, 144A, 5.375%, 3/15/20 |
United States | 500,000 | 501,250 | |||||||
senior note, 144A, 5.625%, 12/01/21 |
United States | 500,000 | 470,000 | |||||||
e Valeant Pharmaceuticals International, senior note, 144A, 6.375%, 10/15/20 |
United States | 1,000,000 | 1,003,440 | |||||||
|
|
|||||||||
6,400,690 | ||||||||||
|
|
|||||||||
Real Estate 0.5% |
||||||||||
Equinix Inc., senior bond, 5.875%, 1/15/26 |
United States | 300,000 | 330,375 | |||||||
MPT Operating Partnership LP/MPT Finance Corp., |
||||||||||
senior bond, 5.25%, 8/01/26 |
United States | 300,000 | 311,250 | |||||||
senior note, 6.375%, 3/01/24 |
United States | 700,000 | 758,625 | |||||||
|
|
|||||||||
1,400,250 | ||||||||||
|
|
|||||||||
Retailing 1.4% |
||||||||||
Dollar Tree Inc., senior note, 5.25%, 3/01/20 |
United States | 400,000 | 411,600 | |||||||
Netflix Inc., senior note, 5.50%, 2/15/22 |
United States | 1,500,000 | 1,642,500 | |||||||
Penske Automotive Group Inc., senior sub. note, 3.75%, 8/15/20 |
United States | 1,400,000 | 1,431,500 | |||||||
e PetSmart Inc., senior note, 144A, 7.125%, 3/15/23 |
United States | 700,000 | 547,960 | |||||||
|
|
|||||||||
4,033,560 | ||||||||||
|
|
|||||||||
Semiconductors & Semiconductor Equipment 0.4% |
||||||||||
e Microsemi Corp., senior note, 144A, 9.125%, 4/15/23 |
United States | 313,000 | 358,776 | |||||||
Qorvo Inc., senior note, 6.75%, 12/01/23 |
United States | 700,000 | 764,855 | |||||||
|
|
|||||||||
1,123,631 | ||||||||||
|
|
|||||||||
Software & Services 1.8% |
||||||||||
e CyrusOne LP/CyrusOne Finance Corp., senior note, 144A, 5.00%, 3/15/24 |
United States | 300,000 | 316,500 | |||||||
e First Data Corp., |
||||||||||
secured note, first lien, 144A, 5.00%, 1/15/24 |
United States | 1,700,000 | 1,771,485 | |||||||
senior note, 144A, 7.00%, 12/01/23 |
United States | 500,000 | 535,150 | |||||||
Infor (U.S.) Inc., senior note, 6.50%, 5/15/22 |
United States | 1,800,000 | 1,875,366 | |||||||
e Symantec Corp., senior note, 144A, 5.00%, 4/15/25 |
United States | 600,000 | 628,878 | |||||||
|
|
|||||||||
5,127,379 | ||||||||||
|
|
|||||||||
Technology Hardware & Equipment 1.1% |
||||||||||
e Blackboard Inc., secured note, second lien, 144A, 9.75%, 10/15/21 |
United States | 1,538,000 | 1,380,355 | |||||||
e Dell International LLC/EMC Corp., senior note, 144A, 5.875%, 6/15/21 |
United States | 400,000 | 419,168 | |||||||
e Tempo Acquisition LLC/Tempo Acquisition Finance Corp., senior note, 144A, 6.75%, 6/01/25 |
United States | 800,000 | 810,000 | |||||||
e TTM Technologies Inc., senior note, 144A, 5.625%, 10/01/25 |
United States | 500,000 | 507,188 | |||||||
|
|
|||||||||
3,116,711 | ||||||||||
|
|
|||||||||
Telecommunication Services 4.1% |
||||||||||
e Block Communications Inc., senior note, 144A, 6.875%, 2/15/25 |
United States | 300,000 | 327,090 | |||||||
CenturyLink Inc., senior bond, 5.625%, 4/01/25 |
United States | 400,000 | 384,500 | |||||||
e Digicel Group Ltd., senior note, 144A, 8.25%, 9/30/20 |
Bermuda | 1,200,000 | 1,173,522 | |||||||
e Digicel Ltd., senior note, 144A, 6.00%, 4/15/21 |
Bermuda | 700,000 | 685,384 | |||||||
e Millicom International Cellular SA, senior note, 144A, 6.625%, 10/15/21 |
Colombia | 1,500,000 | 1,552,500 | |||||||
e,f SBA Communications Corp., senior note, 144A, 4.00%, 10/01/22 |
United States | 1,400,000 | 1,407,000 | |||||||
e Sprint Communications Inc., |
||||||||||
senior note, 144A, 9.00%, 11/15/18 |
United States | 148,000 | 159,100 | |||||||
senior note, 144A, 7.00%, 3/01/20 |
United States | 600,000 | 657,000 |
14 |
Semiannual Report |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
Corporate Bonds (continued) |
||||||||||
Telecommunication Services (continued) |
||||||||||
Sprint Corp., |
||||||||||
senior bond, 7.125%, 6/15/24 |
United States | 300,000 | $ | 338,250 | ||||||
senior note, 7.25%, 9/15/21 |
United States | 500,000 | 556,875 | |||||||
T-Mobile USA Inc., |
||||||||||
senior bond, 6.50%, 1/15/24 |
United States | 500,000 | 534,000 | |||||||
senior note, 6.125%, 1/15/22 |
United States | 1,000,000 | 1,042,500 | |||||||
senior note, 4.00%, 4/15/22 |
United States | 700,000 | 726,614 | |||||||
e Wind Acquisition Finance SA, |
||||||||||
secured note, second lien, 144A, 7.375%, 4/23/21 |
Italy | 1,500,000 | 1,562,640 | |||||||
senior secured note, first lien, 144A, 4.75%, 7/15/20 |
Italy | 500,000 | 508,750 | |||||||
|
|
|||||||||
11,615,725 | ||||||||||
|
|
|||||||||
Transportation 0.8% |
||||||||||
e DAE Funding LLC, |
||||||||||
senior note, 144A, 4.00%, 8/01/20 |
United Arab Emirates | 800,000 | 817,000 | |||||||
senior note, 144A, 4.50%, 8/01/22 |
United Arab Emirates | 400,000 | 410,152 | |||||||
e Park Aerospace Holdings Ltd., senior note, 144A, 5.25%, 8/15/22 |
Ireland | 1,100,000 | 1,144,550 | |||||||
|
|
|||||||||
2,371,702 | ||||||||||
|
|
|||||||||
Utilities 2.6% |
||||||||||
Calpine Corp., senior note, 5.375%, 1/15/23 |
United States | 1,500,000 | 1,466,475 | |||||||
Dynegy Inc., senior note, 6.75%, 11/01/19 |
United States | 1,128,000 | 1,170,300 | |||||||
Ferrellgas Partners LP/Ferrellgas Partners Finance Corp., senior note, 8.625%, 6/15/20 |
United States | 500,000 | 477,500 | |||||||
e InterGen NV, secured bond, 144A, 7.00%, 6/30/23 |
Netherlands | 1,500,000 | 1,462,808 | |||||||
NRG Yield Operating LLC, |
||||||||||
senior bond, 5.375%, 8/15/24 |
United States | 500,000 | 527,500 | |||||||
senior bond, 5.00%, 9/15/26 |
United States | 1,000,000 | 1,045,000 | |||||||
Talen Energy Supply LLC, senior note, 6.50%, 6/01/25 |
United States | 1,500,000 | 1,147,500 | |||||||
|
|
|||||||||
7,297,083 | ||||||||||
|
|
|||||||||
Total Corporate Bonds (Cost $142,096,428) |
145,366,019 | |||||||||
|
|
|||||||||
i,j Senior Floating Rate Interests 50.0% |
||||||||||
Capital Goods 3.4% |
||||||||||
Doncasters U.S. Finance LLC, Term B Loans, 4.833%, (LIBOR + 3.50%), 4/09/20 |
United States | 1,955,354 | 1,897,509 | |||||||
Flying Fortress Inc. (ILFC), New Loan, 3.333%, (LIBOR + 2.00%), 10/30/22 |
Luxembourg | 1,629,859 | 1,641,065 | |||||||
Harsco Corp., Initial Term Loan, 6.25%, (LIBOR + 5.00%), 11/02/23 |
United States | 444,740 | 453,265 | |||||||
Leidos Innovations Corp., Term Loan B, 3.25%, (LIBOR + 2.00%), 8/16/23 |
United States | 430,758 | 432,804 | |||||||
Mueller Water Products Inc., Loans, 3.735% - 3.833%, (LIBOR + 2.50%), 11/25/21 |
United States | 345,643 | 348,343 | |||||||
Navistar Inc., Tranche B Term Loans, 5.24%, (LIBOR + 4.00%), 8/07/20 |
United States | 3,276,397 | 3,305,746 | |||||||
Onsite Rental Group Operations Pty. Ltd., Term B Loan, 5.737%, (LIBOR + 4.50%), 7/31/21 |
Australia | 1,940,000 | 1,581,100 | |||||||
|
|
|||||||||
9,659,832 | ||||||||||
|
|
|||||||||
Commercial & Professional Services 0.8% |
||||||||||
Conduent Business Services LLC, Delayed Draw Term A Loan, 3.485%, |
United States | 1,000,000 | 1,001,250 | |||||||
Ventia Pty. Ltd., Term B Loans (USD), 4.833%, (LIBOR + 3.50%), 5/21/22 |
Australia | 1,326,810 | 1,336,761 | |||||||
|
|
|||||||||
2,338,011 | ||||||||||
|
|
franklintempleton.com |
Semiannual Report |
15 |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
i,j Senior Floating Rate Interests (continued) |
||||||||||
Consumer Services 3.7% |
||||||||||
24 Hour Fitness Worldwide Inc., Term Loan, 5.046%, (LIBOR + 3.75%), 5/28/21 |
