FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY Investment Company Act file number 811-21357 ------------ FRANKLIN TEMPLETON 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) Registrant's telephone number, including area code: (650) 312-2000 ---------------- Date of fiscal year end: 03/31 ----------- Date of reporting period: 6/30/09 ---------- ITEM 1. SCHEDULE OF INVESTMENTS. Franklin Templeton Limited Duration Income Trust QUARTERLY STATEMENT OF INVESTMENTS JUNE 30, 2009 CONTENTS Statement of Investments .................................................. 3 Notes to Statement of Investments.......................................... 15 (FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) FRANKLIN - Templeton - Mutual Series Quarterly Statement of Investments | 1 This page intentionally left blank. Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) COUNTRY SHARES VALUE -------------- ------------------- ------------ PREFERRED STOCKS (COST $237,850) 0.1% DIVERSIFIED FINANCIALS 0.1% (a) Preferred Blocker Inc., 9.00%, pfd., 144A ............................ United States 670 $ 288,184 ------------ PRINCIPAL AMOUNT(b) ------------------- CORPORATE BONDS 58.6% AUTOMOBILES & COMPONENTS 1.2% Ford Motor Credit Co. LLC, senior note, 9.75%, 9/15/10 .................................................... United States 2,000,000 1,916,310 9.875%, 8/10/11 ................................................... United States 2,000,000 1,851,204 ------------ 3,767,514 ------------ CAPITAL GOODS 1.9% (a) Allison Transmission Inc., senior note, 144A, 11.00%, 11/01/15 ....... United States 1,000,000 795,000 Case New Holland Inc., senior note, 7.125%, 3/01/14 .................. United States 2,000,000 1,835,000 RBS Global & Rexnord Corp., senior note, 9.50%, 8/01/14 .............. United States 2,000,000 1,720,000 RSC Equipment Rental Inc., senior note, 9.50%, 12/01/14 .............. United States 2,000,000 1,615,000 ------------ 5,965,000 ------------ COMMERCIAL & PROFESSIONAL SERVICES 1.3% (c) ARAMARK Corp., senior note, FRN, 4.528%, 2/01/15 ..................... United States 2,500,000 2,043,750 JohnsonDiversey Holdings Inc., senior disc. note, 10.67%, 5/15/13 .... United States 2,500,000 2,112,500 ------------ 4,156,250 ------------ CONSUMER DURABLES & APPAREL 1.7% Jarden Corp., senior sub. note, 7.50%, 5/01/17 ....................... United States 2,500,000 2,200,000 Jostens IH Corp., senior sub. note, 7.625%, 10/01/12 ................. United States 2,000,000 2,005,000 KB Home, senior note, 6.375%, 8/15/11 ................................ United States 1,000,000 970,000 ------------ 5,175,000 ------------ CONSUMER SERVICES 4.3% (a) Harrah's Operating Escrow, senior secured note, 144A, 11.25%, 6/01/17 ........................................................... United States 2,500,000 2,375,000 Host Hotels & Resorts LP, senior note, K, 7.125%, 11/01/13 ........... United States 2,400,000 2,268,000 MGM MIRAGE, senior note, 6.75%, 4/01/13 .............................. United States 3,000,000 2,010,000 Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 ....... United States 2,000,000 2,020,000 Royal Caribbean Cruises Ltd., senior note, 8.00%, 5/15/10 ............ United States 2,500,000 2,512,500 Starwood Hotels & Resorts Worldwide Inc., senior note, 6.75%, 5/15/18 ........................................................... United States 2,500,000 2,147,155 ------------ 13,332,655 ------------ DIVERSIFIED FINANCIALS 4.3% American Express Credit Corp., senior note, C, 7.30%, 8/20/13 ........ United States 2,000,000 2,085,828 (c) General Electric Capital Corp., FRN, 1.163%, 4/28/11 ................. United States 2,000,000 1,913,096 (a) GMAC LLC, senior note, 144A, 7.25%, 3/02/11 . .................................................. United States 1,266,000 1,171,050 6.875%, 8/28/12 . ................................................. United States 1,899,000 1,604,655 The Goldman Sachs Group Inc., senior note, 6.00%, 5/01/14 ............ United States 700,000 731,629 JPMorgan Chase & Co., sub. note, 5.75%, 1/02/13 ...................... United States 2,000,000 2,064,824 Quarterly Statement of Investments | 3 Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ CORPORATE BONDS (CONTINUED) DIVERSIFIED FINANCIALS (CONTINUED) (d) Lehman Brothers Holdings Inc., senior note, 6.20%, 9/26/14 ........... United States 3,000,000 $ 457,500 Merrill Lynch & Co. Inc., 5.45%, 2/05/13 ............................. United States 1,500,000 1,461,581 Morgan Stanley, senior note, 6.00%, 5/13/14 .......................... United States 2,000,000 2,027,894 ------------ 13,518,057 ------------ ENERGY 8.1% Berry Petroleum Co., senior note, 10.25%, 6/01/14 .................... United States 500,000 507,500 (e) Bill Barrett Corp., senior note, 9.875%, 7/17/16 ..................... United States 400,000 380,688 Chesapeake Energy Corp., senior note, 7.50%, 6/15/14 ................. United States 4,000,000 3,810,000 Compagnie Generale de Geophysique-Veritas, senior note, 7.50%, 5/15/15 ........................................................... France 2,500,000 2,306,250 El Paso Corp., senior note, 12.00%, 12/12/13 ......................... United States 2,000,000 2,210,000 Mariner Energy Inc., senior note, 7.50%, 4/15/13 ..................... United States 2,000,000 1,830,000 (a) Markwest Energy Partners LP, senior note, 144A, 6.875%, 11/01/14 ..... United States 700,000 581,000 Peabody Energy Corp., senior note, B, 6.875%, 3/15/13 ................ United States 2,000,000 1,990,000 (a) Petrohawk Energy Corp., senior note, 144A, 10.50%, 8/01/14 ........... United States 2,000,000 2,055,000 (a) Petroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14 ............ Switzerland 2,000,000 1,740,000 Plains Exploration & Production Co., senior note, 10.00%, 3/01/16 .... United States 2,000,000 2,065,000 (a) SandRidge Energy Inc., senior note, 144A, 8.00%, 6/01/18 ............. United States 2,500,000 2,150,000 Tesoro Corp., senior note, 6.625%, 11/01/15 .......................... United States 2,000,000 1,805,000 The Williams Co. Inc., 8.125%, 3/15/12 ............................... United States 2,000,000 2,074,340 ------------ 25,504,778 ------------ FOOD & STAPLES RETAILING 1.0% (a) Rite Aid Corp., senior secured note, 144A, 9.75%, 6/12/16 ............ United States 1,300,000 1,306,500 SUPERVALU Inc., senior note, 8.00%, 5/01/16 .......................... United States 2,000,000 1,950,000 ------------ 3,256,500 ------------ FOOD, BEVERAGE & TOBACCO 3.7% Altria Group Inc., 7.75%, 2/06/14 .................................... United States 2,000,000 2,207,626 (a) Anheuser-Busch InBev NV, senior note, 144A, 7.20%, 1/15/14 ........... United States 2,000,000 2,153,154 (a) BAT International Finance PLC, 144A, 8.125%, 11/15/13 ................ United Kingdom 2,000,000 2,174,596 Dean Foods Inc., senior note, 7.00%, 6/01/16 ......................... United States 500,000 458,750 (a) Dole Food Co. Inc, senior note, 144A, 13.875%, 3/15/14 ............... United States 1,500,000 1,657,500 (a) JBS USA LLC, senior note, 144A, 11.625%, 5/01/14 ..................... United States 2,000,000 1,900,000 (a) Tyson Foods Inc., senior note, 144A, 10.50%, 3/01/14 ................. United States 1,000,000 1,090,000 ------------ 11,641,626 ------------ HEALTH CARE EQUIPMENT & SERVICES 5.6% Coventry Health Care Inc., senior note, 5.875%, 1/15/12 .............. United States 2,000,000 1,914,344 DaVita Inc., senior note, 6.625%, 3/15/13 ...................................... United States 900,000 852,750 senior sub. note, 7.25%, 3/15/15 .................................. United States 1,000,000 945,000 FMC Finance III SA, senior note, 6.875%, 7/15/17 ..................... Germany 2,000,000 1,870,000 (a) Fresenius US Finance II, senior note, 144A, 9.00%, 7/15/15 ........... Germany 1,000,000 1,047,500 HCA Inc., senior secured note, 9.125%, 11/15/14 ...................... United States 3,000,000 2,977,500 4 | Quarterly Statement of Investments Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ CORPORATE BONDS (CONTINUED) HEALTH CARE EQUIPMENT & SERVICES (CONTINUED) (a) Tenet Healthcare Corp., senior note, 144A, 9.00%, 05/01/15 ................................................... United States 1,250,000 $ 1,265,625 10.00%, 5/01/18 ................................................... United States 1,250,000 1,318,750 (f) United Surgical Partners International Inc., senior sub. note, PIK, 9.25%, 5/01/17 .................................................... United States 2,000,000 1,640,000 (c, f) US Oncology Holdings Inc., senior note, PIK, FRN, 6.904%, 3/15/12 .... United States 2,237,000 1,895,858 Vanguard Health Holding Co. II LLC, senior sub. note, 9.00%, 10/01/14 .......................................................... United States 2,000,000 1,925,000 ------------ 17,652,327 ------------ INSURANCE 0.6% (a) Metropolitan Life Global Funding I, senior secured note, 144A, 5.125%, 4/10/13 ........................................................... United States 1,700,000 1,722,075 ------------ MATERIALS 5.9% (a) Anglo American Capital PLC, senior note, 144A, 9.375%, 4/08/14 ....... United Kingdom 1,500,000 1,630,942 ArcelorMittal, senior note, 9.00%, 2/15/15 ........................... Luxembourg 2,000,000 2,110,956 (a) Clearwater Paper Corp., senior note, 144A, 10.625%, 6/15/16 .......... United States 1,800,000 1,849,500 Crown Americas Inc., senior note, 7.625%, 11/15/13 ................... United States 2,000,000 1,960,000 (c) Freeport-McMoRan Copper & Gold Inc., senior note, FRN, 4.995%, 4/01/15 ........................................................... United States 1,000,000 937,300 Huntsman International LLC, senior sub. note, 7.875%, 11/15/14 ....... United States 2,000,000 1,595,000 (a) Ineos Group Holdings PLC, senior secured note, 144A, 8.50%, 2/15/16... United Kingdom 1,700,000 578,000 (a) MacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17 ............... United States 2,000,000 1,470,000 Nalco Co., senior sub. note, 8.875%, 11/15/13 ........................ United States 2,000,000 2,050,000 (a) Owens-Brockway Glass Container Inc., senior note, 144A, 7.375%, 5/15/16 ........................................................... United States 700,000 682,500 Solo Cup Co., (a, e) senior secured note, 144A, 10.50%, 11/01/13 ....................... United States 500,000 506,625 senior sub. note, 8.50%, 2/15/14 .................................. United States 700,000 577,500 (a) Teck Resources Ltd., senior secured note, 144A, 9.75%, 5/15/14 ....... Canada 2,300,000 2,382,791 ------------ 18,331,114 ------------ MEDIA 6.4% (d) CanWest Media Inc., senior sub. note, 8.00%, 9/15/12 ................. Canada 2,000,000 600,000 (d, g) CCH II LLC, senior note, 10.25%, 9/15/10 ............................. United States 4,000,000 4,240,000 (a) CSC Holdings Inc., senior note, 144A, 8.50%, 4/15/14 ................. United States 1,000,000 996,250 (d, g) Dex Media West Finance, senior sub. note, 9.875%, 8/15/13 ............ United States 4,000,000 620,000 DIRECTV Holdings LLC, senior note, 8.375%, 3/15/13 ................... United States 2,500,000 2,518,750 EchoStar DBS Corp., senior note, 6.375%, 10/01/11 .................... United States 2,000,000 1,945,000 Lamar Media Corp., senior sub. note, 7.25%, 1/01/13 .................................................... United States 1,000,000 956,250 C, 6.625%, 8/15/15 ................................................ United States 2,000,000 1,700,000 LIN Television Corp., senior sub. note, 6.50%, 5/15/13 ............... United States 1,500,000 1,087,500 Quebecor Media Inc., senior note, 7.75%, 3/15/16 ..................... Canada 2,500,000 2,278,125 Radio One Inc., senior sub. note, B, 8.875%, 7/01/11 ................. United States 2,000,000 835,000 (a) UPC Holding BV, senior note, 144A, 9.875%, 4/15/18 ................... Netherlands 400,000 387,680 (a) WMG Acquisition Corp., senior secured note, 144A, 9.50%, 6/15/16 ..... United States 2,000,000 2,000,000 ------------ 20,164,555 ------------ Quarterly Statement of Investments | 5 Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ CORPORATE BONDS (CONTINUED) REAL ESTATE 0.8% Forest City Enterprises Inc., senior note, 7.625%, 6/01/15 ........... United States 800,000 $ 508,000 Simon Property Group LP, senior note, 6.75%, 5/15/14 ................. United States 2,000,000 2,012,488 ------------ 2,520,488 ------------ RETAILING 0.5% Michaels Stores Inc., senior note, 10.00%, 11/01/14 .................. United States 2,000,000 1,690,000 ------------ SOFTWARE & SERVICES 0.9% SunGard Data Systems Inc., senior note, 9.125%, 8/15/13 .............. United States 3,000,000 2,850,000 ------------ TECHNOLOGY HARDWARE & EQUIPMENT 1.0% (d) Nortel Networks Ltd., senior note, 10.75%, 7/15/16 ................... Canada 2,000,000 700,000 Sanmina-SCI Corp., (a, c) senior note, 144A, FRN, 3.379%, 6/15/14 ........................... United States 1,000,000 825,000 senior sub. note, 6.75%, 3/01/13 .................................. United States 1,000,000 780,000 Xerox Corp., senior note, 8.25%, 5/15/14 ............................. United States 900,000 937,105 ------------ 3,242,105 ------------ TELECOMMUNICATION SERVICES 4.9% (a) CC Holdings GS V LLC, senior secured note, 144A, 7.75%, 5/01/17 ...... United States 400,000 392,000 Crown Castle International Corp., senior note, 9.00%, 1/15/15 ........ United States 1,500,000 1,533,750 (a) Digicel Group Ltd., senior note, 144A, 8.875%, 1/15/15 ............... Jamaica 2,000,000 1,670,000 Intelsat Subsidiary Holding Co. Ltd., senior note, 8.50%, 1/15/13 .................................................... Bermuda 2,500,000 2,412,500 8.875%, 1/15/15 ................................................... Bermuda 500,000 485,000 MetroPCS Wireless Inc., senior note, 9.25%, 11/01/14 ................. United States 2,000,000 1,997,500 Millicom International Cellular SA, senior note, 10.00%, 12/01/13 .... Luxembourg 2,000,000 2,037,500 Qwest Communications International Inc., senior note, B, 7.50%, 2/15/14 ........................................................... United States 2,000,000 1,835,000 (a) Qwest Corp., senior note, 144A, 8.375%, 5/01/16 ...................... United States 400,000 388,000 (a) Wind Acquisition Finance SA, senior note, 144A, 10.75%, 12/01/15 ..... Italy 2,500,000 2,512,500 ------------ 15,263,750 ------------ UTILITIES 4.5% Ameren Corp., senior note, 8.875%, 5/15/14 ........................... United States 2,000,000 2,066,944 Duke Energy Corp., senior note, 6.30%, 2/01/14 ....................... United States 1,500,000 1,621,587 Dynegy Holdings Inc., senior note, 7.50%, 6/01/15 .................... United States 2,000,000 1,677,500 Mirant North America LLC, senior note, 7.375%, 12/31/13 .............. United States 2,000,000 1,930,000 NRG Energy Inc., senior note, 7.25%, 2/01/14 ......................... United States 3,000,000 2,917,500 PG&E Corp., senior note, 5.75%, 4/01/14 .............................. United States 2,000,000 2,133,954 Texas Competitive Electric Holdings Co. LLC, senior note, A, 10.25%, 11/01/15 .......................................................... United States 3,000,000 1,882,500 ------------ 14,229,985 ------------ TOTAL CORPORATE BONDS (COST $197,565,792) ............................ 183,983,779 ------------ MORTGAGE-BACKED SECURITIES 29.4% (c) FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) ADJUSTABLE RATE 0.3% FHLMC, 4.202%, 5/01/34 ............................................... United States 1,014,615 1,049,895 ------------ 6 | Quarterly Statement of Investments Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ MORTGAGE-BACKED SECURITIES (CONTINUED) FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) FIXED RATE 13.9% FHLMC Gold 15 Year, 4.50%, 6/01/23 ................................... United States 2,247,701 $ 2,296,298 FHLMC Gold 15 Year, 5.00%, 5/01/23 - 4/01/24 ......................... United States 3,322,697 3,440,673 FHLMC Gold 15 Year, 5.50%, 7/01/19 ................................... United States 193,555 203,674 FHLMC Gold 15 Year, 6.00%, 7/01/23 ................................... United States 942,090 997,621 (e) FHLMC Gold 30 Year, 5.00%, 7/01/39 ................................... United States 5,025,000 5,110,581 FHLMC Gold 30 Year, 5.50%, 1/01/38 - 6/01/38 ......................... United States 1,773,753 1,834,679 (e) FHLMC Gold 30 Year, 5.50%, 7/01/39 ................................... United States 5,900,000 6,090,830 FHLMC Gold 30 Year, 6.00%, 7/01/28 - 11/01/33 ........................ United States 3,022,784 3,181,439 (e) FHLMC Gold 30 Year, 6.00%, 7/01/39 ................................... United States 9,660,000 10,081,118 (e) FHLMC Gold 30 Year, 6.50%, 7/01/39 ................................... United States 7,211,000 7,662,812 FHLMC Gold 30 Year, 7.00%, 9/01/27 ................................... United States 693,822 759,304 FHLMC Gold 30 Year, 8.00%, 1/01/31 ................................... United States 127,062 139,801 FHLMC Gold 30 Year, 8.50%, 7/01/31 ................................... United States 1,470,386 1,634,478 ------------ 43,433,308 ------------ (c) FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) ADJUSTABLE RATE 0.5% FNMA, 3.473%, 7/01/34 ................................................ United States 1,550,469 1,586,334 FNMA, 5.911%, 6/01/32 ................................................ United States 70,090 73,436 ------------ 1,659,770 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) FIXED RATE 11.9% FNMA 15 Year, 5.00%, 6/01/23 ......................................... United States 1,210,239 1,254,344 FNMA 15 Year, 5.50%, 7/01/20 - 9/01/22 ............................... United States 3,046,276 3,216,962 FNMA 15 Year, 6.00%, 10/01/23 ........................................ United States 1,700,586 1,802,951 FNMA 15 Year, 6.50%, 7/01/20 ......................................... United States 172,149 173,191 FNMA 15 Year, 7.00%, 9/01/18 ......................................... United States 246,735 271,300 (e) FNMA 30 Year, 4.50%, 7/01/39 ......................................... United States 1,540,000 1,537,113 FNMA 30 Year, 5.00%, 5/01/37 ......................................... United States 2,490,486 2,540,199 (e) FNMA 30 Year, 5.00%, 7/01/39 ......................................... United States 7,650,000 7,789,850 (e) FNMA 30 Year, 5.50%, 7/01/39 ......................................... United States 4,798,000 4,953,187 FNMA 30 Year, 6.00%, 4/01/33 ......................................... United States 846,699 892,887 (e) FNMA 30 Year, 6.00%, 7/01/39 ......................................... United States 3,860,000 4,034,302 FNMA 30 Year, 6.50%, 8/01/32 ......................................... United States 1,103,099 1,186,472 (e) FNMA 30 Year, 6.50%, 7/01/39 ......................................... United States 6,623,000 7,054,528 FNMA 30 Year, 8.00%, 10/01/29 ........................................ United States 197,363 215,514 FNMA 30 Year, 8.50%, 8/01/26 ......................................... United States 395,935 434,045 ------------ 37,356,845 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) FIXED RATE 2.8% (e) GNMA I SF 30 Year, 5.50%, 7/01/39 .................................... United States 5,910,000 6,102,997 GNMA I SF 30 Year, 6.50%, 6/15/31 - 12/15/33 ......................... United States 1,765,156 1,898,045 GNMA II SF 30 Year, 7.00%, 1/20/24 - 1/20/29 ......................... United States 183,352 199,224 GNMA II SF 30 Year, 8.00%, 1/20/28 - 2/20/32 ......................... United States 366,538 413,079 ------------ 8,613,345 ------------ TOTAL MORTGAGE-BACKED SECURITIES (COST $90,898,846) .................. 92,113,163 ------------ Quarterly Statement of Investments | 7 Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED SECURITIES 8.2% BANKS 5.2% Banc of America Commercial Mortgage Inc., 2005-3, A2, 4.501%, 7/10/43 ........................................................... United States 5,000,000 $ 4,889,568 (c) Citigroup/Deutsche Bank Commercial Mortgage Trust, 2005-CD1, A3, FRN, 5.225%, 7/15/44 .......................................... United States 3,000,000 2,736,054 A4, FRN, 5.225%, 7/15/44 .......................................... United States 400,000 355,557 Greenwich Capital Commercial Funding Corp., 2004-GG1, A7, 5.317%, 6/10/36 ..................................... United States 1,605,000 1,507,279 2005-GG5, A5, 5.224%, 4/10/37 ..................................... United States 500,000 428,879 GS Mortgage Securities Corp. II, 2003-C1, A3, 4.608%, 1/10/40 ........ United States 400,000 383,443 LB-UBS Commercial Mortgage Trust, (c) 2002-C2, A4, FRN, 5.594%, 6/15/31 ................................. United States 2,000,000 2,010,142 2005-C1, A2, 4.31%, 2/15/30 ....................................... United States 1,395,000 1,368,611 2006-C1, A4, 5.156%, 2/15/31 ...................................... United States 2,800,000 2,338,713 (c) Merrill Lynch Mortgage Investors Trust, 2003-OPT1, B2, FRN, 3.064%, 7/25/34 ........................................................... United States 165,599 13,207 (c) Morgan Stanley ABS Capital I Inc. Trust, 2003-HE3, B1, FRN, 3.614%, 10/25/33 ............................... United States 734,891 143,212 2003-NC10, B1, FRN, 5.264%, 10/25/33 .............................. United States 605,756 63,540 ------------ 16,238,205 ------------ DIVERSIFIED FINANCIALS 3.0% (c) Advanta Business Card Master Trust, 2007-A4, A4, FRN, 0.345%, 4/22/13 ........................................................... United States 1,766,912 1,550,466 (c) Argent Securities Inc., 2003-W5, M4, FRN, 4.064%, 10/25/33 ........... United States 1,151,852 360,007 (c) Chase Funding Mortgage Loan Asset-Backed Certificates, 2004-2, 2A2, FRN, 0.564%, 2/25/35 .............................................. United States 1,544,172 1,021,385 (c) Chase Issuance Trust, 2005-A9, A9, FRN, 0.339%, 11/15/11 ............. United States 1,000,000 999,371 Citigroup Commercial Mortgage Trust, (c) 2007-C6, AM, FRN, 5.699%, 6/10/17 ................................. United States 320,000 173,281 2008-C7, A4, 6.095%, 12/10/49 ..................................... United States 700,000 574,228 (c) GSAMP Trust, 2003-AHL, B1, FRN, 4.314%, 10/25/33 ..................... United States 1,243,595 268,212 JPMorgan Chase Commercial Mortgage Securities Corp., 2005-LDP2, AM, 4.78%, 7/15/42 ..................................... United States 200,000 136,478 (c) 2005-LDP5, A4, FRN, 5.179%, 12/15/44 .............................. United States 1,000,000 847,836 (c) MBNA Master Credit Card Trust II, 1997-B, A, FRN, 0.479%, 8/15/14 .... United States 3,000,000 2,893,527 (c) Morgan Stanley Dean Witter Capital I, 2003-NC3, B1, FRN, 4.814%, 3/25/33 ........................................................... United States 611,179 52,066 (c, h) New Century Home Equity Loan Trust, 2003-2, M3, FRN, 5.864%, 1/25/33.. United States 666,154 23,405 (c) Option One Mortgage Loan Trust, 2003-6, M5, FRN, 3.614%, 11/25/33 .... United States 895,089 236,402 (c) Specialty Underwriting & Residential Finance, 2003-BC4, B2, FRN, 2.814%, 11/25/34 .................................................. United States 313,004 112,478 8 | Quarterly Statement of Investments Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED) DIVERSIFIED FINANCIALS (CONTINUED) (c) Structured Asset Investment Loan Trust, 2003-BC2, M3, FRN, 5.189%, 4/25/33 ................................ United States 13,987 $ 576 2003-BC13, M4, FRN, 4.439%, 11/25/33 .............................. United States 336,209 176,715 ------------ 9,426,433 ------------ TOTAL ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED SECURITIES (COST $31,830,828) ..................... 25,664,638 ------------ (c) SENIOR FLOATING RATE INTERESTS 47.9% AUTOMOBILES & COMPONENTS 1.0% Federal-Mogul Corp., Term Loan B, 2.248% - 2.258%, 12/27/14 .......... United States 2,105,780 1,412,627 United Components Inc., Term Loan D, 3.21%, 6/29/12 .................. United States 2,000,000 1,720,000 ------------ 3,132,627 ------------ CAPITAL GOODS 4.8% Baldor Electric Co., Term Loan B, 5.25%, 1/31/14 ..................... United States 592,262 573,965 BE Aerospace Inc., Term Loan B, 5.75%, 7/28/14 ....................... United States 1,492,481 1,485,019 Goodman Global Holdings Co. Inc., Term Loan B, 6.50%, 2/13/14 ........ United States 1,084,500 1,041,798 Itron Inc., Dollar Term Loan, 3.81%, 4/18/14 ......................... United States 995,405 986,198 Manitowoc Co. Inc., Term Loan B, 6.50%, 11/06/14 ..................... United States 1,791,000 1,623,840 Oshkosh Truck Corp., Term Loan A, 8.25%, 12/06/11 ...................................... United States 471,000 434,497 Term Loan B, 6.64% - 8.25%, 12/06/13 .............................. United States 1,718,537 1,582,128 RBS Global Inc. (Rexnord), Incremental Tranche B-2, 2.313%, 7/22/13 .......................... United States 997,442 846,579 Term Loan, 2.875% - 3.625%, 7/22/13 ............................... United States 3,000,000 2,571,000 Spirit Aerosystems Inc. (Onex Wind Finance LP), Term B-1 Loan, 2.89%, 12/31/11 .......................................................... United States 1,250,590 1,191,187 TriMas Co. LLC, Term Loan B, 2.558% - 3.323%, 8/02/13 ............................. United States 1,543,014 1,357,853 