Edgar Filing: FRANKLIN TEMPLETON LIMITED DURATION INCOME TRUST

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-21357
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FRANKLIN TEMPLETON LIMITED DURATION INCOME TRUST
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(Exact name of registrant as specified in charter)

ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)

MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 03/31
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Date of reporting period: 09/30/04
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ITEM 1. REPORTS TO STOCKHOLDERS.

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SEPTEMBER 30, 2004
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SEMIANNUAL REPORT | INCOME
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FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST
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[LOGO](R)
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS

FRANKLIN o Templeton o Mutual Series

FRANKLIN TEMPLETON INVESTMENTS

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.

FRANKLIN. Founded in 1947, Franklin is a
recognized leader in fixed income investing and
also brings expertise in growth- and value-style
U.S. equity investing.

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched
what has become the industry's oldest global fund.
Today, with research offices in over 25 countries,
they offer investors the broadest global reach in
the industry.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among
undervalued stocks, arbitrage situations and
distressed companies.

TRUE DIVERSIFICATION Because our management groups work independently
and adhere to distinctly different investment
approaches, Franklin, Templeton and Mutual Series
funds typically have a low overlap of securities.
That's why our funds can be used to build truly
diversified portfolios covering every major asset
class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well
as the reliable account services that have helped
us become one of the most trusted names in
financial services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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Not part of the semiannual report

CONTENTS

SEMIANNUAL REPORT

Franklin Templeton Limited Duration Income Trust .......................... 1

Performance Summary ....................................................... 6

Annual Shareholders' Meeting .............................................. 7

Dividend Reinvestment Plan ................................................ 8

Financial Highlights and Statement of Investments ......................... 11

Financial Statements ...................................................... 20

Notes to Financial Statements ............................................. 23

Shareholder Information ................................................... 31

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SEMIANNUAL REPORT

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton Limited Duration
Income Trust seeks to provide high, current income, with a secondary objective
of capital appreciation to the extent possible, through a portfolio consisting
primarily of high yield corporate bonds, floating rate bank loans and mortgage-
and other asset-backed securities.

Dear Shareholder:

We are pleased to bring you Franklin Templeton Limited Duration Income Trust's
semiannual report for the period ended September 30, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Templeton Limited Duration Income
Trust posted cumulative total returns of +3.20% based on net asset value and
+1.95% based on market price. Share price, as measured by net asset value,
decreased from $14.75 per share on March 31, 2004, to $14.60 at period-end, and
the market price fell from $14.87 to $14.54 over the same period. You can find
the Fund's performance data in the Performance Summary on page 6.

ECONOMIC AND MARKET OVERVIEW

Over the past six months, the confusing employment picture was a dominant topic.
While the unemployment rate declined to 5.4% on September 30, 2004,

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 12.

Semiannual Report | 1

and there was some job growth, job creation according to the most recent
nonfarm payroll statistics disappointed many market participants.(1) However,
other sources, such as one from the National Federation of Independent
Businesses (NFIB), showed stronger gains. The NFIB survey was particularly
interesting, because small businesses historically have created about two-thirds
of all new U.S. jobs.(2) As a result, many market participants believed that job
growth was not accurately reflected in the nonfarm payroll numbers. During
the period under review, more jobs combined with reductions in income tax,
helped to increase consumers' disposable income and allowed them to continue
spending. That spending kept the economy growing.

Increases in business spending also contributed to economic growth. After
steadily declining in 2001 and 2002, business spending posted strong results
during the period. For example, nonresidential investment spending increased
12.5% and 11.7% in the second and third quarters of 2004.(3) Historically low
interest rates during the reporting period allowed many businesses the
opportunity to refinance their old debt at more attractive levels. This helped
enhance business operating performance, and corporate profits reflected this
data. Many corporate debt products also benefited from this improvement.
Productivity continued to grow, which helped businesses generate more goods and
services without substantially raising inflation.

Although energy prices rose 4.7% for the six months under review, the core
Consumer Price Index, a measure of inflation excluding food and energy costs,
rose a more subdued 2.0% for the 12 months ended September 30, 2004.(1)
Expected inflation is a key determinant of interest rates, and this environment
contributed to the continued low level of interest rates during the period. The
10-year U.S. Treasury yield rose modestly from 3.86% at the beginning of the
period to 4.14% on September 30, 2004.

In general, this overall environment of positive economic growth and relatively
modest increases in interest rates benefited the more credit-sensitive sectors
of the fixed income markets (such as corporate bonds and bank loans) while
somewhat constraining returns for the more interest-rate sensitive sectors.

INVESTMENT STRATEGY

We invest in a diversified mix of fixed income securities, primarily high yield
corporate bonds, senior secured floating rate bank loans, and mortgage- and

(1) Source: Bureau of Labor Statistics.

(2) Source: Dennis, William J., Jr., NFIB Research Foundation, "The Public
Reviews Small Business," 8/04.

(3) Source: Bureau of Economic Analysis.

2 | Semiannual Report

other asset-backed securities. Our top-down analysis of macroeconomic trends
combined with a bottom-up fundamental analysis of market sectors, industries and
issuers drives our investment process. We seek to maintain a limited duration,
or interest rate sensitivity, to moderate the impact that fluctuating interest
rates might have on the Fund's fixed income portfolio. Within the corporate bond
and bank loan sectors, we seek securities trading at reasonable valuations from
issuers with characteristics such as strong market positions, stable cash flows,
reasonable capital structures, supportive asset values, strong sponsorship and
improving credit fundamentals. In the mortgage- and other asset-backed
securities sector, we look to capture an attractive income stream and total
return through our analysis of security prepayment assumptions, pricing
inefficiencies, and underlying collateral characteristics.

MANAGER'S DISCUSSION

In terms of sector allocation, at period-end high yield corporate bonds
continued to represent our largest sector weighting as we believed supportive
fundamental credit trends should buoy performance for that sector. Our second
largest sector weighting was in floating rate bank loans, which should also be
beneficiaries of this improving credit cycle trend. Moreover, the floating-rate
nature of this asset class generally makes leveraged loans more immune to rising
interest rates. In fact, these loans typically offer higher nominal yields to
investors as short-term interest rates rise, which they have experienced since
June 2004. Finally, during the period, returns for our mortgage-backed
securities (MBS) holdings were somewhat constrained by a modest interest rate
rise, although that market's current yield allowed the sector to still post
positive total returns.

The high yield corporate bond sector was the strongest performer in terms of
total return during the period, as a declining default rate and the prospect for
continued below-average defaults supported bond prices. Consequently, valuations
became richer during the period, with this sector's average yield spread over
Treasuries falling from 5.0% at the beginning of the period to 4.3% by
period-end. Even though valuations were somewhat rich compared with longer-term
averages, we looked favorably on the fundamental credit trends for high yield
issuers, and therefore, still found attractive value in this sector. Overall,
our high yield corporate bond weighting rose moderately during the period,
resulting from select purchases and outperformance relative to the Fund's other
sector holdings.

Over the past six months, demand in the leveraged bank loan market
remained relatively strong as money continued to flow into that asset class.
Much of the strong demand came from investors anticipating the Federal

PORTFOLIO BREAKDOWN
Based on Total Investments as of 9/30/04*

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

High Yield Corporate Bonds 39.3%

Floating Rate Loans 26.5%

Mortgage-Backed Securities 20.4%

Other Asset-Backed Securities 7.1%

Foreign Government & Agency Securities 2.9%

Investment Grade Corporate Bonds 0.8%

Preferred Stock 0.8%

Short-Term Investments & Other Net Assets 2.2%

* Total investments include long-term and short-term investments and other
net assets excluding preferred stock issued by the Fund.

Semiannual Report | 3

DIVIDEND DISTRIBUTIONS*
4/1/04-9/30/04

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MONTH DIVIDEND PER COMMON SHARE
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April 9.88 cents
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May 9.88 cents
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June 9.88 cents
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July 9.88 cents
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August 9.88 cents
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September 9.88 cents
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TOTAL 59.28 CENTS
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* All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.

Reserve Board would increase short-term interest rates and thereby positively
impact the yield offered by floating rate leveraged loans. Fueled by increasing
merger and acquisition activity, institutional loan new issuance was robust, the
highest level seen in the last five years, but was absorbed well by the market.
In terms of valuations, institutional loan spreads above the London InterBank
Offered Rate (LIBOR) remained near historical lows. Moreover, the strong demand
for loans gave borrowers additional flexibility with many loans repricing to
lower spreads. Although a rising proportion of lower-rated new issues may
present credit problems in the future, overall fundamental credit trends
remained generally favorable, with rising corporate earnings and generally good
corporate liquidity. Given supportive fundamental credit trends, somewhat offset
by historically rich valuations, the Fund's loan exposure remained relatively
unchanged during the period as our incremental demand for loans was offset by a
number of paydowns and refinancings. During the period under review, the
floating rate bank loan market, where the Fund held 26.5% of total investments
at period-end, remained strong, benefiting our underlying holdings within the
sector.