United States | 1,935,000 | $ | 1,937,999 | ||||||
Avis Budget Car Rental LLC, Tranche B Term Loan, 3.34%, (LIBOR + 2.00%), 3/15/22 |
United States | 2,073,215 | 2,066,737 | |||||||
Fitness International LLC, Term A Loan, 4.485%, (LIBOR + 3.25%), 4/01/20 |
United States | 1,818,881 | 1,823,050 | |||||||
Hilton Worldwide Finance LLC, Series B-2 Term Loans, 3.237%, (LIBOR + 2.00%), 10/25/23 |
United States | 1,985,013 | 1,995,144 | |||||||
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, Term B Loans, 3.234%, (LIBOR + 2.00%), 6/16/23 |
United States | 1,725,315 | 1,735,173 | |||||||
Las Vegas Sands LLC, Term B Loans, 3.235%, (LIBOR + 2.00%), 3/29/24 |
United States | 130,970 | 131,625 | |||||||
Sabre GLBL Inc., 2017 Other Term A Loans, 3.485%, (LIBOR + 2.25%), 7/01/22 |
United States | 977,096 | 981,166 | |||||||
|
|
|||||||||
10,670,894 | ||||||||||
|
|
|||||||||
Diversified Financials 1.5% |
||||||||||
Avolon TLB Borrower 1 US LLC, Initial Term B-1 Loans, 3.486%, (LIBOR + 2.25%), 9/16/20 |
United States | 2,310,977 | 2,321,293 | |||||||
Finco I LLC, Initial Term Loans, 2.75%, (LIBOR + 2.75%), 6/14/22 |
United States | 2,000,000 | 2,021,750 | |||||||
|
|
|||||||||
4,343,043 | ||||||||||
|
|
|||||||||
Energy 0.9% |
||||||||||
Energy Transfer Equity LP, Loans, 3.981%, (LIBOR + 2.75%), 2/02/24 |
United States | 501,857 | 504,635 | |||||||
OSG Bulk Ships Inc., Initial Term Loan, 5.57%, (LIBOR + 4.25%), 8/05/19 |
United States | 2,035,947 | 1,943,057 | |||||||
|
|
|||||||||
2,447,692 | ||||||||||
|
|
|||||||||
Food, Beverage & Tobacco 1.7% |
||||||||||
JBS USA LUX SA, New Initial Term Loans, 3.804%, (LIBOR + 2.50%), 10/30/22 |
Brazil | 3,006,936 | 2,973,483 | |||||||
Pinnacle Foods Finance LLC, Initial Term Loans, 3.232%, (LIBOR + 2.00%), 2/03/24 |
United States | 132,825 | 133,323 | |||||||
Post Holdings Inc., Series A Incremental Term Loan, 3.49%, (LIBOR + 2.25%), 5/24/24 |
United States | 1,693,281 | 1,698,680 | |||||||
|
|
|||||||||
4,805,486 | ||||||||||
|
|
|||||||||
Health Care Equipment & Services 2.1% |
||||||||||
Envision Healthcare Corp. (Emergency Medical), Initial Term Loans, 4.24%, (LIBOR + 3.00%), 12/01/23 |
United States | 1,639,439 | 1,651,906 | |||||||
Mallinckrodt International Finance SA/CB LLC, Extended Term Loan B, 4.083%, |
United States | 1,990,000 | 1,990,000 | |||||||
U.S. Renal Care Inc., Initial Term Loan, 5.583%, (LIBOR + 4.25%), 12/31/22 |
United States | 2,487,342 | 2,417,385 | |||||||
|
|
|||||||||
6,059,291 | ||||||||||
|
|
|||||||||
Household & Personal Products 1.4% |
||||||||||
FGI Operating Co. LLC, Term B Loans, 5.50%, (LIBOR + 4.25%), 4/19/19 |
United States | 1,981,235 | 1,544,125 | |||||||
Spectrum Brands Inc., USD Term Loans, 3.312% - 3.314%, (LIBOR + 2.00%), 6/23/22 |
United States | 2,413,998 | 2,429,689 | |||||||
|
|
|||||||||
3,973,814 | ||||||||||
|
|
16 |
Semiannual Report |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
i,j Senior Floating Rate Interests (continued) |
||||||||||
Materials 3.6% |
||||||||||
Ashland LLC, Term B Loan, 3.237% - 3.319%, (LIBOR + 2.00%), 5/17/24 |
United States | 541,850 | $ | 544,559 | ||||||
Axalta Coating Systems U.S. Holdings Inc., Term B-2 Dollar Loans, 3.333%, (LIBOR + 2.00%), 6/01/24 |
United States | 1,865,272 | 1,876,833 | |||||||
Chemours Co., Tranche B-1 US Term Loans, 3.74%, (LIBOR + 2.50%), 5/12/22 |
United States | 2,141,057 | 2,155,777 | |||||||
Cyanco Intermediate Corp., Initial Term Loan, 5.735%, (LIBOR + 4.50%), 5/01/20 |
United States | 1,816,120 | 1,830,309 | |||||||
Ineos U.S. Finance LLC, 2024 Dollar Term Loan, 3.985%, (LIBOR + 2.75%), 3/31/24 |
United States | 1,542,260 | 1,552,863 | |||||||
KMG Chemicals Inc., Initial Term Loan, 5.485%, (LIBOR + 4.25%), 6/15/24 |
United States | 448,183 | 456,027 | |||||||
OCI Beaumont LLC, Term B-3 Loan, 8.064%, (LIBOR + 6.75%), 8/20/19 |
United States | 1,220,315 | 1,232,518 | |||||||
Oxbow Carbon LLC, Tranche B Term Loan, 4.735%, (LIBOR + 3.50%), 1/19/20 |
United States | 628,554 | 634,054 | |||||||
|
|
|||||||||
10,282,940 | ||||||||||
|
|
|||||||||
Media 7.5% |
||||||||||
AMC Entertainment Holdings Inc., Incremental Term Loans, 3.484%, (LIBOR + 2.25%), 12/15/23 |
United States | 598,472 | 597,051 | |||||||
CSC Holdings LLC, March 2017 Incremental Term Loans, 3.484%, (LIBOR + 2.25%), 7/17/25 |
United States | 2,599,138 | 2,585,892 | |||||||
Gray Television Inc., Term B-2 Loan, 3.737%, (LIBOR + 2.50%), 2/07/24 |
United States | 2,749,297 | 2,769,059 | |||||||
Lions Gate Entertainment Corp., Term A Loan, 3.235%, (LIBOR + 2.00%), 12/08/21 |
United States | 2,908,125 | 2,912,671 | |||||||
Live Nation Entertainment Inc., Term B-3 Loans, 3.50%, (LIBOR + 2.25%), 10/21/23 |
United States | 842,632 | 846,739 | |||||||
Mediacom Illinois LLC, Tranche K Term Loan, 3.45%, (LIBOR + 2.25%), 2/15/24 |
United States | 1,134,300 | 1,139,404 | |||||||
Mission Broadcasting Inc., Term Loan B-2, 3.737%, (LIBOR + 2.50%), 7/19/24 |
United States | 68,501 | 68,752 | |||||||
Nexstar Broadcasting Inc., Term Loan B-2, 3.737%, (LIBOR + 2.50%), 7/19/24 |
United States | 547,187 | 549,186 | |||||||
Regal Cinemas Corp., Term Loan, 3.235%, (LIBOR + 2.00%), 4/01/22 |
United States | 3,018,643 | 3,007,532 | |||||||
Sinclair Television Group Inc., Tranche B Term Loans, 3.49%, (LIBOR + 2.25%), 1/03/24 |
United States | 1,991,004 | 1,997,019 | |||||||
UPC Financing Partnership, Facility AP, 3.984%, (LIBOR + 2.75%), 4/15/25 |
United States | 2,180,000 | 2,190,316 | |||||||
Virgin Media Bristol LLC, I Facility, 3.984%, (LIBOR + 2.75%), 1/31/25 |
United States | 2,622,768 | 2,635,677 | |||||||
|
|
|||||||||
21,299,298 | ||||||||||
|
|
|||||||||
Pharmaceuticals, Biotechnology & Life Sciences 4.0% |
||||||||||
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 5.50%, (LIBOR + 4.25%), 4/29/24 |
United States | 1,995,000 | 2,017,444 | |||||||
Grifols Worldwide Operations USA Inc., Tranche B Term Loan, 3.447%, (LIBOR + 2.25%), 1/31/25 |
United States | 1,740,638 | 1,745,879 | |||||||
Horizon Pharma Inc., Second Amendment Refinancing Term Loans, 5.00%, (LIBOR + 3.75%), 3/29/24 |
United States | 2,138,620 | 2,158,670 | |||||||
INC Research Holdings Inc., Initial Term B Loans, 3.485%, (LIBOR + 2.25%), 8/01/24 |
United States | 1,878,538 | 1,886,756 | |||||||
RPI Finance Trust, Term A-3 Loan, 3.083%, (LIBOR + 1.75%), 10/14/21 |
United States | 1,200,564 | 1,203,566 |
franklintempleton.com |
Semiannual Report |
17 |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
i,j Senior Floating Rate Interests (continued) |
||||||||||
Pharmaceuticals, Biotechnology & Life Sciences (continued) |
||||||||||
Valeant Pharmaceuticals International Inc., Series F Tranche B Term Loan, 5.99%, (LIBOR + 4.75%), 4/01/22 |
United States | 2,319,012 | $ | 2,362,783 | ||||||
|
|
|||||||||
11,375,098 | ||||||||||
|
|
|||||||||
Retailing 3.4% |
||||||||||
Ascena Retail Group Inc., Tranche B Term Loan, 5.75%, (LIBOR + 4.50%), 8/21/22 |
United States | 3,643,596 | 2,994,580 | |||||||
Dollar Tree Inc., Term A-1 Loans, 2.75%, (LIBOR + 1.50%), 7/06/20 |
United States | 1,567,486 | 1,564,038 | |||||||
Evergreen AcqCo. 1 LP (Savers), Term Loan, 5.064%, (LIBOR + 3.75%), 7/09/19 |
United States | 2,786,119 | 2,610,824 | |||||||
PetSmart Inc., Tranche B-2 Loans, 4.24%, (LIBOR + 3.00%), 3/11/22 |
United States | 2,930,442 | 2,495,064 | |||||||