Tranche B-1 L/C, 2.62%, 8/02/11 ................................... United States 366,149 322,211 URS Corp., Term Loan B, 2.56% - 3.427%, 5/15/13 ...................... United States 1,115,063 1,101,125 ------------ 15,117,400 ------------ COMMERCIAL & PROFESSIONAL SERVICES 2.6% ARAMARK Corp., Synthetic L/C, 2.336%, 1/26/14 .................................... United States 271,357 250,233 Term Loan B, 2.473%, 1/26/14 ...................................... United States 4,271,345 3,938,834 JohnsonDiversey Inc., Delay Draw, 3.016%, 12/16/10 ...................................... United States 256,631 249,253 Term Loan B, 3.016%, 12/16/11 ..................................... United States 733,386 712,300 Nielsen Finance LLC (VNU Inc.), Class A Term Loan, 2.321%, 8/09/13 ... United States 2,726,356 2,460,536 West Corp., Term Loan B-2, 2.683% - 2.693%, 10/24/13 ................. United States 444,795 409,291 ------------ 8,020,447 ------------ Quarterly Statement of Investments | 9 Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ (c) SENIOR FLOATING RATE INTERESTS (CONTINUED) CONSUMER DURABLES & APPAREL 1.2% Jarden Corp., Term Loan B2, 2.348%, 1/24/12 .......................... United States 2,387,155 $ 2,303,939 Jostens IH Corp. (Visant Holding Corp.), Term Loan C, 2.637%, 12/21/11 .......................................................... United States 1,350,000 1,312,875 ------------ 3,616,814 ------------ CONSUMER SERVICES 4.7% Affinion Group Inc., Term Loan B, 2.81%, 10/17/12 .................... United States 2,970,687 2,817,697 Education Management LLC, Term Loan C, 2.375%, 6/01/13 ............... United States 2,427,430 2,245,372 Laureate Education Inc., Closing Date Term Loan, 4.342%, 8/18/14 ........................... United States 1,994,520 1,730,246 Delayed Draw Term Loan, 4.342%, 8/18/14 ........................... United States 298,498 258,947 Penn National Gaming Inc., Term Loan B, 2.06% - 2.72%, 10/03/12 ...... United States 2,693,207 2,592,772 VML U.S. Finance LLC (Venetian Macau), Delayed Draw, 2.85%, 5/25/12 ...................................... Macau 1,163,750 1,000,617 New Project Term Loans, 2.85%, 5/25/13 ............................ Macau 2,970,333 2,553,955 Term Loan B, 2.85%, 5/25/13 ....................................... Macau 1,699,444 1,461,218 ------------ 14,660,824 ------------ ENERGY 0.4% Dresser Inc., Term Loan B, 3.104%, 5/04/14 ........................... United States 1,552,923 1,411,607 ------------ FOOD & STAPLES RETAILING 0.2% Rite Aid Corp., Tranche 4 Term Loan, 9.50%, 6/10/15 .................. United States 500,000 499,166 ------------ FOOD, BEVERAGE & TOBACCO 0.8% Dean Foods Co., Term Loan B, 1.685% - 1.975%, 4/02/14 ................ United States 1,743,917 1,640,010 Wm. Wrigley Jr. Co., Term Loan B, 6.50%, 10/06/14 .................... United States 877,500 881,840 ------------ 2,521,850 ------------ HEALTH CARE EQUIPMENT & SERVICES 6.4% Bausch and Lomb Inc., Delayed Draw Term Loan, 3.25% - 3.848%, 4/28/15 ................... United States 255,904 235,569 Parent Term Loan, 3.848%, 4/28/15 ................................. United States 1,344,350 1,237,523 Community Health Systems Inc., Delayed Draw Term Loan, 2.56%, 7/25/14 ............................ United States 122,735 110,783 Term Loan, 2.56% - 2.924%, 7/25/14 ................................ United States 2,405,040 2,170,823 DaVita Inc., Term Loan B-1, 1.81% - 2.71%, 10/05/12 .................. United States 2,717,434 2,583,261 DJO Finance LLC, Term Loan B, 3.31% - 3.598%, 5/20/14 ................ United States 1,711,282 1,551,919 Fresenius Medical Care Holdings Inc., Term Loan B, 1.973% - 2.514%, 3/31/13 ........................................................... Germany 1,489,073 1,428,447 Fresenius SE (APP), Term Loan B2, 6.75%, 9/10/14 ..................... Germany 277,984 279,999 Fresenius SE (New Finco1), Term Loan B, 6.75%, 9/10/14 ............... Germany 516,016 519,757 HCA Inc., Term Loan B-1, 2.848%, 11/18/13 ............................ United States 3,484,363 3,153,348 Iasis Healthcare LLC, Delayed Draw Term Loan, 2.31%, 3/14/14 ............................ United States 475,375 437,939 Initial Term Loan, 2.31%, 3/14/14 ................................. United States 1,373,697 1,265,518 Synthetic L/C, 4.54%, 3/14/14 ..................................... United States 128,047 117,963 10 | Quarterly Statement of Investments Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ (c) SENIOR FLOATING RATE INTERESTS (CONTINUED) HEALTH CARE EQUIPMENT & SERVICES (CONTINUED) LifePoint Hospitals Inc., Term Loan B, 2.295%, 4/15/12 ............... United States 1,980,324 $ 1,888,019 Psychiatric Solutions Inc., Term Loan, 2.058% - 2.068%, 7/01/12 ...... United States 918,761 861,339 Team Finance LLC, Term Loan B, 2.608% - 2.716%, 11/23/12 ............. United States 992,275 875,682 Vanguard Health Holding Co. II LLC, Replacement Term Loan, 2.56%, 9/23/11 ........................................................... United States 1,568,279 1,503,098 ------------ 20,220,987 ------------ INSURANCE 0.5% Conseco Inc., Term Loan, 6.50%, 10/10/13 ............................. United States 2,152,804 1,463,907 ------------ MATERIALS 7.0% Anchor Glass Container Corp., Term Loan, 6.75%, 6/20/14 .............. United States 1,429,201 1,386,325 Ashland Inc., Term Loan B, 7.65%, 5/13/14 ............................ United States 471,226 474,937 Celanese U.S. Holdings LLC, Dollar Term Loan, 2.942%, 4/02/14 ........ United States 2,954,698 2,747,459 Domtar Corp., Term Loan, 1.696%, 3/07/14 ............................. United States 990,228 935,765 Georgia-Pacific LLC, Additional Term Loan, 2.31% - 2.323%, 12/20/12 .................... United States 1,482,660 1,402,462 Term Loan B, 2.31% - 2.65%, 12/20/12 .............................. United States 1,420,112 1,343,297 Hexion Specialty Chemicals BV, Term Loan C-2, 2.875%, 5/03/13 ........ Netherlands 694,332 478,703 Hexion Specialty Chemicals Inc., Term Loan C-1, 3.50%, 5/03/13 ....... United States 3,204,558 2,209,363 Huntsman International LLC, Term Loan B, 2.058%, 4/21/14 ............. United States 2,683,616 2,415,255 Nalco Co., Term Loan B, 6.50%, 5/13/16 ............................... United States 1,000,000 1,006,875 NewPage Corp., Term Loan, 4.063%, 12/22/14 ........................... United States 1,797,533 1,561,357 Oxbow Carbon LLC, Delayed Draw Term Loan, 2.31%, 5/08/14 ............................ United States 277,655 252,435 Term Loan B, 2.31% - 2.598%, 5/08/14 .............................. United States 2,907,405 2,643,317 Rockwood Specialties Group Inc., Term Loan H, 6.00%, 5/15/14 ......... United States 500,000 499,063 Univar Inc., Opco Tranche B Term Loan, 3.31%, 10/10/14 ............... United States 3,206,817 2,763,208 ------------ 22,119,821 ------------ MEDIA 7.8% CSC Holdings Inc., Incremental Term Loan B-2, 2.069%, 3/29/13 ........ United States 774,000 743,316 Dex Media West LLC, Term Loan B, 7.00%, 10/24/14 ..................... United States 3,901,398 3,238,160 Discovery Communications Inc., Term Loan C, 5.25%, 5/14/14 ........... United States 897,750 888,773 Entravision Communications Corp., Term Loan B, 6.46%, 3/29/13 ........ United States 1,254,810 1,083,843 Gray Television Inc., Term Loan B, 3.82%, 12/31/14 ................... United States 1,550,834 964,425 Insight Midwest Holdings, Term Loan B, 2.32%, 4/02/14 ................ United States 2,160,000 2,015,999 MCC Iowa, Term Loan E, 6.50%, 1/03/16 ....................................... United States 891,000 891,000 Tranche D-1 Term Loan, 2.05%, 1/31/15 ............................. United States 494,714 456,621 Tranche D-2 Term Loan, 2.05%, 1/31/15 ............................. United States 57,525 53,096 Mission Broadcasting Inc., Term Loan B, 2.348%, 10/01/12 ............. United States 878,163 656,427 Newsday LLC, Floating Rate Term Loan, 6.631%, 8/01/13 ................ United States 2,400,000 2,322,000 Nexstar Broadcasting Inc., Term Loan B, 2.789%, 10/01/12 ............. United States 830,530 620,821 Regal Cinemas Corp., Term Loan, 4.348%, 10/27/13 ..................... United States 2,067,659 2,019,844 Quarterly Statement of Investments | 11 Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ (c) SENIOR FLOATING RATE INTERESTS (CONTINUED) MEDIA (CONTINUED) (d) Tribune Co., Term Loan B, 5.25%, 5/16/14 ....................................... United States 3,950,000 $ 1,354,522 Term Loan X, 5.00%, 2/20/49 ....................................... United States 1,375,714 470,494 Tribune Receivables LLC, Term Loan (DIP), 9.00%, 4/10/10 ............. United States 125,000 125,938 Univision Communications Inc., Initial Term Loan, 2.56%, 9/29/14 ..... United States 3,000,000 2,251,071 UPC Financing Partnership, Term Loan N, 2.065%, 12/31/14 ..................................... Netherlands 2,897,847 2,691,375 Term Loan T, 3.815%, 12/31/16 ..................................... Netherlands 1,572,153 1,506,320 ------------ 24,354,045 ------------ PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 0.9% Life Technologies Corp., Term Loan B, 5.25%, 11/21/15 ................ United States 794,000 795,632 Mylan Inc., Term Loan B, 3.563% - 3.875%, 10/02/14 ................... United States 2,134,000 2,065,089 ------------ 2,860,721 ------------ REAL ESTATE 0.2% CB Richard Ellis Services Inc., Term Loan B, 6.00 - 6.25%, 12/20/13 .. United States 806,375 730,576 ------------ RETAILING 0.3% Dollar General Corp., Tranche B-1 Term Loan, 3.06% - 3.789%, 7/07/14 ........................................................... United States 1,000,000 953,748 ------------ SOFTWARE & SERVICES 3.7% Affiliated Computer Services Inc., Additional Term Loan, 2.31% - 2.321%, 3/20/13 ..................... United States 1,746,846 1,665,782 Term Loan B, 2.308%, 3/20/13 ...................................... United States 482,500 460,109 Emdeon Business Services LLC, First Lien Term Loan, 2.31% - 2.598%, 11/16/13 .......................................................... United States 2,030,199 1,908,387 First Data Corp., Term Loan B-2, 3.06% - 3.065%, 9/24/14 ............. United States 2,452,538 1,845,535 Metavante Corp., Term Loan B, 2.778%, 11/01/14 ....................... United States 1,994,950 1,931,360 Rovi Corp., Term Loan B, 6.00%, 5/02/13 .............................. United States 584,655 583,193 SunGard Data Systems Inc., New U.S. Term Loan, 2.071% - 2.724%, 2/28/14 ...................... United States 119,548 111,351 Tranche B U.S. TL, 3.951% - 4.604%, 2/28/16 ....................... United States 3,370,292 3,155,436 ------------ 11,661,153 ------------ TECHNOLOGY HARDWARE & EQUIPMENT 1.2% CommScope Inc., Term Loan B, 3.098%, 12/26/14 ........................ United States 984,412 943,498 Flextronics International USA Inc., Term Loan A, 2.568% - 3.458%, 10/01/14 ............................ United States 1,831,661 1,518,970 Term Loan A-1, 3.381%, 10/01/14 ................................... United States 526,339 436,486 Sensus Metering Systems Inc., Term Loan B1, 2.613% - 2.716%, 12/17/10 .......................................................... United States 1,064,215 984,399 ------------ 3,883,353 ------------ 12 | Quarterly Statement of Investments Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) COUNTRY PRINCIPAL AMOUNT(b) VALUE -------------- ------------------- ------------ (c) SENIOR FLOATING RATE INTERESTS (CONTINUED) TELECOMMUNICATION SERVICES 2.5% GCI Holdings Inc., Add-On Term Loan, 4.56%, 8/31/12 .................. United States 2,369,713 $ 2,322,318 Intelsat Corp. (Panamsat), Tranche B-2-A, 2.819%, 1/03/14 .................................... United States 1,278,240 1,169,590 Tranche B-2-B, 2.819%, 1/03/14 .................................... United States 1,277,852 1,169,235 Tranche B-2-C, 2.819%, 1/03/14 .................................... United States 1,277,852 1,169,234 Windstream Corp., Tranche B-1, 1.82% - 2.62%, 7/17/13 ................ United States 2,007,593 1,898,430 ------------ 7,728,807 ------------ UTILITIES 1.7% Dynegy Holdings Inc., Term L/C Facility, 1.81%, 4/02/13 .............. United States 1,499,049 1,351,018 NRG Energy Inc., Credit Link, 0.498%, 2/01/13 ...................................... United States 819,782 773,296 Term Loan, 1.81% - 2.098%, 2/01/13 ................................ United States 1,529,371 1,442,648 Texas Competitive Electric Holdings Co. LLC, Term Loan B-2, 3.81% - 3.821%, 10/10/14 .......................................... United States 2,451,288 1,757,728 ------------ 5,324,690 ------------ TOTAL SENIOR FLOATING RATE INTERESTS (COST $159,860,113) 150,282,543 ------------ FOREIGN GOVERNMENT AND AGENCY SECURITIES 1.0% Government of Argentina, senior bond, amortization and cpn., 8/03/09 .................................... Argentina 1,975,000 486,151 (c, i) FRN, 1.683%, 8/03/12 .............................................. Argentina 3,950,000 938,125 Government of Malaysia, 3.756%, 4/28/11 .............................. Malaysia 5,860,000 MYR 1,706,719 ------------ TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $3,601,829) ................................................. 3,130,995 ------------ TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $483,995,258) ............................................... 455,463,302 ------------ SHARES ------------------- SHORT TERM INVESTMENTS (COST $3,883,074) 1.2% MONEY MARKET FUNDS 1.2% (j) Institutional Fiduciary Trust Money Market Portfolio, 0.00% .......... United States 3,883,074 3,883,074 ------------ TOTAL INVESTMENTS (COST $487,878,332) 146.4% ......................... 459,346,376 PREFERRED SHARES (28.7)% . ........................................... (90,000,000) OTHER ASSETS, LESS LIABILITIES (17.7)% . ............................. (55,470,527) ------------ NET ASSETS APPLICABLE TO COMMON SHARES 100.0% ........................ $313,875,849 ============ Quarterly Statement of Investments | 13 Franklin Templeton Limited Duration Income Trust STATEMENT OF INVESTMENTS, JUNE 30, 2009 (UNAUDITED) (CONTINUED) (a) Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Fund's Board of Trustees. At June 30, 2009, the aggregate value of these securities was $46,667,377, representing 14.87% of net assets. (b) The principal amount is stated in U.S. dollars unless otherwise indicated. (c) The coupon rate shown represents the rate at period end. (d) Defaulted security or security for which income has been deemed uncollectible. (e) A portion or all of the security purchased on a when-issued or to-be-announced basis. (f) Income may be received in additional securities and/or cash. (g) See Note 5 regarding other considerations. (h) The bond pays interest and/or principal based upon the issuer's ability to pay, which may be less than the stated interest rate or principal paydown. (i) The principal amount is stated in original face, and scheduled paydowns are reflected in the market price on ex-date. (j) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. At June 30, 2009, the Fund had the following forward exchange contracts outstanding. CONTRACT SETTLEMENT UNREALIZED UNREALIZED CURRENCY COUNTERPARTY TYPE QUANTITY AMOUNT(*) DATE APPRECIATION DEPRECIATION -------- ------------ ---- ----------- ----------- ---------- ------------ ------------ South Korean Won ......................... JPHQ Buy 308,000,000 289,716 CHF 7/09/09 $ -- $(24,842) South Korean Won ......................... JPHQ Sell 308,000,000 312,310 CHF 7/09/09 45,633 -- United States Dollar ..................... JPHQ Buy 300,000 195,081 EUR 7/10/09 26,377 -- United States Dollar ..................... JPHQ Sell 300,000 236,072 EUR 7/10/09 31,116 -- South Korean Won ......................... JPHQ Buy 101,000,000 95,042 CHF 7/24/09 -- (8,124) South Korean Won ......................... JPHQ Sell 101,000,000 101,722 CHF 7/24/09 14,272 -- -------- -------- Unrealized appreciation (depreciation) ..................... 117,398 (32,966) -------- -------- Net unrealized appreciation (depreciation) ..................... $ 84,432 ======== * In U.S. dollars unless otherwise indicated. See Abbreviations on page 19. See Notes to Statement of Investments. 14 | Quarterly Statement of Investments Franklin Templeton Limited Duration Income Trust NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) 1. ORGANIZATION Franklin Templeton Limited Duration Income Trust (Fund) is registered under the Investment Company Act of 1940, as amended, as a closed-end investment company. 2. SECURITY VALUATION Equity and other securities listed on a securities exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter securities and listed securities for which there is no reported sale are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds are valued at the closing net asset value. Corporate debt securities, government securities, mortgage backed securities, asset-backed securities, collateralized debt obligations and other debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Fund may utilize independent pricing services, quotations from bond dealers, and information with respect to bond and note transactions, to assist in determining a current market value for each security. The Fund's pricing services may use valuation models or matrix pricing which considers information with respect to comparable bond and note transactions, quotations from bond dealers, or by reference to other securities that are considered comparable in such characteristics as rating, interest rate and maturity date, option adjusted spread models, prepayment projections, interest rate spreads and yield curves, to determine current value. Debt securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Senior secured corporate loans with floating or variable interest rates generally trade in the over-the-counter market rather than on a securities exchange. The Fund may utilize independent pricing services, quotations from loan dealers and other financial institutions, and information with respect to bond and note transactions, to assist in determining a current market value for each security. The Fund's pricing services use independent market quotations from loan dealers or financial institutions and may incorporate valuation methodologies that consider multiple bond characteristics such as dealer quotes, issuer type, coupon, maturity, weighted average maturity, interest rate spreads and yield curves, cash flow and credit risk/quality analysis, to determine current value. Quarterly Statement of Investments | 15 Franklin Templeton Limited Duration Income Trust NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED) 2. SECURITY VALUATION (CONTINUED) The Fund has procedures to determine the fair value of individual securities and other assets for which market prices are not readily available or which may not be reliably priced. Methods for valuing these securities may include: fundamental analysis based upon the underlying investment book value, anticipated future cash flows, market changes in comparable or similar securities, matrix pricing, discounts from market prices of similar securities, or discounts applied due to the nature and duration of restrictions on the disposition of the securities. Due to the inherent uncertainty of valuations of such securities, the fair values may differ significantly from the values that would have been used had a ready market for such investments existed. Occasionally, events occur between the time at which trading in a security is completed and the close of the NYSE that might call into question the availability (including the reliability) of the value of a portfolio security held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services. All security valuation procedures are approved by the Fund's Board of Trustees. 