Over the period, market interest rates gyrated, reflecting changing expectations
for economic growth and potential inflation. In the mortgage-backed sector, our
research guided us to the opportunity to move current positions toward higher
coupon issues. We reallocated out of some 5.0% coupon, 30-year maturity MBS into
the 5.5% and 6.0% coupon range. These higher coupon positions offered less price
risk as interest rates rose. We also looked to investing in more specified pool
securities. One sector of the specified pool market where we increased
allocation was MBS backed by mortgages with relatively low loan balances. We
believed that the borrowers behind these loans had reduced incentive to
refinance their loans. We also looked to some higher quality mortgage
related-securities to help add yield as these securities typically carry a yield
premium over their government-guaranteed counterparts. With a modest rise in
intermediate-term interest rates, offset by the current yield offered in the
sector, mortgages were able to provide positive total returns during the
six-month period. Overall, our weighting in mortgages and other asset-backed
securities remained relatively flat during the period.

4 | Semiannual Report

Thank you for your continued participation in Franklin Templeton Limited
Duration Income Trust. We look forward to serving your future investment needs.

Sincerely,

[PHOTO OMITTED]

/s/ Christopher J. Molumphy
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Christopher J. Molumphy, CFA

[PHOTO OMITTED]

/s/ Richard S. Hsu
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Richard S. Hsu, CFA

[PHOTO OMITTED]

/s/ Eric G. Takaha
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Eric G. Takaha, CFA

[PHOTO OMITTED]

/s/ Roger A. Bayston
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Roger A. Bayston, CFA

Portfolio Management Team
Franklin Templeton Limited Duration Income Trust

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF SEPTEMBER 30, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.

Semiannual Report | 5

PERFORMANCE SUMMARY AS OF 9/30/04

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. Total return reflects the Fund's dividend income, capital gain
distributions, if any, and any unrealized gains or losses. All total returns
include reinvested distributions according to the terms specified in the Fund's
dividend reinvestment plan and do not reflect any sales charges paid at
inception or brokerage commissions paid on secondary market purchases.

PRICE AND DISTRIBUTION INFORMATION(1)

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CHANGE 9/30/04 3/31/04
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Net Asset Value (NAV) -$0.15 $14.60 $14.75
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Market Price (AMEX) -$0.33 $14.54 $14.87
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DISTRIBUTIONS (4/1/04-9/30/04)
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Dividend Income $0.5928
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PERFORMANCE(1)

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COMMENCEMENT OF
6-MONTH 1 YEAR OPERATIONS (8/27/03)
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Cumulative Total Return(2)
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Based on change in NAV +3.20% +9.12% +10.57%
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Based on change in market price +1.95% +5.48% +5.20%
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Average Annual Total Return(2)
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Based on change in NAV +3.20% +9.12% +9.62%
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Based on change in market price +1.95% +5.48% +4.74%
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Distribution Rate(3) 8.15%
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PERFORMANCE DATA SHOWN 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.

FOR MORE CURRENT PERFORMANCE, CALL FRANKLIN TEMPLETON INVESTMENTS AT
1-800/342-5236.

ENDNOTES

INTEREST RATE MOVEMENTS AND MORTGAGE PREPAYMENTS MAY AFFECT THE FUND'S SHARE
PRICE AND YIELD. THE RISKS ASSOCIATED WITH HIGHER-YIELDING, LOWER-RATED
SECURITIES INCLUDE HIGHER RISK OF DEFAULT AND LOSS OF PRINCIPAL.

(1) Figures are for common shares.

(2) Total return calculations represent the cumulative and average annual
changes in value of an investment over the periods indicated.

(3) Distribution rate is based on an annualization of the 9.88 cent per share
September dividend and the AMEX closing price of $14.54 per share on 9/30/04.

6 | Semiannual Report

ANNUAL SHAREHOLDERS' MEETING

SEPTEMBER 8, 2004

At an annual Meeting of Shareholders of Franklin Templeton Limited
Duration Income Trust (the "Fund") held on September 8, 2004, shareholders
approved the following:

Regarding the proposal to elect nominees for Trustees:

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% OF % OF
SHARES OUTSTANDING % OF WITHHELD OR OUTSTANDING % OF
TRUSTEES FOR SHARES VOTED ABSTAIN SHARES VOTED
-----------------------------------------------------------------------------------------------------

Frank H. Abbott, III 23,347,893.308 87.596% 98.957% 246,101.000 0.923% 1.043%
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Harris J. Ashton 23,358,188.308 87.635% 99.001% 235,806.000 0.885% 0.999%
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Martin L. Flanagan 23,378,234.308 87.710% 99.086% 215,760.000 0.809% 0.914%
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Semiannual Report | 7

DIVIDEND REINVESTMENT PLAN

The Fund's Dividend Reinvestment Plan (the "Plan") offers you a prompt and
simple way to reinvest dividends and capital gain distributions
("Distributions") in shares of the Fund. PFPC, Inc. (the "Agent"), P.O. Box
43027, Providence, RI 02940-3027, will act as your Agent in administering the
Plan. The Agent will open an account for you under the Plan in the same name as
your outstanding shares are registered. The complete Terms and Conditions of
the Dividend Reinvestment Plan are contained in the Fund's Dividend Reinvestment
Plan Brochure. A copy of that Brochure may be obtained from the Fund at the
address on the back cover of this report.

You are automatically enrolled in the Plan unless you elect to receive
Distributions in cash. If you own shares in your own name, you should notify the
Agent, in writing, if you wish to receive Distributions in cash.

If the Fund declares a Distribution, you, as a participant in the Plan, will
automatically receive an equivalent amount of shares of the Fund purchased on
your behalf by the Agent.

If on the payment date for a Distribution, the net asset value per share is
equal to or less than the market price per share plus estimated brokerage
commissions, the Agent shall receive newly issued shares, including fractions,
from the Fund for your account. The number of additional shares to be credited
shall be determined by dividing the dollar amount of the Distribution by the
greater of the net asset value per share on the payment date, or 95% of the then
current market price per share.

If the net asset value per share exceeds the market price plus estimated
brokerage commissions on the payment date for a Distribution, the Agent (or a
broker-dealer selected by the Agent) shall try, for a purchase period of 30
days, to apply the amount of such Distribution on your shares (less your pro
rata share of brokerage commissions incurred) to purchase shares on the open
market. The weighted average price (including brokerage commissions) of all
shares it purchases shall be your allocated price per share. If, before the
Agent has completed its purchases, the market price plus estimated brokerage
commissions exceeds the net asset value of the shares as of the payment date,
the purchase price the Agent paid may exceed the net asset value of the shares,
resulting in the acquisition of fewer shares than if such Distribution had been
paid in shares issued by the Fund. Participants should note that they will not
be able to instruct the Agent to purchase shares at a specific time or at a
specific price. The Agent may make open-market purchases on any securities
exchange where shares are traded, in the over-the-counter market or in
negotiated transactions, and may be on such terms as to price, delivery and
otherwise as the Agent shall determine.

8 | Semiannual Report

The market price of shares on a particular date shall be the last sales price on
the American stock exchange, or, if there is no sale on the exchange on that
date, then the mean between the closing bid and asked quotations on the exchange
on such date. The net asset value per share on a particular date shall be the
amount most recently calculated by or on behalf of the Fund as required by law.
The Agent shall at all times act in good faith and agree to use its best efforts
within reasonable limits to ensure the accuracy of all services performed under
this agreement and to comply with applicable law, but assumes no responsibility
and shall not be liable for loss or damage due to errors unless such error is
caused by the Agent's negligence, bad faith, or willful misconduct or that of
its employees. Your uninvested funds held by the Agent will not bear interest.
The Agent shall have no responsibility for the value of shares acquired. For the
purpose of cash investments, the Agent may commingle your funds with those of
other participants of the same Fund.

There is no direct charge to participants for reinvesting Distributions, since
the Agent's fees are paid by the Fund. However, when shares are purchased in the
open market, each participant will pay a pro rata portion of any brokerage
commissions incurred. If you elect by notice to the Agent to have it sell part
or all of your shares and remit the proceeds, the Agent will deduct brokerage
commissions from the proceeds.

The automatic reinvestment of Distributions does not relieve you of any taxes
that may be payable on Distributions. In connection with the reinvestment of
Distributions, shareholders generally will be treated as having received a
Distribution equal to the cash Distribution that would have been paid.

The Agent will forward to you any proxy solicitation material and will vote any
shares so held for you first in accordance with the instructions set forth on
proxies you return to the Fund, and then with respect to any proxies you do not
return to the Fund in the same portion as the Agent votes proxies the
participants return to the Fund.