|
|
|||||||||
9,664,506 | ||||||||||
|
|
|||||||||
Semiconductors & Semiconductor Equipment 1.7% |
||||||||||
MACOM Technology Solutions Holdings Inc., Initial Term Loans, 3.487%, (LIBOR + 2.25%), 5/07/24 |
United States | 2,630,671 | 2,627,382 | |||||||
MKS Instruments Inc., Tranche B-3 Term Loans, 3.485%, (LIBOR + 2.25%), 4/29/23 |
United States | 339,855 | 343,200 | |||||||
ON Semiconductor Corp., 2017 Replacement Term Loans, 3.485%, (LIBOR + 2.25%), 3/31/23 |
United States | 1,953,072 | 1,962,330 | |||||||
|
|
|||||||||
4,932,912 | ||||||||||
|
|
|||||||||
Software & Services 1.8% |
||||||||||
Global Payments Inc., Term A-2 Loan, 2.947%, (LIBOR + 1.75%), 5/02/22 |
United States | 1,349,834 | 1,350,115 | |||||||
Rackspace Hosting Inc., 2017 Refinancing Term B Loans, 4.311%, (LIBOR + 3.00%), 11/03/23 |
United States | 2,036,613 | 2,036,978 | |||||||
Sungard Availability Services Capital Inc., 2019 Tranche B Term Loan, 6.235%, (LIBOR + 5.00%), 3/29/19 |
United States | 1,740,703 | 1,644,964 | |||||||
|
|
|||||||||
5,032,057 | ||||||||||
|
|
|||||||||
Technology Hardware & Equipment 3.1% |
||||||||||
Ciena Corp., Refinancing Term Loan, 3.736%, (LIBOR + 2.50%), 1/28/22 |
United States | 2,357,809 | 2,369,598 | |||||||
Commscope Inc., Tranche 5 Term Loans, 3.235%, (LIBOR + 2.00%), 12/29/22 |
United States | 2,093,107 | 2,106,149 | |||||||
Dell International LLC, Term A-3 Loan, 3.20%, (LIBOR + 2.00%), 12/31/18 |
United States | 2,538,306 | 2,543,065 | |||||||
Western Digital Corp., US Term B-2 Loan, 3.985%, (LIBOR + 2.75%), 4/29/23 |
United States | 1,716,821 | 1,731,843 | |||||||
|
|
|||||||||
8,750,655 | ||||||||||
|
|
|||||||||
Telecommunication Services 0.2% |
||||||||||
Consolidated Communications Inc., Initial Term Loan, 4.24%, (LIBOR + 3.00%), 10/05/23 |
United States | 527,596 | 515,989 | |||||||
|
|
|||||||||
Transportation 5.2% |
||||||||||
Air Canada, Term Loan, 3.568%, (LIBOR + 2.25%), 10/06/23 |
Canada | 3,010,393 | 3,032,345 | |||||||
American Airlines Inc., Class B Term Loans, 3.735%, (LIBOR + 2.50%), 4/28/23 |
United States | 1,981,015 | 1,989,682 | |||||||
Delos Finance SARL (ILFC), New Loan, 3.333%, (LIBOR + 2.00%), 10/06/23 |
Luxembourg | 2,500,000 | 2,518,528 | |||||||
The Hertz Corp., Tranche B-1 Term Loan, 3.985%, (LIBOR + 2.75%), 6/30/23 |
United States | 3,008,670 | 2,994,568 | |||||||
Pilot Travel Centers LLC, Initial Tranche B Term Loans, 3.235%, (LIBOR + 2.00%), 5/25/23 |
United States | 1,488,750 | 1,500,536 |
18 |
Semiannual Report |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||||||
i,j Senior Floating Rate Interests (continued) |
||||||||||||||
Transportation (continued) |
||||||||||||||
United Air Lines Inc., Class B Term Loans, 3.561%, (LIBOR + 2.25%), 4/01/24 |
United States | 995,000 | $ | 999,851 | ||||||||||
XPO Logistics Inc., Loans, 3.554%, (LIBOR + 2.25%), 11/01/21 |
United States | 1,867,306 | 1,874,168 | |||||||||||
|
|
|||||||||||||
14,909,678 | ||||||||||||||
|
|
|||||||||||||
Utilities 4.0% |
||||||||||||||
Calpine Corp., Term Loan (B5), 4.09%, (LIBOR + 2.75%), 1/15/24 |
United States | 2,552,448 | 2,550,689 | |||||||||||
EFS Cogen Holdings I LLC (Linden), Term B Advance, 4.84%, (LIBOR + 3.50%), 6/28/23 |
United States | 2,408,700 | 2,442,824 | |||||||||||
Lightstone Holdco LLC, |
||||||||||||||
Initial Term B Loan, 5.735%, (LIBOR + 4.50%), 1/30/24 |
United States | 2,795,479 | 2,790,892 | |||||||||||
Initial Term C Loan, 5.735%, (LIBOR + 4.50%), 1/30/24 |
United States | 174,187 | 173,901 | |||||||||||
NRG Energy Inc., Term Loans, 3.583%, (LIBOR + 2.25%), 6/30/23 |
United States | 3,440,767 | 3,447,477 | |||||||||||
|
|
|||||||||||||
11,405,783 | ||||||||||||||
|
|
|||||||||||||
Total Senior Floating Rate Interests (Cost $143,780,401) |
142,466,979 | |||||||||||||
|
|
|||||||||||||
Foreign Government and Agency Securities (Cost $1,923,108) 0.6% |
||||||||||||||
Government of Mexico, 7.75%, 12/14/17 |
Mexico | 320,000 | k | MXN | 1,759,938 | |||||||||
|
|
|||||||||||||
Commercial Mortgage-Backed Securities 6.1% |
||||||||||||||
Banks 2.9% |
||||||||||||||
Banc of America Commercial Mortgage Trust, 2006-4, AJ, 5.695%, 7/10/46 |
United States | 147,910 | 149,764 | |||||||||||
i,l Bear Stearns ARM Trust, 2004-4, A6, FRN, 3.499%, 6/25/34 |
United States | 555,524 | 566,563 | |||||||||||
Citigroup Commercial Mortgage Trust, |
||||||||||||||
2006-C5, AJ, 5.482%, 10/15/49 |
United States | 588,738 | 556,519 | |||||||||||
2015-GC27, A5, 3.137%, 2/10/48 |
United States | 1,520,000 | 1,533,922 | |||||||||||
i,l Commercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.766%, 7/10/38 |
United States | 1,005,000 | 943,468 | |||||||||||
CSAIL Commercial Mortgage Trust, 2015-C1, A4, 3.505%, 4/15/50 |
United States | 1,410,000 | 1,459,147 | |||||||||||
JPMBB Commercial Mortgage Securities Trust, 2015-C28, A4, 3.227%, 10/15/48 |
United States | 1,410,000 | 1,433,782 | |||||||||||
m Merrill Lynch Mortgage Investors Trust, |
||||||||||||||
n 2003-OPT1, B2, FRN, 5.362%, (1-month USD LIBOR + 4.125%), 7/25/34 |
United States | 33,301 | 8,231 | |||||||||||
2005-A6, 2A3, FRN, 1.617%, (1-month USD LIBOR + 0.38%), 8/25/35 |
United States | 257,677 | 255,196 | |||||||||||
m Morgan Stanley ABS Capital I Inc. Trust, 2003-NC10, B1, FRN, 6.187%, (1-month USD LIBOR + 4.95%), 10/25/33 |
United States | 350,442 | 361,620 | |||||||||||
i,l Morgan Stanley Capital I Trust, 2007-IQ16, AMA, FRN, 6.091%, 12/12/49 |
United States | 309,137 | 311,498 | |||||||||||
Wells Fargo Commercial Mortgage Trust, 2014-LC16, A4, 3.548%, 8/15/50 |
United States | 550,000 | 572,280 | |||||||||||
|
|
|||||||||||||
8,151,990 | ||||||||||||||
|
|
|||||||||||||
Diversified Financials 3.2% |
||||||||||||||
m Argent Securities Inc., 2003-W5, M4, FRN, 6.862%, (1-month USD LIBOR + 5.625%), 10/25/33 |
United States | 220,871 | 223,275 | |||||||||||
e,i,l BCAP LLC Trust, 2009-RR1, 2A2, 144A, FRN, 3.35%, 5/26/35 |
United States | 1,591,366 | 1,520,921 | |||||||||||
m Chase Funding Trust, 2004-2, 2A2, FRN, 1.737%, (1-month USD LIBOR + 0.50%), 2/26/35 |
United States | 456,519 | 444,263 |
franklintempleton.com |
Semiannual Report |
19 |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
Commercial Mortgage-Backed Securities (continued) |
||||||||||
Diversified Financials (continued) |
||||||||||
m FHLMC Structured Agency Credit Risk Debt Notes, |
||||||||||
2014-DN1, M2, FRN, 3.437%, (1-month USD LIBOR + 2.20%), 2/25/24 |
United States | 2,093,904 | $ | 2,161,599 | ||||||
2014-HQ2, M2, FRN, 3.437%, (1-month USD LIBOR + 2.20%), 9/25/24 |
United States | 900,000 | 929,680 | |||||||
2015-DN1, M2, FRN, 3.637%, (1-month USD LIBOR + 2.40%), 1/25/25 |
United States | 230,769 | 231,135 | |||||||
2015-HQ1, M2, FRN, 3.437%, (1-month USD LIBOR + 2.20%), 3/25/25 |
United States | 415,476 | 419,041 | |||||||
m Impac Secured Assets Trust, 2007-2, FRN, 1.487%, (1-month USD LIBOR + 0.25%), 4/25/37 |
United States | 241,121 | 240,809 | |||||||
e,m Invitation Homes Trust, 2015-SFR1, A, 144A, FRN, 2.684%, (1-month USD LIBOR + 1.45%), 3/17/32 |
United States | 854,915 | 861,925 | |||||||
m MortgageIT Trust, 2004-1, A2, FRN, 2.137%, (1-month USD LIBOR + 0.90%), 11/25/34 |
United States | 325,146 | 320,166 | |||||||
m Opteum Mortgage Acceptance Corp. Trust, 2005-4, 1APT, FRN, 1.547%, (1-month USD LIBOR + 0.31%), 11/25/35 |