3. DERIVATIVE FINANCIAL INSTRUMENTS The Fund may invest in derivative financial instruments (derivatives) in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and the potential for market movements. Derivatives are marked to market daily based upon quotations from market makers or the Fund's independent pricing services and the Fund's net benefit or obligation under the contract, as measured by the fair market value of the contract, is included in net assets. The Fund enters into forward exchange contracts in order to hedge against fluctuations in foreign exchange rates or to gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date. 16 | Quarterly Statement of Investments Franklin Templeton Limited Duration Income Trust NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED) 4. INCOME TAXES At June 30, 2009, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows: Cost of investments ........................... $489,165,721 ============ Unrealized appreciation ....................... $ 12,076,687 Unrealized depreciation ....................... (41,896,032) ------------ Net unrealized appreciation (depreciation)..... $(29,819,345) ============ 5. OTHER CONSIDERATIONS From time to time officers, directors or employees of the Fund's Investment Manager may have discussions or enter into agreements with issuers, underwriters or creditors' committees which, pursuant to the Fund's policies and requirements of applicable securities laws, could prevent the Fund from trading in the securities of such company for limited or extended periods of time. 6. FAIR VALUE MEASUREMENTS Financial Accounting Standards Board (FASB) Statement No. 157, "Fair Value Measurement" establishes a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund's investments and are summarized in the following fair value hierarchy: - Level 1 - quoted prices in active markets for identical securities - Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.) - Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. Quarterly Statement of Investments | 17 Franklin Templeton Limited Duration Income Trust NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED) 6. FAIR VALUE MEASUREMENTS (CONTINUED) The following is a summary of the inputs used as of June 30, 2009, in valuing the Fund's assets and liabilities carried at fair value: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL ---------- ------------ ------- ------------ ASSETS: Investments in Securities: Equity Investments $ -- $ 288,184 $-- $ 288,184 Corporate Bonds -- 183,983,779 -- 183,983,779 Mortgage-Backed Securities -- 92,113,163 -- 92,113,163 Asset-Backed Securities and Commercial Mortgage-Backed Securities -- 25,664,638 -- 25,664,638 Senior Floating Rate Interests -- 150,282,543 -- 150,282,543 Foreign Government and Agency Securities -- 3,130,995 -- 3,130,995 Short Term Investments 3,883,074 -- -- 3,883,074 ---------- ------------ --- ------------ Total Investments in Securities(a) $3,883,074 $455,463,302 $-- $459,346,376 ========== ============ === ============ Foorward Exchange Contracts -- 117,938 -- 117,938 Unfunded Loan Commitments -- 11,012 -- 11,012 LIABILITIES: Forward Exchange Contracts -- 32,966 -- 32,966 (a) For detailed industry descriptions, see the accompanying Statement of Investments. 7. SUBSEQUENT EVENTS Management has evaluated subsequent events through August 21, 2009 and determined that no events have occurred that require disclosure. 18 | Quarterly Statement of Investments Franklin Templeton Limited Duration Income Trust NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED) ABBREVIATIONS CURRENCY CHF - Swiss Franc EUR - Euro MYR - Malaysian Ringgit SELECTED PORTFOLIO DIP - Debtor-In-Possession FHLMC - Federal Home Loan Mortgage Corp. FNMA - Federal National Mortgage Association FRN - Floating Rate Note GNMA - Government National Mortgage Association L/C - Letter of Credit PIK - Payment-In-Kind SF - Single Family COUNTERPARTY JPHQ - JPMorgan Chase Bank, N.A. For information on the Fund's policy regarding other significant accounting policies, please refer to the Fund's most recent semiannual or annual shareholder report. Quarterly Statement of Investments | 19 ITEM 2. CONTROLS AND PROCEDURES. (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant's management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Within 90 days prior to the filing date of this Quarterly Schedule of Portfolio Holdings on Form N-Q, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant's management, including the Registrant's principal executive officer and the Registrant's principal financial officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures. Based on such evaluation, the Registrant's principal executive officer and principal financial officer concluded that the Registrant's disclosure controls and procedures are effective. (b) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Quarterly Schedule of Portfolio Holdings on Form N-Q. ITEM 3. EXHIBITS. (a) Certification pursuant to Section 30a-2 under the Investment Company Act of 1940 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRANKLIN TEMPLETON LIMITED DURATION INCOME TRUST By /s/LAURA F. FERGERSON -------------------------------- Laura F. Fergerson Chief Executive Officer - Finance and Administration Date August 27, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/LAURA F. FERGERSON -------------------------------- Laura F. Fergerson Chief Executive Officer - Finance and Administration Date August 27, 2009 By /s/GASTON GARDEY ------------------------------- Gaston Gardey Chief Financial Officer and Chief Accounting Officer Date August 27, 2009