As long as you participate in the Plan, the Agent will hold the shares it has
acquired for you in safekeeping, in its name or in the name of its nominee. This
convenience provides added protection against loss, theft or inadvertent
destruction of certificates. However, you may request that a certificate
representing your Plan shares be issued to you. Upon your written request, the
Agent will deliver to you, without charge, a certificate or certificates for the
full shares. The Agent will send you a confirmation of each acquisition made for
your account as soon as practicable, but not later than 60 days after the

Semiannual Report | 9

acquisition date. Although from time to time you may have an undivided
fractional interest in a share of the Fund, no certificates for a fractional
share will be issued. Distributions on fractional shares will be credited to
your account. If you terminate your account under the Plan, the Agent will
adjust for any such undivided fractional interest in cash at the market value of
shares at the time of termination.

You may withdraw from the Plan at any time, without penalty, by notifying the
Agent in writing at the address above or by telephone at 1-800/331-1710. Such
termination will be effective with respect to a Distribution if the Agent
receives your notice prior to the Distribution record date. The Agent or the
Fund may terminate the Plan upon notice to you in writing mailed at least 30
days prior to any record date for the payment of any Distribution. Upon any
termination, the Agent will issue, without charge, stock certificates for all
full shares you own and will convert any fractional shares you hold at the time
of termination to cash at current market price and send you a check for the
proceeds.

The Fund or the Agent may amend the Plan. You will receive written notice at
least 30 days before the effective date of any amendment.

10 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

FINANCIAL HIGHLIGHTS

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SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 2004 MARCH 31,
(UNAUDITED) 2004(f)
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PER COMMON SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............................... $ 14.75 $ 14.33
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Income from investment operations:

Net investment income(a) ......................................... .52 .53

Net realized and unrealized gains (losses) ....................... (.03) .63

Dividends to preferred shareholders from net investment income(a) (.05) (.03)
----------------------------------
Total from investment operations ................................... .44 1.13
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Less distributions to common shareholders from net investment income (.59) (.59)
----------------------------------
Offering costs charged to capital:

Common shares .................................................... -- (.03)

Preferred shares ................................................. -- (.09)
----------------------------------
Total offering costs ............................................... -- (.12)
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Net asset value, end of period ..................................... $ 14.60 $ 14.75
==================================
Market value, end of period(b) ..................................... $ 14.54 $ 14.87
==================================

Total return [based on market value per share](c) .................. 1.95% 3.16%

RATIOS/SUPPLEMENTAL DATA

Net assets applicable to common shares, end of period (000's) ...... $ 389,089 $ 393,125

Ratios to average net assets applicable to common shares:

Expenses(d) ...................................................... 1.34% 1.11%

Net investment income(d) ......................................... 7.22% 6.12%

Portfolio turnover rate ............................................ 28.71% 45.08%

Portfolio turnover rate excluding mortgage dollar rolls(e) ......... 28.71% 41.02%

Asset coverage per preferred share ................................. $ 76,196 $ 76,727

Liquidation preference per preferred share ......................... $ 25,000 $ 25,000

(a) Based on average daily common shares outstanding.

(b) Based on the last sale on the American Stock Exchange.

(d) Annualized.

(e) See Note 1(d) regarding mortgage dollar rolls.

(f) For the period August 27, 2003 (commencement of operations) to March 31,
2004.

Semiannual Report | See notes to financial statements. | 11

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED)

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COUNTRY PRINCIPAL AMOUNT(d) VALUE
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BONDS 59.6%
COMMERCIAL SERVICES .9%
JohnsonDiversey Holdings Inc., senior disc. note, zero cpn. to
5/17/07, 10.67% thereafter, 5/15/13 ........................... United States $4,300,000 $ 3,569,000
-----------

COMMUNICATIONS 8.0%
American Cellular Corp., senior note, 10.00%, 8/01/11 ........... United States 4,000,000 3,260,000
MCI Inc., senior note, 5.908%, 5/01/07 .......................... United States 1,108,000 1,101,075
MCI Inc., senior note, 6.688%, 5/01/09 .......................... United States 2,000,000 1,932,500
MCI Inc., senior note, 7.735%, 5/01/14 .......................... United States 950,000 902,500
Millicom International Cellular SA, senior note, 144A, 10.00%,
12/01/13 ...................................................... Luxembourg 4,000,000 4,040,000
Nextel Communications Inc., senior note, 9.375%, 11/15/09 ....... United States 4,000,000 4,255,000
NTL Cable PLC, senior note, 144A, FRN, 6.61%, 10/15/12 .......... United Kingdom 3,000,000 3,097,500
Qwest Services Corp., senior secured note, 144A, 13.50%,
12/15/07 ...................................................... United States 4,000,000 4,570,000
Rural Cellular Corp., senior note, 9.875%, 2/01/10 .............. United States 4,000,000 3,980,000
Time Warner Telecom Inc., senior note, 10.125%, 2/01/11 ......... United States 2,000,000 1,930,000
Time Warner Telecom Inc., senior note, 9.25%, 2/15/14 ........... United States 2,000,000 2,000,000
-----------
31,068,575
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CONSUMER DURABLES 1.6%
D. R. Horton Inc., senior note, 8.00%, 2/01/09 .................. United States 4,000,000 4,560,000
True Temper Sports Inc., senior sub. note, 8.375%, 9/15/11 ...... United States 1,900,000 1,776,500
-----------
6,336,500
-----------

CONSUMER NON-DURABLES 3.3%
Del Monte Corp., senior sub. note, B, 9.25%, 5/15/11 ............ United States 4,000,000 4,420,000
Smithfield Foods Inc., senior note, 8.00%, 10/15/09 ............. United States 4,000,000 4,430,000
Stater Brothers Holdings, senior note, FRN, 5.38%, 6/15/10 ...... United States 4,000,000 4,080,000
-----------
12,930,000
-----------

CONSUMER SERVICES 15.9%
Advanstar Communications Inc., senior secured note, 10.75%,
8/15/10 ....................................................... United States 4,000,000 4,450,000
Boyd Gaming Corp., senior sub. note, 8.75%, 4/15/12 ............. United States 4,000,000 4,480,000
Charter Communications Holdings II, senior note, 10.25%,
9/15/10 ....................................................... United States 4,000,000 4,105,000
Clear Channel Communications Inc., senior note, 7.65%,
9/15/10 ....................................................... United States 4,000,000 4,570,036
CSC Holdings Inc., senior note, 8.125%, 7/15/09 ................. United States 4,000,000 4,270,000
Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 ........... United States 3,903,000 4,605,540
DirecTV Holdings LLC, senior note, 8.375%, 3/15/13 .............. United States 4,000,000 4,570,000
Inmarsat Finance PLC, senior note, 144A, 7.625%, 6/30/12 ........ United Kingdom 3,000,000 2,992,500
Lin Television Corp., senior note, 8.00%, 1/15/08 ............... United States 4,000,000 4,220,000
Marquee Inc., senior note, 144A, FRN, 5.97%, 8/15/10 ............ United States 4,000,000 4,140,000
Park Place Entertainment Corp., senior sub. note, 9.375%,
2/15/07 ....................................................... United States 4,000,000 4,470,000

12 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) (CONTINUED)

-------------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT(d) VALUE
-------------------------------------------------------------------------------------------------------------------------------

BONDS (CONT.)
CONSUMER SERVICES (CONT.)
Paxson Communications Corp., senior secured note, 144A, FRN,
4.35%, 1/15/10 ................................................... United States $3,500,000 $ 3,500,000
Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 ..... United States 1,000,000 1,030,000
Pinnacle Entertainment Inc., senior sub. note, B, 9.25%,
2/15/07 .......................................................... United States 2,077,000 2,139,310
Quebecor Media Inc., senior disc. note, zero cpn. to 7/15/06, 13.75%
thereafter, 7/15/11 .............................................. Canada 4,000,000 3,880,000
Royal Caribbean Cruises Ltd., senior note, 8.00%, 5/15/10 .......... United States 4,000,000 4,525,000
-----------
61,947,386
-----------

ELECTRONIC TECHNOLOGY 2.3%
Solectron Corp., senior note, 9.625%, 2/15/09 ...................... United States 4,000,000 4,450,000
Xerox Corp., senior note, 9.75%, 1/15/09 ........................... United States 4,000,000 4,680,000
-----------
9,130,000
-----------

HEALTH SERVICES 2.0%
Medcath Holdings Corp., senior note, 144A, 9.875%, 7/15/12 ......... United States 1,200,000 1,260,000
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11 .............. United States 4,000,000 3,610,000
Vanguard Health Holding Co. II LLC, senior sub. note, 144A, 9.00%,
10/01/14 ......................................................... United States 2,800,000 2,821,000
-----------
7,691,000
-----------