United States | 443,638 | 433,564 | |||||||
m,n Option One Mortgage Loan Trust, 2003-6, M5, FRN, 6.187%, (1-month USD LIBOR + 4.95%), 11/25/33 |
United States | 147,107 | 116,145 | |||||||
m,n Structured Asset Investment Loan Trust, 2003-BC2, M3, FRN, 6.112%, (1-month USD LIBOR + 4.875%), 4/25/33 |
United States | 13,987 | 11,721 | |||||||
m Structured Asset Securities Corp., 2005-2XS, 2A2, FRN, 2.737%, (1-month USD LIBOR + 1.50%), 2/25/35 |
United States | 345,175 | 340,837 | |||||||
i,l Thornburg Mortgage Securities Trust, 2005-1, A3, FRN, 3.028%, 4/25/45 |
United States | 725,014 | 728,458 | |||||||
Wells Fargo Mortgage Backed Securities Trust, |
||||||||||
i,l 2004-W, A9, FRN, 3.616%, 11/25/34 |
United States | 226,625 | 231,990 | |||||||
2007-3, 3A1, 5.50%, 4/25/22 |
United States | 68,169 | 69,748 | |||||||
|
|
|||||||||
9,285,277 | ||||||||||
|
|
|||||||||
Total Commercial Mortgage-Backed Securities (Cost $17,487,957) |
17,437,267 | |||||||||
|
|
|||||||||
Mortgage-Backed Securities 38.0% |
||||||||||
o Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0% |
||||||||||
FHLMC, 3.827%, (12-month USD LIBOR +/- MBS Margin), 5/01/34 |
United States | 88,861 | 93,518 | |||||||
|
|
|||||||||
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 18.4% |
||||||||||
FHLMC Gold 15 Year, 5.00%, 12/01/23 |
United States | 513,670 | 549,171 | |||||||
FHLMC Gold 15 Year, 5.50%, 7/01/19 |
United States | 6,943 | 7,114 | |||||||
FHLMC Gold 30 Year, 3.00%, 4/01/47 |
United States | 5,957,681 | 5,982,084 | |||||||
p FHLMC Gold 30 Year, 3.00%, 10/01/47 |
United States | 6,450,000 | 6,470,156 | |||||||
FHLMC Gold 30 Year, 3.50%, 3/01/45 |
United States | 49,285 | 50,875 | |||||||
FHLMC Gold 30 Year, 3.50%, 3/01/47 |
United States | 6,050,676 | 6,245,918 | |||||||
p FHLMC Gold 30 Year, 3.50%, 10/01/47 |
United States | 7,980,000 | 8,229,063 | |||||||
FHLMC Gold 30 Year, 4.00%, 8/01/47 |
United States | 12,235,530 | 12,888,969 | |||||||
p FHLMC Gold 30 Year, 4.00%, 10/01/47 |
United States | 9,935,000 | 10,458,139 | |||||||
FHLMC Gold 30 Year, 6.00%, 7/01/28 - 11/01/36 |
United States | 613,688 | 695,271 | |||||||
FHLMC Gold 30 Year, 6.50%, 8/01/27 - 3/01/38 |
United States | 352,099 | 391,152 | |||||||
FHLMC Gold 30 Year, 7.00%, 9/01/27 |
United States | 106,002 | 115,525 | |||||||
FHLMC Gold 30 Year, 8.00%, 1/01/31 |
United States | 8,100 | 8,260 | |||||||
FHLMC Gold 30 Year, 8.50%, 7/01/31 |
United States | 309,928 | 370,098 | |||||||
|
|
|||||||||
52,461,795 | ||||||||||
|
|
20 |
Semiannual Report |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Principal Amount* |
Value | ||||||||
Mortgage-Backed Securities (continued) |
||||||||||
o Federal National Mortgage Association (FNMA) Adjustable Rate 0.2% |
||||||||||
FNMA, 2.79% - 2.975%, (6-month USD LIBOR +/- MBS Margin), 6/01/32 - 7/01/34 |
United States | 565,496 | $ | 586,516 | ||||||
|
|
|||||||||
Federal National Mortgage Association (FNMA) Fixed Rate 13.6% |
||||||||||
FNMA 15 Year, 3.00%, 8/01/27 |
United States |
13,046 | 13,420 | |||||||
FNMA 15 Year, 3.50%, 1/01/21 - 1/01/26 |
United States |
43,578 | 45,393 | |||||||
FNMA 15 Year, 5.50%, 7/01/20 |
United States |
126,178 | 129,579 | |||||||
FNMA 15 Year, 6.50%, 7/01/20 |
United States |
197 | 198 | |||||||
FNMA 30 Year, 3.00%, 4/01/47 |
United States |
1,455,973 | 1,461,445 | |||||||
p FNMA 30 Year, 3.00%, 10/01/47 |
United States | 6,450,000 | 6,468,141 | |||||||
FNMA 30 Year, 3.50%, 4/01/47 |
United States |
1,939,244 | 2,000,473 | |||||||
FNMA 30 Year, 3.50%, 1/01/45 - 5/01/47 |
United States |
2,073,262 | 2,138,721 | |||||||
p FNMA 30 Year, 3.50%, 10/01/47 |
United States | 6,825,000 | 7,033,749 | |||||||
FNMA 30 Year, 3.50%, 7/01/56 |
United States |
947,857 | 975,144 | |||||||
FNMA 30 Year, 4.00%, 11/01/44 - 1/01/45 |
United States |
1,158,572 | 1,221,037 | |||||||
FNMA 30 Year, 4.00%, 3/01/47 |
United States |
2,298,704 | 2,421,408 | |||||||
p FNMA 30 Year, 4.00%, 10/01/47 |
United States | 8,375,000 | 8,815,342 | |||||||
FNMA 30 Year, 4.50%, 12/01/44 |
United States |
781,735 | 840,363 | |||||||
FNMA 30 Year, 4.50%, 5/01/24 - 12/01/44 |
United States |
2,198,961 | 2,363,956 | |||||||
p FNMA 30 Year, 4.50%, 10/01/47 |
United States | 675,000 | 724,386 | |||||||
FNMA 30 Year, 5.00%, 5/01/38 - 7/01/39 |
United States |
468,420 | 515,720 | |||||||
FNMA 30 Year, 5.50%, 6/01/37 |
United States |
367,422 | 407,601 | |||||||
FNMA 30 Year, 6.00%, 4/01/33 - 6/01/38 |
United States |
949,692 | 1,077,548 | |||||||
FNMA 30 Year, 6.50%, 8/01/32 |
United States |
128,095 | 145,442 | |||||||
FNMA 30 Year, 7.00%, 9/01/18 |
United States |
5,266 | 5,323 | |||||||
FNMA 30 Year, 8.00%, 10/01/29 |
United States |
7,910 | 7,932 | |||||||
|
|
|||||||||
38,812,321 | ||||||||||
|
|
|||||||||
Government National Mortgage Association (GNMA) Fixed Rate 5.8% |
||||||||||
GNMA I SF 30 Year, 6.50%, 6/15/31 - 12/15/33 |
United States |
410,436 | 454,046 | |||||||
GNMA II SF 30 Year, 3.50%, 3/20/45 - 12/20/45 |
United States |
868,052 | 903,969 | |||||||
GNMA II SF 30 Year, 3.50%, 3/20/47 |
United States |
5,323,873 | 5,542,021 | |||||||
p GNMA II SF 30 Year, 3.50%, 10/01/47 |
United States | 8,915,000 | 9,266,028 | |||||||
GNMA II SF 30 Year, 7.00%, 1/20/24 - 1/20/29 |
United States |
41,759 | 46,944 | |||||||
GNMA II SF 30 Year, 8.00%, 1/20/28 - 10/20/31 |
United States |
106,817 | 128,204 | |||||||
|
|
|||||||||
16,341,212 | ||||||||||
|
|
|||||||||
Total Mortgage-Backed Securities (Cost $108,220,123) |
108,295,362 | |||||||||
|
|
|||||||||
Shares | ||||||||||
Escrows and Litigation Trusts 0.0% |
||||||||||
a,b Midstates Petroleum Co. Inc./Midstates Petroleum Co. LLC, Litigation Trust |
United States | 800,000 | | |||||||
a,b NewPage Corp., Litigation Trust. |
United States | 1,500,000 | | |||||||
a Penn Virginia Corp., Litigation Trust |
United States | 300,000 | 6,000 | |||||||
a,b Vistra Energy Corp., Litigation Trust |
United States | 2,000,000 | 23,200 | |||||||
|
|
|||||||||
Total Escrows and Litigation Trusts (Cost $58,482) |
29,200 | |||||||||
|
|
|||||||||
Total Investments before Short Term Investments (Cost $422,489,490) |
419,802,259 | |||||||||
|
|
franklintempleton.com |
Semiannual Report |
21 |
FRANKLIN LIMITED DURATION INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Country | Shares | Value | ||||||||
Short Term Investments (Cost $14,825,987) 5.2% |
||||||||||
Money Market Funds 5.2% |
||||||||||
q,r Institutional Fiduciary Trust Money Market Portfolio, 0.67% |
United States | 14,825,987 | $ | 14,825,987 | ||||||
|
|
|||||||||
Total Investments (Cost $437,315,477) 152.6% |
434,628,246 | |||||||||
Preferred Shares (31.6)% |
(90,000,000 | ) | ||||||||
Other Assets, less Liabilities (21.0)% |
(59,814,132 | ) | ||||||||
|
|
|||||||||
Net Assets 100.0% |
$ | 284,814,114 | ||||||||
|
|
See Abbreviations on page 33.
Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.
cSee Note 9 regarding restricted securities.
dPerpetual security with no stated maturity date.
eSecurity 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 Trusts Board of Trustees. At September 30, 2017, the aggregate value of these securities was $79,119,165, representing 27.8% of net assets.
fSecurity purchased on a when-issued basis. See Note 1(c).
gSee Note 8 regarding defaulted securities.