INDUSTRIAL SERVICES 2.6%
Allied Waste North America Inc., senior note, B, 8.50%, 12/01/08 ... United States 2,000,000 2,180,000
Hanover Equipment Trust 01, A, senior secured note, 8.50%,
9/01/08 .......................................................... United States 4,000,000 4,320,000
URS Corp., senior note, 11.50%, 9/15/09 ............................ United States 3,000,000 3,465,000
-----------
9,965,000
-----------

NON-ENERGY MINERALS 1.1%
Ispat Inland ULC, senior secured note, FRN, 8.35%, 4/01/10 ......... United States 4,000,000 4,280,000
-----------

PROCESS INDUSTRIES 7.7%
Crown European Holdings SA, senior secured note, 10.875%,
3/01/13 .......................................................... France 4,000,000 4,670,000
Georgia-Pacific Corp., senior note, 9.375%, 2/01/13 ................ United States 4,000,000 4,730,000
Graham Packaging Co., senior disc. note, B, 10.75%, 1/15/09 ........ United States 1,000,000 1,042,500
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08 .......... United States 2,000,000 2,067,500
Huntsman ICI Holdings LLC, senior disc. note, zero cpn.,
12/31/09 ......................................................... United States 6,000,000 3,210,000
Jefferson Smurfit Corp., senior note, 7.50%, 6/01/13 ............... United States 4,000,000 4,240,000
Lyondell Chemical Co., senior secured note, B, 9.875%, 5/01/07 ..... United States 3,569,000 3,787,601
Nalco Co., senior note, 7.75%, 11/15/11 ............................ United States 2,000,000 2,130,000
Rhodia SA, senior note, 10.25%, 6/01/10 ............................ France 4,000,000 4,160,000
-----------
30,037,601
-----------

Semiannual Report | 13

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) (CONTINUED)

-----------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT(d) VALUE
-----------------------------------------------------------------------------------------------------------------------

BONDS (CONT.)
PRODUCER MANUFACTURING 4.1%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11 .. United States $ 4,000,000 $ 4,500,000
Invensys PLC, senior note, 144A, 9.875%, 3/15/11 .......... United Kingdom 3,000,000 3,090,000
Milacron Escrow Corp., senior secured note, 144A, 11.50%,
5/15/11 ................................................. United States 4,000,000 4,260,000
TRW Automotive Inc., senior note, 9.375%, 2/15/13 ......... United States 3,500,000 4,016,250
------------
15,866,250
------------

REAL ESTATE INVESTMENT TRUSTS 1.2%
Host Marriott LP, senior note, 9.25%, 10/01/07 ............ United States 4,000,000 4,500,000
------------

TRANSPORTATION 2.4%
CP Ships Ltd., senior note, 10.375%, 7/15/12 .............. Canada 4,000,000 4,600,000
Laidlaw International Inc., senior note, 10.75%, 6/15/11 .. United States 4,000,000 4,585,000
------------
9,185,000
------------

UTILITIES 6.5%
Calpine Corp., senior secured note, 144A, 8.50%, 7/15/10 .. United States 4,000,000 3,080,000
Centerpoint Energy Inc., senior note, B, 7.25%, 9/01/10 ... United States 4,000,000 4,424,948
Dynegy Holdings Inc., senior note, 8.75%, 2/15/12 ......... United States 1,000,000 1,045,000
Dynegy Holdings Inc., senior secured note, 144A, 9.875%,
7/15/10 ................................................. United States 3,000,000 3,405,000
Edison Mission, senior note, 9.875%, 4/15/11 .............. United States 4,000,000 4,680,000
El Paso Natural Gas Co., senior note, 7.625%, 8/01/10 ..... United States 4,000,000 4,300,000
Utilicorp United Inc., senior note, 9.95%, 2/01/11 ........ United States 4,000,000 4,420,000
------------
25,354,948
------------
TOTAL BONDS (COST $225,879,859) ........................... 231,861,260
------------

U.S. GOVERNMENT AGENCIES/MORTGAGES 30.3%
FHLMC, 4.50%, 6/01/18 - 9/01/18 ........................... United States 4,473,958 4,471,191
FHLMC, 5.00%, 9/01/18 - 6/01/34 ........................... United States 26,684,345 26,746,676
FHLMC, 5.50%, 7/01/19 - 8/01/33 ........................... United States 8,667,320 8,816,639
FHLMC, 6.00%, 7/01/28 - 9/01/33 ........................... United States 7,309,939 7,566,145
FHLMC, 7.00%, 9/01/27 ..................................... United States 2,026,538 2,158,412
FHLMC, 8.00%, 1/01/31 ..................................... United States 763,639 830,699
FHLMC, 8.50%, 7/01/31 ..................................... United States 6,029,637 6,607,148
FNMA, 5.00%, 10/01/17 ..................................... United States 2,798,160 2,851,625
FNMA, 5.50%, 10/01/17 - 10/01/33 .......................... United States 19,426,950 19,850,992
FNMA, 6.00%, 4/01/33 ...................................... United States 2,274,607 2,357,751
FNMA, 6.50%, 8/01/32 ...................................... United States 3,745,020 3,932,194
FNMA, 7.00%, 9/01/18 ...................................... United States 873,207 929,739
FNMA, 8.00%, 10/01/29 ..................................... United States 650,731 712,855
FNMA, 8.50%, 8/01/26 ...................................... United States 919,434 1,015,749
GNMA, 5.00%, 10/20/33 ..................................... United States 5,644,040 5,619,465

14 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) (CONTINUED)

--------------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT(d) VALUE
--------------------------------------------------------------------------------------------------------------------------------

U.S. GOVERNMENT AGENCIES/MORTGAGES (CONT.)
GNMA, 5.50%, 6/15/33 ............................................. United States $ 960,076 $ 979,044
GNMA, 6.50%, 6/15/31 - 12/15/33 .................................. United States 15,039,096 15,889,588
GNMA, 7.00%, 1/20/24 - 12/20/30 .................................. United States 4,312,197 4,595,137
GNMA, 8.00%, 1/20/28 - 2/20/32 ................................... United States 688,380 747,990
GNMA II, 8.00%, 2/20/30 - 5/20/30 ................................ United States 962,215 1,045,656
------------
TOTAL U.S. GOVERNMENT AGENCIES/MORTGAGES (COST $116,083,695) ..... 117,724,695
------------

ASSET-BACKED SECURITIES 10.6%
Argent Securities Inc., Series 2003-W5, M4, 5.59%, 10/25/33 ...... United States 4,000,000 4,235,478
GSR Mortgage Trust, Series 2003-AHL, B1, 5.84%, 10/25/33 ......... United States 5,000,000 5,141,514
Merrill Lynch Mortgage Investors Inc., Series 2003-OPT1, B2,
4.59%, 7/25/34 ................................................. United States 1,000,000 1,037,321
Morgan Stanley ABS Capital, Series 2003-HE3, B1, 5.14%,
10/25/33 ....................................................... United States 3,500,000 3,563,289
Morgan Stanley ABS Capital, Series 2003-NC10, B1, 5.14%,
10/25/33 ....................................................... United States 3,000,000 3,090,527
Morgan Stanley Auto Loan Trust, Series 2003-HB1, D, 144A, 5.50%,
4/15/11 ........................................................ United States 2,666,300 2,643,072
Morgan Stanley Dean Witter Capital Trust I, Series 2003-NC3, B1,
4.84%, 3/25/33 ................................................. United States 4,508,000 4,646,394
New Century Home Equity Loan Trust, Series 2003-2, M3, 5.54%,
1/25/33 ........................................................ United States 5,000,000 5,162,893
Option One Mortgage Loan Trust, Series 2003-6, M5, 5.14%,
11/25/33 ....................................................... United States 3,500,000 3,669,981
Residential Asset Securities Corp., Series 2003-KS10, MII3, 4.39%,
12/25/33 ....................................................... United States 1,500,000 1,550,149
Specialty Underwriting and Residential Finance, Series 03-BC4,
4.34%, 11/25/34 ................................................ United States 1,500,000 1,540,016
Structured Asset Investment Loan Trust, Series 03-BC13, 4.59%,
11/25/33 ....................................................... United States 3,340,000 3,391,308
Structured Asset Investment Loan Trust, Series 2003-BC2, M3,
5.09%, 4/25/33 ................................................. United States 1,471,000 1,495,899
------------
TOTAL ASSET-BACKED SECURITIES (COST $39,534,194) ................. 41,167,841
------------

(a) SENIOR FLOATING RATE INTERESTS 39.4%
COMMERCIAL SERVICES 1.0%
DS Waters Enterprises LP, Term Loan, 4.62 - 4.92%, 11/07/09 ...... United States 3,870,000 3,728,745
------------

COMMUNICATIONS 5.3%
AAT Communications Corp., Term Loan B, 4.40 - 4.53%, 12/31/11 .... United States 3,000,000 3,041,250
Alec Holdings Inc., Term Loan B, 5.25%, 8/20/10 .................. United States 2,977,500 3,007,894
American Tower Corp., Term Loan B, 4.09%, 8/31/11 ................ United States 748,125 758,295
Cincinnati Bell Inc., Term Loan D, 4.18 - 4.47%, 6/30/08 ......... United States 1,521,909 1,538,079
Dobson Cellular Systems Inc., Term Loan, 5.17 - 5.36%, 3/31/10 ... United States 2,970,000 2,954,779
GCI Holdings Inc., Term Loan, 3.95%, 10/30/04 .................... United States 712,753 720,722

Semiannual Report | 15

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) (CONTINUED)

-----------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT(d) VALUE
-----------------------------------------------------------------------------------------------------------------------------

(a) SENIOR FLOATING RATE INTERESTS (CONT.)
COMMUNICATIONS (CONT.)
Nextel Finance (Nextel Communications Inc.), Term Loan E, 4.188%,
12/15/10 ......................................................... United States $1,985,000 $ 1,997,007
Panamsat Corp., Term Loan B, 4.561%, 8/01/11 ....................... United States 4,000,000 4,006,876
Spectrasite Communications Inc., Term Loan C, 3.68%, 2/22/07 ....... United States 2,640,904 2,668,396
-----------
20,693,298
-----------

CONSUMER DURABLES 2.6%
BRP Holdings LP, Term Loan, 4.46%, 12/18/10 ........................ United States 3,980,000 4,051,517
Landsource Communities Development LLC, Term Loan B, 4.375%,
3/31/10 .......................................................... United States 1,000,000 1,015,625
Sola International Inc., Term Loan, 4.48%, 12/05/09 ................ United States 975,000 988,406
Solo Cup Co., Term Loan B, 4.21 - 4.475%, 2/23/11 .................. United States 1,994,987 2,014,937
Springs Industries Inc., Term Loan A, 5.25%, 3/05/07 ............... United States 2,144,177 2,156,909
-----------
10,227,394
-----------

CONSUMER NON-DURABLES 2.1%
Atkins Nutritionals Inc., First Lien Term Loan, 5.23%, 11/21/09 .... United States 1,895,000 1,681,813
B&G Foods Inc., Term Loan, 4.94 - 7.00%, 9/03/09 ................... United States 990,000 995,775
Dole Food Inc., Term Loan D, 3.938 - 6.00%, 3/28/08 ................ United States 618,730 623,717
Land O'Lakes Inc., Term Loan B, 4.73%, 10/11/08 .................... United States 695,661 707,980
Meow Mix Co., First Lien Term Loan, 6.12 - 6.20%, 8/21/09 .......... United States 1,033,797 1,002,783
Michael Foods Inc., Term Loan B, 3.84 - 4.214%, 11/21/10 ........... United States 694,750 703,000
Rayovac Corp., Term Loan C, 4.10 - 4.33%, 10/01/09 ................. United States 810,726 817,398
Southern Wine & Spirits of America Inc., Term Loan B, 4.23%,
6/21/08 .......................................................... United States 1,682,847 1,703,882
-----------
8,236,348
-----------

CONSUMER SERVICES 12.8%
Alderwoods Group Inc., Term Loan B1, 4.42 - 6.50%, 8/19/10 ......... United States 1,452,180 1,466,281
Alliance Gaming Corp., Term Loan B, 3.538%, 8/22/09 ................ United States 1,814,326 1,836,460
Canwest Media Inc., Term Loan E, 4.065%, 5/15/09 ................... Canada 1,506,093 1,524,528
Charter Communications Operating LLC, Term Loan B, 4.92%,
4/23/11 .......................................................... United States 1,995,000 1,981,476
Cinram International, Term Loan D, 4.80%, 9/30/09 .................. Canada 3,804,698 3,844,647
Dex Media West LLC, Term Loan B, 3.83 - 4.09%, 3/09/10 ............. United States 3,459,259 3,508,058
DirecTV Holdings LLC, Term Loan, 3.63 - 3.82%, 3/06/10 ............. United States 1,651,837 1,654,149
Emmis Operating Co., Term Loan B, 3.488%, 11/10/11 ................. United States 1,000,000 1,009,306
Grapeclose Ltd. (Inmarsat), Term Loan B, 4.829 - 4.889%,
10/10/10 ......................................................... United Kingdom 2,000,000 2,011,062
Grapeclose Ltd. (Inmarsat), Term Loan C, 5.329 - 5.389%,
10/10/11 ......................................................... United Kingdom 2,000,000 2,018,000
Green Valley Ranch Gaming LLC, Term Loan B, 4.725%,
12/05/10 ......................................................... United States 992,500 1,007,387
Insight Midwest Holdings, Term Loan A, 3.25%, 6/30/09 .............. United States 1,362,305 1,361,651
Insight Midwest Holdings, Term Loan B, 4.75%, 12/31/09 ............. United States 2,014,775 2,043,038

16 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) (CONTINUED)

(a) SENIOR FLOATING RATE INTERESTS (CONT.)
CONSUMER SERVICES (CONT.)
MCC Iowa (Broadband), Term Loan B1, 4.17 - 4.48%, 9/12/10 .......... United States $1,995,000 $ 2,013,011
Medianews Group Inc., Term Loan C, 3.26 - 5.25%, 12/30/10 .......... United States 2,312,386 2,318,792
Metro-Goldwyn-Mayer Studios Inc., Term Loan B, 4.48%,
4/30/11 .......................................................... United States 1,500,000 1,506,000
Primedia Inc., Term Loan B, 4.625%, 6/30/09 ........................ United States 1,695,509 1,639,981
Rainbow National Services LLC, Term Loan B, 4.50%, 3/31/12 ......... United States 2,500,000 2,535,313
Readers Digest Association, Term Loan B, 3.57%, 5/20/08 ............ United States 533,299 540,048
Regal Cinemas Inc., Term Loan B, 4.225%, 11/10/10 .................. United States 1,929,546 1,953,665
Scientific Games Corp., Term Loan C, 4.34%, 12/31/09 ............... United States 1,985,000 2,013,947
Six Flags Theme Parks, Term Loan B, 4.19%, 6/30/09 ................. United States 3,612,716 3,643,201
Warner Music, Term Loan B, 4.025 - 4.531%, 2/28/11 ................. United States 4,975,000 5,050,068
Wyndham International Inc., Term Loan B, 6.625%, 6/30/06 ........... United States 1,305,125 1,298,328
------------
49,778,397
------------

ELECTRONIC TECHNOLOGY .7%
AMI Semiconductor, Term Loan, 4.34%, 9/26/08 ....................... United States 2,673,000 2,703,071
------------

ENERGY MINERALS .3%
Peabody Energy Corp., Term Loan B, 3.51 - 3.59%, 3/21/10 ........... United States 994,962 1,004,435
------------

FINANCE 1.3%
Conseco Inc., Term Loan, 5.333%, 6/22/10 ........................... United States 2,000,000 2,030,327
Newkirk Master LP, Term Loan, 6.079 - 6.475%, 11/24/06 ............. United States 845,551 853,478
Refco Group Ltd. LLC, Term Loan B, 4.561%, 7/28/11 ................. United States 2,250,000 2,250,000
------------
5,133,805
------------

HEALTH SERVICES 1.5%
DaVita Inc., Term Loan B, 3.60 - 4.17%, 6/30/10 .................... United States 3,654,698 3,693,814
Multiplan Inc., Term Loan, 4.73%, 3/04/09 .......................... United States 995,000 1,004,950
Quintiles Transnational Corp., Term Loan B, 6.23%, 9/25/09 ......... United States 990,000 1,004,850
------------
5,703,614
------------

HEALTH TECHNOLOGY .5%
DJ Orthopedics LLC, Term Loan B, 3.938 - 4.25%, 6/03/09 ............ United States 1,925,000 1,946,656
------------

INDUSTRIAL SERVICES 1.8%
Allied Waste North America Inc., Term Loan C, 4.63 - 4.67%,
1/15/10 .......................................................... United States 983,951 999,633
Allied Waste North America Inc., Term Loan D, 4.10%, 1/15/10 ....... United States 1,967,902 1,997,596
Washington Group, Synthetic Term Loan, 1.54%, 10/01/07 ............. United States 4,000,000 4,003,280
------------
7,000,509
------------

NON-ENERGY MINERALS .5%
St. Marys Cement Inc., Term Loan B, 3.975%, 11/24/09 ............... Canada 1,989,987 2,005,535
------------

Semiannual Report | 17

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) (CONTINUED)