hIncome may be received in additional securities and/or cash.
iThe coupon rate shown represents the rate at period end.
jSee Note 1(e) regarding senior floating rate interests.
kPrincipal amount is stated in 100 Mexican Peso Units.
lAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions.
mThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.
nThe bond pays interest and/or principal based upon the issuers ability to pay, which may be less than the stated interest rate or principal paydown.
oAdjustable Rate Mortgage-Backed Security (ARM); the rate shown is the effective rate at period end. ARM rates are not based on a published reference rate and spread, but instead pass-through weighted average interest income inclusive of any caps or floors, if applicable, from the underlying mortgage loans in which the majority of mortgages pay interest based on the index shown at their designated reset dates plus a spread, less the applicable servicing and guaranty fee (MBS margin).
pSecurity purchased on a to-be-announced (TBA) basis. See Note 1(c).
qSee Note 4(c) regarding investments in affiliated management investment companies.
rThe rate shown is the annualized seven-day yield at period end.
22 |
Semiannual Report | |
The accompanying notes are an integral part of these financial statements. |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
Statement of Assets and Liabilities
September 30, 2017 (unaudited)
Assets: |
||||
Investments in securities: |
||||
Cost - Unaffiliated issuers |
$ | 422,489,490 | ||
Cost - Non-controlled affiliates (Note 4c) |
14,825,987 | |||
|
|
|||
Value - Unaffiliated issuers |
$ | 419,802,259 | ||
Value - Non-controlled affiliates (Note 4c) |
14,825,987 | |||
Cash |
530,617 | |||
Receivables: |
||||
Investment securities sold |
38,742 | |||
Interest |
3,258,159 | |||
|
|
|||
Total assets |
438,455,764 | |||
|
|
|||
Liabilities: |
||||
Payables: |
||||
Investment securities purchased |
60,764,382 | |||
Management fees |
245,571 | |||
Trustees fees and expenses |
1,598 | |||
Distributions to common shareholders |
2,400,558 | |||
Distributions to preferred shareholders |
65,208 | |||
Accrued expenses and other liabilities |
164,333 | |||
|
|
|||
Total liabilities |
63,641,650 | |||
|
|
|||
Preferred shares at redemption value [$25,000 liquidation preference per share (3,600 shares outstanding)](Note 3) |
90,000,000 | |||
|
|
|||
Net assets applicable to common shares |
$ | 284,814,114 | ||
|
|
|||
Net assets applicable to common shares consist of: |
||||
Paid-in capital |
$ | 318,326,409 | ||
Distributions in excess of net investment income |
(11,329,930) | |||
Net unrealized appreciation (depreciation) |
(2,687,845) | |||
Accumulated net realized gain (loss) |
(19,494,520) | |||
|
|
|||
Net assets applicable to common shares |
$ | 284,814,114 | ||
|
|
|||
Common shares outstanding |
22,604,126 | |||
|
|
|||
Net asset value per common share |
$12.60 | |||
|
|
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report |
23 |
FRANKLIN LIMITED DURATION INCOME TRUST
FINANCIAL STATEMENTS
Statement of Operations
for the six months ended September 30, 2017 (unaudited)
Investment income: |
||||
Dividends: |
||||
Non-controlled affiliates (Note 4c) |
$ | 43,528 | ||
Interest: |
||||
Unaffiliated issuers |
8,996,501 | |||
|
|
|||
Total investment income |
9,040,029 | |||
|
|
|||
Expenses: |
||||
Management fees (Note 4a) |
1,534,014 | |||
Transfer agent fees |
28,497 | |||
Custodian fees (Note 5) |
3,016 | |||
Reports to shareholders |
22,186 | |||
Professional fees |
42,046 | |||
Trustees fees and expenses |
9,024 | |||
Auction agent fees and expenses |
22,002 | |||
Other |
56,313 | |||
|
|
|||
Total expenses |
1,717,098 | |||
Expense reductions (Note 5) |
(1,631 | ) | ||
Expenses waived/paid by affiliates (Note 4c) |
(29,108 | ) | ||
|
|
|||
Net expenses |
1,686,359 | |||
|
|
|||
Net investment income |
7,353,670 | |||
|
|
|||
Realized and unrealized gains (losses): |
||||
Net realized gain (loss) from: |
||||
Investments: |
||||
Unaffiliated issuers |
2,351,301 | |||
Foreign currency transactions |
5,942 | |||
|
|
|||
Net realized gain (loss) |
2,357,243 | |||
|
|
|||
Net change in unrealized appreciation (depreciation) on: |
||||
Investments: |
||||
Unaffiliated issuers |
(990,022 | ) | ||
Translation of other assets and liabilities denominated in foreign currencies |
(3,467 | ) | ||
|
|
|||
Net change in unrealized appreciation (depreciation) |
(993,489 | ) | ||
|
|
|||
Net realized and unrealized gain (loss) |
1,363,754 | |||
|
|
|||
Net increase (decrease) in net assets resulting from operations |
$ | 8,717,424 | ||
|
|
|||
Distributions to preferred shareholders from net investment income |
(1,228,308 | ) | ||
|
|
|||
Net increase (decrease) in net assets applicable to common shares resulting from operations |
$ | 7,489,116 | ||
|
|
24 |
Semiannual Report | |
The accompanying notes are an integral part of these financial statements. |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Six Months Ended September 30, 2017 (unaudited) |
Year Ended March 31, 2017 |
|||||||
Increase (decrease) in net assets: |
||||||||
Operations: |
||||||||
Net investment income |
$ 7,353,670 | $ 16,513,971 | ||||||
Net realized gain (loss) |
2,357,243 | (8,867,745 | ) | |||||
Net change in unrealized appreciation (depreciation) |
(993,489 | ) | 32,077,052 | |||||
Distributions to preferred shareholders from net investment income |
(1,228,308 | ) | (1,856,851 | ) | ||||
|
|
|||||||
Net increase (decrease) in net assets applicable to common shares resulting from operations |
7,489,116 | 37,866,427 | ||||||
|
|
|||||||
Distributions to common shareholders from: |
||||||||
Net investment income |
(14,550,276 | ) | (15,071,636 | ) | ||||
Tax return of capital |
| (9,335,223 | ) | |||||
|
|
|||||||
Total distributions to common shareholders |
(14,550,276 | ) | (24,406,859 | ) | ||||
|
|
|||||||
Capital share transactions from - repurchase of shares (Note 2) |
| (53,715,818 | ) | |||||
|
|
|||||||
Net increase (decrease) in net assets |
(7,061,160 | ) | (40,256,250 | ) | ||||
Net assets applicable to common shares: |
||||||||
Beginning of period |
291,875,274 | 332,131,524 | ||||||
|
|
|||||||
End of period |
$284,814,114 | $291,875,274 | ||||||
|
|
|||||||
Distributions in excess of net investment income included in net assets: |
||||||||
End of period |
$(11,329,930 | ) | $ (2,905,016 | ) | ||||
|
|
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report |
25 |
FRANKLIN LIMITED DURATION INCOME TRUST
Notes to Financial Statements (unaudited)
26 |
Semiannual Report |
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FRANKLIN LIMITED DURATION INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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27 |
FRANKLIN LIMITED DURATION INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
28 |
Semiannual Report |
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FRANKLIN LIMITED DURATION INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
2. Shares of Beneficial Interest
At September 30, 2017, there were an unlimited number of shares authorized (without par value). During the period ended September 30, 2017 there were no shares issued; all reinvested distributions were satisfied with previously issued shares purchased in the open market.