(a) SENIOR FLOATING RATE INTERESTS (CONT.)
PROCESS INDUSTRIES 1.6%
Berry Plastics, Term Loan C, 3.71%, 7/22/10 ........................ United States $ 867,425 $ 878,630
Kraton Polymers LLC, Term Loan B, 4.375 - 4.625%, 12/24/10 ......... United States 950,592 955,939
Nalco Co., Term Loan B, 4.33 - 6.25%, 11/04/10 ..................... United States 3,375,628 3,419,416
Rockwood Specialties Group Inc., Term Loan B, 4.21%, 7/30/11 ....... United States 1,000,000 1,007,891
------------
6,261,876
------------

PRODUCER MANUFACTURING 3.3%
Day International Group Inc., Term Loan D, 5.34 - 5.48%,
1/01/10 .......................................................... United States 896,431 904,835
Itron Inc., Term Loan B, 4.25%, 11/24/10 ........................... United States 943,446 953,077
Masonite International Corp., Term Loan C2, 4.063%, 8/31/08 ........ United States 994,997 1,012,099
Metaldyne (Masotech Inc.), Term Loan D, 5.875%, 12/31/09 ........... United States 1,755,390 1,755,208
Roper Industries Inc., Term Loan, 3.59 - 3.66%, 12/19/08 ........... United States 962,500 976,937
Sensus Metering Systems Inc., Term Loan, 4.891 - 4.921%,
12/16/10 ......................................................... United States 985,000 997,313
(b) Trimas Corp., Term Loan B, 5.188%, 12/06/09 ........................ United States 2,304,833 2,324,760
TRW Automotive Acquisition Corp., Term Loan A1, 3.625%,
2/28/09 .......................................................... United States 2,000,000 2,020,416
TRW Automotive Acquisition Corp., Term Loan D1, 4.125%,
2/28/11 .......................................................... United States 1,990,000 2,025,655
------------
12,970,300
------------

RETAIL TRADE 1.4%
CSK Auto Inc., Term Loan C, 3.60%, 6/20/09 ......................... United States 497,500 500,236
(b) Jean Coutu Group PJC Inc., Term Loan B, 4.125%, 7/28/11 ............ United States 4,000,000 4,055,456
Pantry Inc., Term Loan, 4.59%, 3/12/11 ............................. United States 668,763 678,854
------------
5,234,546
------------

TECHNOLOGY SERVICES .1%
Worldspan, Term Loan, 5.438 - 7.50%, 6/30/07 ....................... United States 561,481 563,587
------------

TRANSPORTATION .5%
Laidlaw International Inc., Term Loan B, 5.59%, 6/17/09 ............ United States 1,898,990 1,930,739
------------

UTILITIES 2.1%
AES Corp., Term Loan B, 4.00 - 4.25%, 4/30/08 ...................... United States 571,431 578,305
Calpine Corp., Second Lien Term Loan, 6.89%, 7/15/07 ............... United States 1,980,000 1,738,276
Centerpoint Energy Inc., Term Loan B, 4.723%, 10/07/06 ............. United States 3,956,757 3,979,014
Coleto Creek WLE LP, Term Loan C, 5.19%, 7/31/12 ................... United States 2,000,000 2,025,834
------------
8,321,429
------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $152,932,379) ........... 153,444,284
------------

18 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) (CONTINUED)

----------------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT(d) VALUE
----------------------------------------------------------------------------------------------------------------------------------

FOREIGN GOVERNMENT AND AGENCY SECURITIES 4.2%
Government of New Zealand, 8.00%, 11/15/06 ...................... New Zealand $ 3,600,000 NZD $ 2,521,934
Kingdom of Norway, 6.75%, 1/15/07 ............................... Norway 10,700,000 NOK 1,737,535
Kingdom of Sweden, 8.00%, 8/15/07 ............................... Sweden 10,900,000 SEK 1,689,184
Kingdom of Thailand, 8.50%, 10/14/05 ............................ Thailand 120,000,000 THB 3,096,243
Korea Treasury Bond, 6.90%, 1/16/07 ............................. South Korea 5,100,000,000 KRW 4,817,926
New South Wales Treasury Corp., 6.50%, 5/01/06 .................. Australia 3,300,000 AUD 2,442,684
-------------

TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES
(COST $16,190,113) ............................................ 16,305,506
-------------

-----------
SHARES
-----------

PREFERRED STOCK (COST $4,165,250) 1.1%
HEALTH SERVICES
Fresenius Medical Care Capital Trust II, 7.875%, 2/01/08 ........ Germany 4,000 4,380,000
-------------
TOTAL LONG TERM INVESTMENTS (COST $554,785,490) ................. 564,883,586
-------------

SHORT TERM INVESTMENT (COST $12,754,960) 3.3%
(c) Franklin Institutional Fiduciary Trust Money Market Portfolio ... United States 12,754,960 12,754,960
-------------
TOTAL INVESTMENTS (COST $567,540,450) 148.5% .................... 577,638,546
PREFERRED SHARES (48.8)% ........................................ (190,000,000)
OTHER ASSETS, LESS LIABILITIES .3% .............................. 1,450,831
-------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0% ................... $ 389,089,377
=============

(a) See Note 1(e) regarding senior floating rate interests.

(b) See Note 1(c) regarding securities purchased on a when-issued, delayed
delivery or to-be-announced basis.

(d) The principal amount is stated in U.S. dollars unless otherwise indicated.

Semiannual Report | See notes to financial statements. | 19

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
September 30, 2004 (unaudited)

Assets:

Investments in securities:
Cost - Unaffiliated issuers .................................................................. $ 554,785,490
Cost - Sweep Money Fund (Note 7) ............................................................. 12,754,960
=============
Value - Unaffiliated issuers ................................................................. 564,883,586
Value - Sweep Money Fund (Note 7) ............................................................ 12,754,960
Cash .......................................................................................... 1,157,527
Receivables:
Investment securities sold ................................................................... 555,396
Interest ..................................................................................... 5,672,141
-------------
Total assets ........................................................................... 585,023,610
-------------

Liabilities:
Payables:
Investment securities purchased .............................................................. 2,429,075
Affiliates ................................................................................... 329,921
Distributions to shareholders ................................................................. 2,633,409
Other liabilities ............................................................................. 541,828
-------------
Total liabilities ...................................................................... 5,934,233
-------------
Preferred shares at redemption value [$25,000 liquidation per share (7,600 shares outstanding)] 190,000,000
-------------
Net assets applicable to common shares ............................................... $ 389,089,377
=============

Net assets applicable to common shares consist of:
Distributions in excess of net investment income .............................................. $ (4,663,281)
Net unrealized appreciation (depreciation) .................................................... 10,103,913
Accumulated net realized gain (loss) .......................................................... 4,892,642
Capital shares ................................................................................ 378,756,103
-------------
Net assets applicable to common shares ............................................... $ 389,089,377
=============
Net asset value per common share ($389,089,377 / 26,653,938 common shares outstanding) .......... $14.60
=============

20 | See notes to financial statements. | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended September 30, 2004 (unaudited)

Investment income:

Dividends
Unaffiliated issuers ................................................................... $ 157,500
Sweep Money Fund (Note 7) .............................................................. 55,841
Interest ................................................................................ 16,375,743
------------
Total investment income ............................................................ 16,589,084
------------

Expenses:
Management fees (Note 4) ................................................................ 1,423,971
Administrative fees (Note 4) ............................................................ 578,252
Transfer agent fees ..................................................................... 19,003
Custodian fees .......................................................................... 4,881
Reports to shareholders ................................................................. 19,867
Professional fees ....................................................................... 23,399
Trustees' fees and expenses ............................................................. 25,355
Auction agent fees and expenses ......................................................... 488,172
Other ................................................................................... 13,485
------------
Total expenses ..................................................................... 2,596,385
Expenses reductions (Note 5) ....................................................... (393)
------------
Net expenses ..................................................................... 2,595,992
------------
Net investment income .......................................................... 13,993,092
------------

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................................ 3,910,113
Foreign currency transactions .......................................................... (23,082)
------------
Net realized gain (loss) ......................................................... 3,887,031
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................................ (4,740,525)
Translation of assets and liabilities denominated in foreign currencies ................ 817
------------
Net unrealized appreciation (depreciation) ....................................... (4,739,708)
------------
Net realized and unrealized gain (loss) ................................................... (852,677)
------------
Net increase (decrease) in net assets resulting from operations ........................... 13,140,415
Distributions to preferred shareholders from net investment income ........................ (1,375,294)
------------
Net increase (decrease) in net assets applicable to common shares resulting from operations $ 11,765,121
============

Semiannual Report | See notes to financial statements. | 21

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended September 30, 2004 (unaudited)
and the period ended March 31, 2004(a)

--------------------------------
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, MARCH 31,
2004 2004
--------------------------------

Increase (decrease) in net assets applicable to common shares:
Operations:
Net investment income .................................................................... $ 13,993,092 $ 13,948,935
Net realized gain (loss) from investments and foreign currency transactions .............. 3,887,031 2,220,430
Net change in unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies ............................... (4,739,708) 14,843,621
Distributions to preferred shareholders from net investment income ....................... (1,375,294) (876,027)
--------------------------------
Net increase (decrease) in net assets applicable to common shares resulting
from operations .................................................................... 11,765,121 30,136,959
Distributions to common shareholders from net investment income ............................ (15,800,453) (15,768,522)
Capital share transactions:
Net proceeds from sale of common stock (Note 2) .......................................... -- 380,472,000
Common stock offering costs (Note 1 and Note 2) .......................................... -- (796,800)
Preferred stock offering costs and underwriting discounts (Note 1 and Note 3) ............ -- (2,311,090)
Reinvestment of distributions (Note 2) ................................................... -- 1,292,162
--------------------------------
Total capital share transactions ........................................................... -- 378,656,272
Net increase (decrease) in net assets ................................................ (4,035,332) 393,024,709
Net assets applicable to common shares:
Beginning of period ........................................................................ 393,124,709 100,000(b)
--------------------------------
End of period .............................................................................. $ 389,089,377 $ 393,124,709
================================
Distributions in excess of net investment income included in net assets:
End of period .............................................................................. $ (4,663,281) $ (1,480,626)
================================

(a) For the period August 27, 2003 (commencement of operations) to March 31,
2004.

(b) On August 19, 2003, the Fund was seeded by Franklin Advisers Inc. with
aggregate proceeds of $100,000.

22 | See notes to financial statements. | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Franklin Templeton Limited Duration Income Trust (the Fund) is registered
under the Investment Company Act of 1940 as a diversified, closed-end investment
company. The Fund seeks high current income. The following summarizes the Fund's
significant accounting policies.

A. SECURITY VALUATION

Securities listed or traded on a recognized national exchange are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing price. Debt securities, other over-the-counter
securities and listed securities for which no sale is reported are valued within
the range of the latest quoted bid and asked prices by independent pricing
services or recognized dealers in such securities. Foreign securities are
valued at the close of trading of the foreign exchange or the NYSE, whichever is
earlier. If events occur that materially affect the values of securities after
the prices or foreign exchange rates are determined, but prior to 4:00 p.m.
Eastern time or the close of trading on the NYSE, whichever is earlier, or if
market quotations are deemed not readily available or reliable, the securities
will be valued at fair value. Investments in open-end mutual funds are valued at
the closing net asset value. All security valuation procedures are approved by
the Board of Trustees.

The Fund invests in senior secured corporate loans and senior secured debt that
meet credit standards established by Franklin Advisers, Inc. The Fund values its
securities based on quotations provided by banks, broker/dealers or pricing
services experienced in such matters.

B. FOREIGN CURRENCY TRANSLATION

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date.

The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.

Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded
amounts of dividends, interest, and foreign withholding taxes and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in foreign exchange rates
on foreign denominated assets and liabilities other than investments in
securities held at the end of the reporting period.

Semiannual Report | 23

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. SECURITIES PURCHASED ON A WHEN-ISSUED, DELAYED DELIVERY, OR TBA BASIS

The Fund may purchase securities on a when-issued, delayed delivery, or
to-be-announced (TBA) basis, with payment and delivery scheduled for a future
date. These transactions are subject to market fluctuations and are subject to
the risk that the value at delivery may be more or less than the trade date
purchase price. Although the Fund will generally purchase these securities with
the intention of holding the securities, it may sell the securities before the
settlement date.

D. MORTGAGE DOLLAR ROLLS

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Dollar
rolls are agreements between the Fund and a financial institution to
simultaneously sell and repurchase a mortgage-backed security at a future date.
Gains or losses are realized at the time of the sale and the difference between
the repurchase price and sale price is recorded as an unrealized gain to the
Fund. The risks of mortgage dollar roll transactions include the potential
inability of the counterparty to fulfill its obligations.

E. SENIOR FLOATING RATE INTERESTS

Senior secured corporate loans pay interest at rates which are periodically
reset by reference to a base lending rate plus a spread. These base lending
rates are generally the prime rate offered by a designated U.S. bank or the
London InterBank Offered Rate (LIBOR).

F. INCOME TAXES

No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under Sub Chapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.

G. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Facility fees are recognized as income over the expected term of the
loan. Dividend income and distributions to shareholders are recorded on the
ex-dividend date.

H. OFFERING COSTS

Offering costs are charged to paid-in-capital upon the sale of Fund shares.

24 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

I. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.

J. GUARANTEES AND INDEMNIFICATIONS

Under the Funds' organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

On August 27, 2003, the Fund completed the initial public offering. On September
25, 2003 and October 14, 2003, the Fund issued additional shares in connection
with the exercise of the underwriters' over allotment allocation option.
Shares were issued at $15.00 per share before the underwriters discount of
$0.675 per share. The Fund's manager agreed in advance to assume as its own
expense all offering and organizational expenses in excess of $.03 per share,
excluding the underwriters' discount.

Transactions in the Fund's common shares were as follows:

------------------------------------------------------------------------------------------
PERIOD ENDED
SEPTEMBER 30, 2004 YEAR ENDED
(UNAUDITED) MARCH 31, 2004
------------------------------------------------------------------------------------------
UNDERWRITERS PROCEEDS TO
SHARES AMOUNT SHARES AMOUNT DISCOUNT THE FUND
------------------------------------------------------------------------------------------

Initial Public
Offering ....... -- $ -- 24,600,000 $369,000,000 $16,605,000 $352,395,000
Over-Allotment
Allocation ..... -- -- 1,960,000 29,400,000 1,323,000 28,077,000
Shares issued in
reinvestment
of distributions -- -- 86,957 1,292,162 -- 1,292,162
------------------------------------------------------------------------------------------
Total ............ -- $ -- 26,646,957 $399,692,162 $17,928,000 $381,764,162
==========================================================================================

At September 30, 2004, there were 28,290,900 shares authorized (no par value).

Semiannual Report | 25

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. AUCTION RATE PREFERRED SHARES

On November 7, 2003 the Fund issued 2,534 Preferred Shares Series M, 2,533
Preferred Shares Series W and 2,533 Preferred Shares Series F, each with a
$25,000 liquidation preference per share totaling $190,000,000. Dividends to
preferred shareholders are cumulative and are declared weekly, at rates
established through an auction process. In connection with the weekly auctions,
the Fund pays an annual fee as well as commissions to the auction agent for its
services. During the period ended September 30, 2004, the dividends on Preferred
Shares ranged from 1.02% to 1.87%.

The Fund is required to maintain on a weekly basis a specified discounted value
of its portfolio in compliance with guidelines established by Fitch Ratings and
Moody's Investor Services Inc., and is required to maintain asset coverage for
the Preferred Shares of at least 200%.

The Preferred Shares are redeemable by the Fund at any time and are subject to
mandatory redemption if the asset coverage or discounted value requirements
are not met. During the period ended September 30, 2004, all requirements were
met.

4. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Fund are also officers and/or directors of
the following entities:

-----------------------------------------------------------------------------
ENTITY AFFILIATION
-----------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager

The Fund pays an investment management fee and administrative fee to Advisers
and FT Services of .50% and .20%, respectively, per year of the average daily
net assets, plus the liquidation value of the preferred shares.

5. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended September 30, 2004, the
custodian fees were reduced as noted in the Statement of Operations.

26 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. INCOME TAXES

At September 30, 2004, the net unrealized appreciation (depreciation) based on
the cost of investments for income tax purposes was as follows:

Cost of investments ...................... $ 568,999,515
=============
Unrealized appreciation .................. $ 12,430,025
Unrealized depreciation .................. (3,790,994)
-------------
Net unrealized appreciation (depreciation) $ 8,639,031
=============

At March 31, 2004, the Fund had deferred currency losses occurring subsequent to
October 31, 2003 of $7,863. For tax purposes, such losses will be reflected in
the year ending March 31, 2005.

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, mortgage dollar
rolls, paydown losses, and bond discount and premiums.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, mortgage dollar rolls, paydown losses, and bond discount and
premiums.

7. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended September 30, 2004 aggregated $162,001,351 and $166,918,997,
respectively.

8. INVESTMENTS IN THE FRANKLIN INSTITUTIONAL FIDUCIARY MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Fund are reduced on assets invested in the
Sweep Money Fund, in an amount not to exceed the management fees paid by the
Sweep Money Fund.

9. CREDIT RISK

The Fund has 67.13% of its portfolio invested in below investment grade and
comparable quality unrated high yield securities, which tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities because such securities may be unsecured and
subordinated to other creditors of the issuer.