Under the Board approved open-market share repurchase program which commenced on June 1, 2016, the Fund may purchase, from time to time, up to 10% of the Funds common shares in open-market transactions, at the discretion of management. Since the inception of the program, the Fund has repurchased a total of 242,561 shares. Transactions in the Funds shares were as follows:
Six Months Ended September 30, 2017 |
Year Ended March 31, 2017 |
|||||||||||||||
|
|
|||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares repurchaseda |
| $ | 4,231,524 | $53,715,818 | ||||||||||||
|
|
|||||||||||||||
Weighted average discount of market price to net asset value of shares repurchased |
% | 8.14% |
aOn January 19, 2017, the Fund announced a tender offer to purchase for cash up to 15 percent of its issued and outstanding common shares (3,988,963 shares), each without par value. The tender period commenced on January 30, 2017 and expired at 11:59 p.m. Eastern Standard Time on Friday, March 3, 2017 at which time the tender was oversubscribed. The Fund accepted the maximum allowed by the offer of 3,988,963 shares for cash payment at a price equal to $12.73 per share. This purchase price was 98% of the Funds net asset value (NAV) per share of $12.99 as of the close of regular trading on the New York Stock Exchange on March 6, 2017.
3. Auction Rate Preferred Shares
The Fund has outstanding 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. Preferred Shares are senior to common shares and the Fund will not declare or pay any dividend on the common shares unless the Fund has declared or paid full cumulative dividends on the Preferred Shares through the most recent dividend date. 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, 2017; consequently, the dividend rate paid on the Preferred Shares has moved to the maximum rate as defined in the prospectus. During the period ended September 30, 2017, the dividends on Preferred Shares ranged from 2.45% to 2.71%.
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 Moodys Investor Services Inc., and is required to maintain asset coverage for the Preferred Shares of at least 200%.
franklintempleton.com |
Semiannual Report |
29 |
FRANKLIN LIMITED DURATION INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
3. Auction Rate Preferred Shares (continued)
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, 2017, 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 |
a. Management Fees
The Fund pays an investment management fee to Advisers of 0.70% per year of the average daily managed assets. Managed assets are defined as the Funds gross asset value minus the sum of accrued liabilities, other than the liquidation value of the Preferred Shares and other financial leverage.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Funds average daily net assets, and is not an additional expense of the Fund.
c. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to April 1, 2013, the waiver was accounted for as a reduction to management fees. During the period ended September 30, 2017, the Fund held investments in affiliated management investment companies as follows:
Number of Shares Held at Beginning of Period |
Gross Additions |
Gross Reductions |
Number of Held at End |
Value at End of Period |
Dividend Income |
Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||
Non-Controlled Affiliates |
||||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 0.67% |
21,388,024 | 42,113,883 | (48,675,920) | 14,825,987 | $14,825,987 | $43,528 | $ | $ | ||||||||||||||||||||||||
|
|
5. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds custodian expenses. During the period ended September 30, 2017, the custodian fees were reduced as noted in the Statement of Operations.
30 |
Semiannual Report |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
6. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.
At March 31, 2017, the capital loss carryforwards were as follows:
Capital loss carryforwards subject to expiration: |
||||
2018 |
$ | 8,480,888 | ||
Capital loss carryforwards not subject to expiration: |
||||
Short term |
447,668 | |||
Long term |
12,920,343 | |||
|
|
|||
Total capital loss carryforwards |
$ | 21,848,899 | ||
|
|
At September 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Cost of investments |
$ | 437,674,854 | ||
|
|
|||
Unrealized appreciation |
$ | 9,208,721 | ||
Unrealized depreciation |
(12,255,329) | |||
|
|
|||
Net unrealized appreciation (depreciation) |
$ | (3,046,608) | ||
|
|
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities, foreign currency transactions, paydown losses and bond discounts and premiums.
7. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended September 30, 2017, aggregated $418,822,478 and $429,576,136, respectively.
8. Credit Risk and Defaulted Securities
At September 30, 2017, the Fund had 65.0% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
The Fund held a defaulted security and/or other securities for which the income has been deemed uncollectible. At September 30, 2017, the value of this security represents less than 0.1% of the Funds 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 security has been identified in the accompanying Statement of Investments.
9. Restricted Securities
The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.
franklintempleton.com |
Semiannual Report |
31 |
FRANKLIN LIMITED DURATION INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
9. Restricted Securities (continued)
At September 30, 2017, investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:
Shares | Issuer | Acquisition Date |
Cost | Value | ||||||||||
404 | Nine Point Energy Holdings Inc., cvt. pfd | 3/24/17 | $ | 377,604 | $ | 478,838 | ||||||||
18,477 | Nine Point Energy LLC. | 7/15/14 - 1/5/15 | 830,630 | 221,719 | ||||||||||
|
|
|||||||||||||
Total Restricted Securities (Value is 0.2% of Net Assets) | $ | 1,208,234 | $ | 700,557 | ||||||||||
|
|
10. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds financial instruments and are summarized in the following fair value hierarchy:
| Level 1 quoted prices in active markets for identical financial instruments |
| Level 2 other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of September 30, 2017, in valuing the Funds assets carried at fair value, is as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Investments in Securities: |
||||||||||||||||
Equity Investments:a |
||||||||||||||||
Energy |
$ | 1,439,923 | $ | 896,979 | $ | 700,846 | $ | 3,037,748 | ||||||||
Materials |
21,194 | | | 21,194 | ||||||||||||
Transportation |
| 163,421 | | 163,421 | ||||||||||||
Convertible Bonds |
| 1,225,131 | | 1,225,131 | ||||||||||||
Corporate Bonds |
| 145,366,019 | | 145,366,019 | ||||||||||||
Senior Floating Rate Interests |
| 142,466,979 | | 142,466,979 | ||||||||||||
Foreign Government and Agency Securities |
| 1,759,938 | | 1,759,938 | ||||||||||||
Commercial Mortgage-Backed Securities |
| 17,437,267 | | 17,437,267 | ||||||||||||
Mortgage-Backed Securities |
| 108,295,362 | | 108,295,362 | ||||||||||||
Escrows and Litigation Trusts |
| 6,000 | 23,200 | b | 29,200 | |||||||||||
Short Term Investments |
14,825,987 | | | 14,825,987 | ||||||||||||
|
|
|||||||||||||||
Total Investments in Securities |
$ | 16,287,104 | $ | 417,617,096 | $ | 724,046 | $ | 434,628,246 | ||||||||
|
|
aIncludes common and convertible preferred stocks as well as other equity investments.
bIncludes securities determined to have no value at September 30, 2017.
32 |
Semiannual Report |
franklintempleton.com |
FRANKLIN LIMITED DURATION INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the period.
11. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, ReceivablesNonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount, which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Currency | Selected Portfolio | |||||
MXN Mexican Peso | ARM | Adjustable Rate Mortgage | ||||
FHLMC | Federal Home Loan Mortgage Corp. | |||||
FNMA | Federal National Mortgage Association | |||||
FRN | Floating Rate Note | |||||
GNMA | Government National Mortgage Association | |||||
LIBOR | London InterBank Offered Rate | |||||
PIK | Payment-In-Kind | |||||
SF | Single Family |
franklintempleton.com |
Semiannual Report |
33 |
FRANKLIN LIMITED DURATION INCOME TRUST
Annual Meeting of Shareholders
The Annual Meeting of Shareholders (the Meeting) of the Fund was held on October 5, 2017, and then adjourned to October 26, 2017, in order to allow shareholders additional opportunity to vote. At the Meeting, shareholders elected Terrence J. Checki, Mary C. Choksi, Rupert H. Johnson, Jr. and Larry D. Thompson as Trustees of the Fund to hold office for a three year term, set to expire at the 2020 Annual Meeting of Shareholders. These terms continue, however, until their successors are duly elected and qualified or until a Trustees resignation, retirement, death or removal, whichever is earlier.
The results of the voting are as follows:
Common and Preferred Shares | ||||||||
Trustee Nominees | For | Withheld | ||||||
Terrence J. Checki |
19,495,730 | 603,369 | ||||||
Mary C. Choksi |
19,788,125 | 310,974 | ||||||
Larry D. Thompson |
19,667,441 | 431,658 | ||||||
Preferred Shares | ||||||||
Trustee Nominees | For | Withheld | ||||||
Rupert H. Johnson, Jr. |
1,294 | 71 |
Note: Harris J. Ashton, Gregory E. Johnson, Edith E. Holiday, J. Michael Luttig, and John B. Wilson are Trustees of the Fund who are currently serving and whose terms of office continued after the meeting.
34 |
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FRANKLIN LIMITED DURATION INCOME TRUST
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35 |
FRANKLIN LIMITED DURATION INCOME TRUST
DIVIDEND REINVESTMENT PLAN
36 |
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FRANKLIN LIMITED DURATION INCOME TRUST
Proxy Voting Policies and Procedures
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Franklin Limited Duration Income Trust
|
||||
Investment Manager | ||||
Franklin Advisers, Inc. | ||||
(800) DIAL BEN® / 342-5236
|
||||
Transfer Agent | ||||
American Stock Transfer & Trust Co., LLC | ||||
6201 15th Avenue | ||||
Brooklyn, NY 11219 | ||||
www.astfinancial.com |
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
© 2017 Franklin Templeton Investments. All rights reserved. |
FTF S 11/17 |
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: Mary C. Choksi, Michael Luttig, Larry D. Thompson 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 Funds investment manager Franklin Advisers, Inc. in accordance with the Proxy Voting Policies and Procedures (Policies) adopted by the investment manager.
The investment manager has delegated its administrative duties with respect to the voting of proxies for securities to the Proxy Group within Franklin Templeton Companies, LLC (Proxy Group), an affiliate and wholly owned subsidiary of Franklin Resources, Inc. All proxies received by the Proxy Group will be voted based upon the investment managers instructions and/or policies. The investment manager votes proxies solely in the best interests of the Fund and its shareholders.
To assist it in analyzing proxies of equity securities, the investment manager subscribes to Institutional Shareholder Services, Inc. (ISS), an unaffiliated third-party corporate governance research service that provides in-depth analyses of shareholder meeting agendas, vote recommendations, vote execution services, ballot reconciliation services, recordkeeping and vote disclosure services. In addition, the investment manager subscribes to Glass, Lewis & Co.,
LLC (Glass Lewis), an unaffiliated third-party analytical research firm, to receive analyses and vote recommendations on the shareholder meetings of publicly held U.S. companies, as well as a limited subscription to its international research. Also, the investment manager has a supplemental subscription to Egan-Jones Proxy Services (Egan-Jones), an unaffiliated third party proxy advisory firm, to receive analyses and vote recommendations. Although analyses provided by ISS, Glass Lewis, Egan-Jones, and/or another independent third party proxy service provider (each a Proxy Service) are thoroughly reviewed and considered in making a final voting decision, the investment manager does not consider recommendations from a Proxy Service or any third party to be determinative of the investment managers ultimate decision. Rather, the investment manager exercises its independent judgment in making voting decisions. For most proxy proposals, the investment managers evaluation should result in the same position being taken for all Funds. In some cases, however, the evaluation may result in a Fund voting differently, depending upon the nature and objective of the Fund, the composition of its portfolio and other factors. As a matter of policy, the officers, directors/trustees and employees of the investment manager and the Proxy Group will not be influenced by outside sources whose interests conflict with the interests of the Fund and its shareholders. Efforts are made to resolve all conflicts in the best interests of the investment managers clients. Material conflicts of interest are identified by the Proxy Group based upon analyses of client, distributor, broker-dealer and vendor lists, information periodically gathered from directors and officers, and information derived from other sources, including public filings. In situations where a material conflict of interest is identified, the Proxy Group may vote consistent with the voting recommendation of a Proxy Service; or send the proxy directly to the Funds board or a committee of the board with the investment managers recommendation regarding the vote for approval.
Where a material conflict of interest has been identified, but the items on which the investment managers vote recommendations differ from a Proxy Service and relate specifically to (1) shareholder proposals regarding social or environmental issues, (2) Other Business without describing the matters that might be considered, or (3) items the investment manager wishes to vote in opposition to the recommendations of an issuers management, the Proxy Group may defer to the vote recommendations of the investment manager rather than sending the proxy directly to the Funds board or a board committee for approval.
To avoid certain potential conflicts of interest, the investment manager will employ echo voting, 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, the rules thereunder, or pursuant to a SEC exemptive order thereunder; (2) when the Fund invests uninvested cash in affiliated money market funds pursuant to the rules under the 1940 Act or any exemptive orders thereunder (cash sweep arrangement); or (3) when required pursuant to the Funds governing documents or applicable law. Echo voting means that the investment manager will vote the shares in the same proportion as the vote of all of the other holders of the underlying funds shares.
The recommendation of management on any issue is a factor that the investment manager considers in determining how proxies should be voted. However, the investment manager does not consider recommendations from management to be determinative of the investment managers ultimate decision. As a matter of practice, the votes with respect to most issues are cast in accordance with the position of the companys management. Each issue, however, is considered on its
own merits, and the investment manager will not support the position of the companys management in any situation where it deems that the ratification of managements position would adversely affect the investment merits of owning that companys shares.
Engagement with issuers. The investment manager believes that engagement with issuers is important to good corporate governance and to assist in making proxy voting decisions. The investment manager may engage with issuers to discuss specific ballot items to be voted on in advance of an annual or special meeting to obtain further information or clarification on the proposals. The investment manager may also engage with management on a range of environmental, social or corporate governance issues throughout the year.
Investment managers proxy voting policies and principles The investment manager has adopted general proxy voting guidelines, which are summarized below. These guidelines are not an exhaustive list of all the issues that may arise and the investment manager cannot anticipate all future situations. In all cases, each proxy and proposal (including both management and shareholder proposals) will be considered based on the relevant facts and circumstances on a case-by-case basis.
Board of directors. The investment manager supports an independent, diverse board of directors, and prefers that key committees such as audit, nominating, and compensation committees be comprised of independent directors. The investment manager supports boards with strong risk management oversight. The investment manager will generally vote against management efforts to classify a board and will generally support proposals to declassify the board of directors. The investment manager will consider withholding votes from directors who have attended less than 75% of meetings without a valid reason. While generally in favor of separating Chairman and CEO positions, the investment manager will review this issue as well as proposals to restore or provide for cumulative voting on a case-by-case basis, taking into consideration factors such as the companys corporate governance guidelines or provisions and performance. The investment manager generally will support non-binding shareholder proposals to require a majority vote standard for the election of directors; however, if these proposals are binding, the investment manager will give careful review on a case-by-case basis of the potential ramifications of such implementation.
In the event of a contested election, the investment manager will review a number of factors in making a decision including managements track record, the companys financial performance, qualifications of candidates on both slates, and the strategic plan of the dissidents and/or shareholder nominees.
Ratification of auditors of portfolio companies. The investment manager will closely scrutinize the independence, role and performance of auditors. On a case-by-case basis, the investment manager will examine proposals relating to non-audit relationships and non-audit fees. The investment manager will also consider, on a case-by-case basis, proposals to rotate auditors, and will vote against the ratification of auditors when there is clear and compelling evidence of a lack of independence, accounting irregularities or negligence. The investment manager may also consider whether the ratification of auditors has been approved by an appropriate audit committee that meets applicable composition and independence requirements.
Management and director compensation. A companys equity-based compensation plan should be in alignment with the shareholders long-term interests. The
investment manager believes that executive compensation should be directly linked to the performance of the company. The investment manager evaluates plans on a case-by-case basis by considering several factors to determine whether the plan is fair and reasonable, including the ISS quantitative model utilized to assess such plans and/or the Glass Lewis evaluation of the plans. The investment manager will generally oppose plans that have the potential to be excessively dilutive, and will almost always oppose plans that are structured to allow the repricing of underwater options, or plans that have an automatic share replenishment evergreen feature. The investment manager will generally support employee stock option plans in which the purchase price is at least 85% of fair market value, and when potential dilution is 10% or less.
Severance compensation arrangements will be reviewed on a case-by-case basis, although the investment manager will generally oppose golden parachutes that are considered to be excessive. The investment manager will normally support proposals that require a percentage of directors compensation to be in the form of common stock, as it aligns their interests with those of shareholders.