Semiannual Report | 27

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

10. REGULATORY MATTERS

MASSACHUSETTS ADMINISTRATIVE PROCEEDING

On September 20, 2004, Franklin Resources, Inc. (Franklin Resources, Inc. and
its subsidiaries are referred to collectively as the "Company") announced that
an agreement has been reached by two of its subsidiaries, Franklin Advisers,
Inc. ("Franklin Advisers") and Franklin Templeton Alternative Strategies, Inc.
("FTAS"), with the Securities Division of the Office of the Secretary of the
Commonwealth of Massachusetts (the "State of Massachusetts") related to an
administrative complaint filed on February 4, 2004. The administrative complaint
addressed one instance of market timing that was also a subject of the August 2,
2004 settlement that Franklin Advisers reached with the SEC, as described below.

Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers and FTAS have consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts. The consent order has multiple sections, including
"Statements of Fact" and "Violations of Massachusetts Securities Laws." The
Company admitted the "Statements of Fact." The Company did not admit or deny the
"Violations of the Massachusetts Securities Laws." While Franklin Advisers and
FTAS did not admit or deny engaging in any wrongdoing, the Company believes that
it is in its best interest and the interests of its funds' shareholders to
settle this issue now and move forward.

On October 25, 2004, the State of Massachusetts filed an administrative
complaint against Franklin Resources, Inc. ("FRI") alleging a violation of the
Massachusetts Uniform Securities law (the "Act") in connection with having filed
on September 20, 2004, an allegedly false and misleading report on Form 8-K with
the SEC. The Massachusetts administrative complaint seeks an order calling for
FRI to cease and desist from further violations of the Act and to pay an
administrative fine in an amount to be determined.

FRI's SEC filing of September 20, 2004 described the settlement consent order
with the State of Massachusetts and reported while "Franklin Advisers and FTAS
did not admit or deny engaging in any wrongdoing, the Company believes that it
is in the best interest of the Company and its funds' shareholders to settle
this issue now and move forward." The October 25, 2004 State of Massachusetts
administrative complaint alleges that this description of the settlement consent
order was materially false and misleading under Massachusetts law. FRI's
management disagrees with the allegation made in this administrative complaint
and continues to believe that the description of the terms of the settlement
consent order issued by the State of Massachusetts is neither false nor
misleading.

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT

On August 2, 2004, the Company announced that an agreement has been reached by
Franklin Advisers with the SEC that resolves the issues resulting from the SEC's
investigation of market timing activity and the SEC issued an "Order instituting
administrative and cease-and-desist

28 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

10. REGULATORY MATTERS (CONTINUED)

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT (CONTINUED)

proceedings pursuant to sections 203(e) and 203(k) of the Investment Advisers
Act of 1940 and sections 9(b) and 9(f) of the Investment Company Act of 1940,
making findings and imposing remedial sanctions and a cease-and-desist order"
(the "Order"). The SEC's Order concerns the activities of a limited number of
third parties that ended in 2000 and those that are the subject of the
Massachusetts administrative complaint described above.

Under the terms of the SEC's Order, pursuant to which Franklin Advisers neither
admits nor denies any wrongdoing, Franklin Advisers has agreed to pay $50
million, of which $20 million is a civil penalty, to be distributed to
shareholders of certain funds in accordance with a plan to be developed by an
Independent Distribution Consultant. At this time, it is unclear which funds
will receive distributions or which shareholders of any particular fund will
receive distributions. The SEC Order also requires Franklin Advisers to, among
other things, enhance and periodically review compliance policies and
procedures.

OTHER GOVERNMENTAL INVESTIGATIONS

As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees have been providing documents and information in response
to these requests and subpoenas. In addition, the Company has responded to
requests for similar kinds of information from regulatory authorities in some of
the foreign countries where the Company conducts its global asset management
business.

The staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against Franklin Advisers and Franklin
Templeton Distributors, Inc. ("FTDI") concerning payments to securities dealers
who sell fund shares (commonly referred to as "revenue sharing"). The staff of
the California Attorney General's Office ("CAGO") also has advised the Company
that the California Attorney General is authorized to bring a civil action
against the Company and FTDI arising from the same events. Even though the
Company currently believes that the charges the SEC staff and CAGO staff are
contemplating are unwarranted, it also believes that it is in the best interest
of the Company's and funds' shareholders to resolve these issues voluntarily, to
the extent the Company can reasonably do so. The Company continues to have
discussions towards resolving these governmental investigations.

Semiannual Report | 29

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

10. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS

The Fund, in addition to other entities within Franklin Templeton Investments,
including certain of its subsidiaries, other funds, and current and former
officers, employees, and directors have been named in multiple lawsuits in
different federal courts in Nevada, California, Illinois, New York and Florida,
alleging violations of various federal securities laws and seeking, among other
things, monetary damages and costs. Specifically, the lawsuits claim breach of
duty with respect to alleged arrangements to permit market timing and/or late
trading activity, or breach of duty with respect to the valuation of the
portfolio securities of certain funds managed by Company subsidiaries, resulting
in alleged market timing activity. The majority of these lawsuits duplicate, in
whole or in part, the allegations asserted in the Massachusetts administrative
complaint described above. The lawsuits are styled as class actions or
derivative actions on behalf of either the named funds or the Company.

Various subsidiaries of the Company have also been named in multiple lawsuits
filed in state courts in Illinois alleging breach of duty with respect to
valuation of the portfolio securities of certain funds managed by such
subsidiaries.

In addition, the Company and certain of its subsidiaries, as well as certain
current and former officers, employees, and directors have been named in
multiple lawsuits alleging violations of various securities laws and pendent
state law claims relating to the disclosure of directed brokerage payments
and/or payment of allegedly excessive advisory, commission, and distribution
fees. These lawsuits are styled as class actions and derivative actions brought
on behalf of certain funds.

The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.

The Company cannot predict with certainty the eventual outcome of the foregoing
governmental investigations or class actions or other lawsuits. If the Company
finds that it bears responsibility for any unlawful or inappropriate conduct
that caused losses to the Fund, it is committed to making the Fund or its
shareholders whole, as appropriate.

30 | Semiannual Report

FRANKLIN TEMPLETON

LIMITED DURATION INCOME TRUST

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the 12-month period beginning July 1, 2003, and
ending June 30, 2004.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

CERTIFICATIONS

The Fund's Chief Executive Officer - Finance and Administration is required by
the New York Stock Exchange's Listing Standards to file annually with the
Exchange a certification that he is not aware of any violation by the Fund of
the Exchange's Corporate Governance Standards applicable to the Fund. The Fund
has filed such certification.

In addition, the Fund's Chief Executive Officer - Finance and Administration and
Chief Financial Officer and Chief Accounting Officer are required by the rules
of the SEC to provide certain certifications with respect to the Fund's Form
N-CSR and Form N-CSRS (which include the Fund's annual and semiannual reports to
shareholders) that are filed semiannually with the SEC. The Fund has filed such
certifications with its Form N-CSR for the fiscal year ended March 31, 2004.
Additionally, the Fund expects to file, on or before November 30, 2004, such
certifications with its Form N-CSRS for the six months ended September 30, 2004.

Semiannual Report | 31

This page intentionally left blank.

LITERATURE REQUEST

TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT 1-800/DIAL BEN(R)
(1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International(Ex EM) Fund

GLOBAL

Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
Franklin Small-Mid Cap Growth Fund

VALUE

Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund

BLEND

Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund(4)

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund

TARGET FUNDS

Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME

Franklin Adjustable U.S. Government Securities Fund(5)
Franklin's AGE High Income Fund
Franklin Federal Money Fund(5),(6)
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust(3)
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(5),(7)
Franklin Money Fund(5),(6)
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund

TAX-FREE INCOME(8)

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(9)
Tax-Exempt Money Fund(5),(6)

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC

Alabama
Arizona
California(10)
Colorado
Connecticut
Florida(10)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(9)
Michigan(9)
Minnesota(9)
Missouri
New Jersey
New York(10)
North Carolina
Ohio(9)
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance
Products Trust(11)

1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

2. The fund is only open to existing shareholders and select retirement
plans.

3. The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.

4. Upon reaching approximately $350 million in assets, the fund intends to
close to all investors.

5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

6. Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.

7. Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and
strategy remained the same.

8. For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.

9. Portfolio of insured municipal securities.

10. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).

11. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

09/04 Not part of the semiannual report

[LOGO](R)
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906

SEMIANNUAL REPORT

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

INVESTMENT MANAGER

Franklin Advisers, Inc.
1-800/DIAL BEN(R)

TRANSFER AGENT

PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

FTF S2004 11/04

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.

(d) N/A

(f) Pursuant to Item 11(A), 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 Frank W.T. LaHaye 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. N/A

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. None

ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.

ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 11. EXHIBITS.

(A) Code of Ethics

(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial 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/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 29, 2004

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/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 29, 2004

By /s/Galen G. Vetter
Chief Financial Officer
Date November 29, 2004