The investment manager will review non-binding say-on-pay proposals on a case-by-case basis, and will generally vote in favor of such proposals unless compensation is misaligned with performance and/or shareholders interests, the company has not provided reasonably clear disclosure regarding its compensation practices, or there are concerns with the companys remuneration practices.
Anti-takeover mechanisms and related issues. The investment manager generally opposes anti-takeover measures since they tend to reduce shareholder rights. However, as with all proxy issues, the investment manager conducts an independent review of each anti-takeover proposal. On occasion, the investment manager may vote with management when the research analyst has concluded that the proposal is not onerous and would not harm the Fund or its shareholders interests. The investment manager generally supports proposals that require shareholder rights plans (poison pills) to be subject to a shareholder vote and will closely evaluate such plans on a case-by-case basis to determine whether or not they warrant support. In addition, the investment manager will generally vote against any proposal to issue stock that has unequal or subordinate voting rights. The investment manager generally opposes any supermajority voting requirements as well as the payment of greenmail. The investment manager generally supports fair price provisions and confidential voting. The investment manager will review a companys proposal to reincorporate to a different state or country on a case-by-case basis taking into consideration financial benefits such as tax treatment as well as comparing corporate governance provisions and general business laws that may result from the change in domicile.
Changes to capital structure. The investment manager realizes that a companys financing decisions have a significant impact on its shareholders, particularly when they involve the issuance of additional shares of common or preferred stock or the assumption of additional debt. The investment manager will review, on a case-by-case basis, proposals by companies to increase authorized shares and the purpose for the increase. The investment manager will generally not vote in favor of dual-class capital structures to increase the number of authorized shares where that class of stock would have superior voting rights. The investment manager will generally vote in favor of the issuance of preferred stock in cases where the company specifies the voting, dividend, conversion and other rights of such stock and the terms of the preferred stock issuance are deemed reasonable. The investment manager will review proposals seeking preemptive rights on a case-by-case basis.
Mergers and corporate restructuring. Mergers and acquisitions will be subject to careful review by the research analyst to determine whether they would be beneficial to shareholders. The investment manager will analyze various economic and strategic factors in making the final decision on a merger or acquisition. Corporate restructuring proposals are also subject to a thorough examination on a case-by-case basis.
Environmental and social issues. The investment manager considers environmental and social issues alongside traditional financial measures to provide a more comprehensive view of the value, risk and return potential of an investment. Companies may face significant financial, legal and reputational risks resulting from poor environmental and social practices, or negligent oversight of environmental or social issues. Franklin Templetons Responsible Investment Principles and Policies describes the investment managers approach to consideration of environmental, social and governance issues within the investment managers processes and ownership practices.
In the investment managers experience, those companies that are managed well are often effective in dealing with the relevant environmental and social issues that pertain to their business. As such, the investment manager will generally give management discretion with regard to environmental and social issues. However, in cases where management and the board have not demonstrated adequate efforts to mitigate material environmental or social risks, have engaged in inappropriate or illegal conduct, or have failed to adequately address current or emergent risks that threaten shareholder value, the investment manager may choose to support well-crafted shareholder proposals that serve to promote or protect shareholder value. This may include seeking appropriate disclosure regarding material environmental and social issues. The investment manager will review shareholder proposals on a case-by-case basis and may support those that serve to enhance value or mitigate risk, are drafted appropriately, and do not disrupt the course of business or require a disproportionate or inappropriate use of company resources.
The investment manager will consider supporting a shareholder proposal seeking disclosure and greater board oversight of lobbying and corporate political contributions if the investment manager believes that there is evidence of inadequate oversight by the companys board, if the companys current disclosure is significantly deficient, or if the disclosure is notably lacking in comparison to the companys peers.
Governance matters. The investment manager generally supports the right of shareholders to call special meetings and act by written consent. However, the investment manager will review such shareholder proposals on a case-by-case basis in an effort to ensure that such proposals do not disrupt the course of business or require a disproportionate or inappropriate use of company resources.
Proxy access. In cases where the investment manager is satisfied with company performance and the responsiveness of management, it will generally vote against shareholder proxy access proposals not supported by management. In other instances, the investment manager will consider such proposals on a case-by-case basis, taking into account factors such as the size of the company, ownership thresholds and holding periods, nomination limits (e.g., number of candidates that can be nominated), the intentions of the shareholder proponent, and shareholder base.
Global corporate governance. Many of the tenets discussed above are applied to the investment managers proxy voting decisions for international investments. However, the investment manager must be flexible in these worldwide markets. Principles of good corporate governance may vary by country, given the constraints of a countrys laws and acceptable practices in the markets. As a result, it is on occasion difficult to apply a consistent set of governance practices to all issuers. As experienced money managers, the investment managers analysts are skilled in understanding the complexities of the regions in which they specialize and are trained to analyze proxy issues germane to their regions.
The investment manager will generally attempt to process every proxy it receives for all domestic and foreign securities. However, there may be situations in which the investment manager may be unable to successfully vote a proxy, or may choose not to vote a proxy, such as where: (i) a proxy ballot was not received from the custodian bank; (ii) a meeting notice was received too late; (iii) there are fees imposed upon the exercise of a vote and it is determined that such fees outweigh the benefit of voting; (iv) there are legal encumbrances to voting, including blocking restrictions in certain markets that preclude the ability to dispose of a security if the investment manager votes a proxy or where the investment manager is prohibited from voting by applicable law, economic or other sanctions, or other regulatory or market requirements, including but not limited to, effective Powers of Attorney; (v) additional documentation or the disclosure of beneficial owner details is required; (vi) the investment manager held shares on the record date but has sold them prior to the meeting date; (vii) a proxy voting service is not offered by the custodian in the market; (viii) due to either system error or human error, the investment managers intended vote is not correctly submitted; (ix) the investment manager believes it is not in the best interest of the Fund or its shareholders to vote the proxy for any other reason not enumerated herein; or (x) a security is subject to a securities lending or similar program that has transferred legal title to the security to another person.
In some non-U.S. jurisdictions, even if the investment manager uses reasonable efforts to vote a proxy on behalf of the Fund, such vote or proxy may be rejected because of (a) operational or procedural issues experienced by one or more third parties involved in voting proxies in such jurisdictions; (b) changes in the process or agenda for the meeting by the issuer for which the investment manager does not have sufficient notice; or (c) the exercise by the issuer of its discretion to reject the vote of the investment manager. In addition, despite the best efforts of the Proxy Group and its agents, there may be situations where the investment managers votes are not received, or properly tabulated, by an issuer or the issuers agent.
The investment manager or its affiliates may, on behalf of one or more of the proprietary registered investment companies advised by the investment manager or its affiliates, determine to use its best efforts to recall any security on loan where the investment manager or its affiliates (a) learn of a vote on a material event that may affect a security on loan and (b) determine that it is in the best interests of such proprietary registered investment companies to recall the security for voting purposes.
Procedures for meetings involving fixed income securities. From time to time, certain custodians may process events for fixed income securities through their proxy voting channels rather than corporate action channels for administrative convenience. In such cases, the Proxy Group will receive ballots for such events on the ISS voting platform. The Proxy Group will solicit voting
instructions from the investment manager for each Fund involved. If the Proxy Group does not receive voting instructions from the investment manager, the Proxy Group will take no action on the event. The investment manager may be unable to vote a proxy for a fixed income security, or may choose not to vote a proxy, for the reasons described under the section entitled Proxy Procedures.
The Proxy Group will monitor such meetings involving fixed income securities for conflicts of interest in accordance with these procedures for fixed income securities. If a fixed income issuer is flagged as a potential conflict of interest, the investment manager may nonetheless vote as it deems in the best interests of the Fund. The investment manager will report such decisions on an annual basis to the Fund board as may be required.
Shareholders may view the complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301-1923, Attention: Proxy Group. Copies of the Funds proxy voting records are available online at franklintempleton.com and posted on the SEC website at www.sec.gov. The proxy voting records are updated each year by August 31 to reflect the most recent 12-month period ended June 30.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. N/A |
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A |
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrants Board of Trustees that would require disclosure herein.
Item 11. | Controls and Procedures. |
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrants 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 Registrants management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrants management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrants management, including the Registrants principal executive officer and the Registrants principal
financial officer, of the effectiveness of the design and operation of the Registrants disclosure controls and procedures. Based on such evaluation, the Registrants principal executive officer and principal financial officer concluded that the Registrants disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There have been no changes in the Registrants internal controls or in other factors that could materially affect the internal controls over financial reporting 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 Matthew T. Hinkle , Chief Executive OfficerFinance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive OfficerFinance 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 Limited Duration Income Trust | ||
By | /s/ Matthew T. Hinkle | |
Matthew T. Hinkle Chief Executive Officer - Finance and Administration Date November 27, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By | /s/ Matthew T. Hinkle | |
Matthew T. Hinkle Chief Executive Officer - Finance and Administration Date November 27, 2017 |
By | /s/ Gaston Gardey | |
Gaston Gardey Chief Financial Officer and Chief Accounting Officer Date November 27, 2017 |