Edgar Filing: FRANKLIN TEMPLETON LTD 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

FRANKLIN TEMPLETON LIMITED DURATION INCOME TRUST
(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906 (Address of principal executive
offices) (Zip code)

Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)

Registrant's telephone number, including area code: 650/312-2000
------------
Date of fiscal year end: 3/31
------
Date of reporting period: 9/30/07
---------

Item 1. Reports to Stockholders.

[GRAPHIC OMITTED]

--------------------------------------------------------------------------------
SEPTEMBER 30, 2007
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
SEMIANNUAL REPORT INCOME
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST
--------------------------------------------------------------------------------

[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS

FRANKLIN o Templeton o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE(R)

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

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

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

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched
what has become the industry's oldest global fund.
Today, with offices in over 25 countries,
Templeton offers investors a truly global
perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.

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

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

--------------------------------------------------------------------------------
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
--------------------------------------------------------------------------------

[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

SEMIANNUAL REPORT

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

Performance Summary ....................................................... 7

Annual Shareholders' Meeting .............................................. 8

Dividend Reinvestment Plan ................................................ 9

Financial Highlights and Statement of Investments ......................... 12

Financial Statements ...................................................... 24

Notes to Financial Statements ............................................. 27

Shareholder Information ................................................... 36

--------------------------------------------------------------------------------

Semiannual Report

Franklin Templeton
Limited Duration Income Trust

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

Dear Shareholder:

This semiannual report for Franklin Templeton Limited Duration Income Trust
covers the period ended September 30, 2007.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Templeton Limited Duration Income
Trust posted cumulative total returns of +0.41% based on net asset value and
-9.62% based on market price. Net asset value decreased from $14.24 per share on
March 31, 2007, to $13.79 at period-end, and the market price fell from $14.27
to $12.40 over the same time. You can find the Fund's performance data in the
Performance Summary on page 7.

ECONOMIC AND MARKET OVERVIEW

The U.S. economy grew at a solid pace for the six-month period ended September
30, 2007. A surge in exports fueled second quarter 2007 gross domestic product
(GDP) growth to 3.8% annualized. In the third quarter,

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 13.

Semiannual Report | 1

PORTFOLIO BREAKDOWN
Based on Total Investments as of 9/30/07*

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

Floating Rate Loans 39.0%
High Yield Corporate Bonds 30.7%
Mortgage-Backed Securities 22.4%
Foreign Government & Agency Securities 3.6%
Other Asset-Backed Securities 3.0%
Short-Term Investments & Other Net Assets 1.3%

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

GDP growth advanced at an estimated 3.9% annualized rate, the fastest pace in
over a year. Over the reporting period, consumer spending and personal income
remained positive contributors to economic expansion, while a declining housing
market, softening employment environment and tighter credit conditions weighed
on overall economic growth.

Oil prices exhibited volatility, reaching a historical high in September. Core
inflation, which excludes food and energy costs, remained modest. For September
2007, the core Consumer Price Index (CPI) had a 12-month increase of 2.1%. 1 The
Federal Reserve Board's (Fed's) preferred measure of inflation, core personal
consumption expenditures, reported a 12-month increase of 1.8%. 2 These current
levels of inflation, generally within the Fed's target range of 1% to 2%,
lessened near-term concerns and provided the Fed with more flexibility to
respond to ongoing economic pressures resulting from tightening credit
conditions.

In August, the Fed cut the discount rate (the Fed's interest rate charged to
member banks) from 6.25% to 5.75% and followed up in September with a further
cut of 50 basis points, bringing the rate to 5.25%. After remaining on hold
since June 2006, the Fed lowered the federal funds target rate 50 basis points
to 4.75% at its September meeting, citing increased uncertainty surrounding the
economic outlook due to significant dislocations in parts of the credit markets.
The committee noted that "some inflation risks remain, and it will continue to
monitor inflation developments carefully." The Fed stated it will continue to
act as necessary to restore stability as the potential of increased distress
from a housing correction threatens to "restrain economic growth more
generally."

Over the period, investors sought relative safety in short-term U.S. Treasuries,
Treasury yields declined and the yield curve steepened. Short-term, two- and
five-year yields declined substantially, with the two-year bill yielding 3.97%
at the end of September, down from 4.58% six months earlier. The 10-year U.S.
Treasury note ended September yielding 4.59%, compared with 4.65% at the
beginning of the period.

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
other asset-backed securities. Our top-down analysis of macroeconomic trends

1. Source: Bureau of Labor Statistics.

2. Source: Bureau of Economic Analysis.

2 | Semiannual Report

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

MANAGER'S DISCUSSION

The six-month period under review was one of extreme financial market volatility
in general, and for the Fund's core asset classes in particular. Treasury yields
and credit spreads exhibited more volatility than they have in recent history;
first due to inflationary fears that drove Treasury yields to their highest
levels in over five years, and then due to concerns that problems in the
subprime mortgage markets would spill over into other asset classes and even
impact the broader economy. During July and August 2007, disruptions in the
commercial paper markets caused some companies to have difficulty refinancing
their short-term obligations, prompting the Fed to step in and lower its
overnight lending rate in an effort to prevent a broad credit crunch from
occurring.

In this environment, all of the Fund's primary asset classes generated
below-coupon returns. High yield bonds continued to benefit from positive
fundamentals and a low default rate, but suffered from an overhang of leveraged
buyout (LBO) financing that was not absorbed by the market this summer.
Leveraged corporate bank loans faced a similar situation, with an even larger
overhang of impending deals resulting from the near disappearance of the
collateralized loan obligation (CLO) market, which had accounted for purchases
of roughly two-thirds of all loans issued earlier in the year. The
mortgage-backed securities (MBS) market saw divergent returns, as
government-backed and government-sponsored securities benefited from investors'
flight to quality, while subprime mortgages suffered from increasing default
rates. Toward the latter half of the period we increased the Fund's exposure to
bank loans, seeking to take advantage of recent market dislocation to purchase
at attractive prices loans that are senior in the capital structure. Meanwhile,
we lowered portfolio exposure to high yield corporate bonds and MBS, as we found
these to be somewhat less attractive versus bank loans.

DIVIDEND DISTRIBUTIONS*
4/1/07-9/30/07

--------------------------------------------------------------------------------
MONTH DIVIDEND PER COMMON SHARE
--------------------------------------------------------------------------------
April 8.4 cents
--------------------------------------------------------------------------------
May 8.4 cents
--------------------------------------------------------------------------------
June 8.4 cents
--------------------------------------------------------------------------------
July 8.4 cents
--------------------------------------------------------------------------------
August 8.4 cents
--------------------------------------------------------------------------------
September 8.4 cents
--------------------------------------------------------------------------------
TOTAL 50.4 CENTS
--------------------------------------------------------------------------------

* All Fund distributions will vary depending upon current market conditions, and
past distributions are not indicative of future trends.

Semiannual Report | 3

Strong corporate earnings, a low default rate and sound balance sheet liquidity
led to a favorable fundamental credit environment for high yield corporate
bonds. These bonds' yield spreads over Treasuries, as measured by the Credit
Suisse (CS) High Yield Index, trended tighter and reached a record low of 2.7
percentage points in early June 2007. 3 The spread widened dramatically on the
heels of turmoil in the subprime mortgage markets and resultant investor
concerns about a general credit crunch. At period-end, although we still
believed the fundamental outlook remained healthy, high yield spreads remained
below historical averages even after widening during the period. This contrasted
sharply with the bank loan market. Therefore, we slightly reduced the Fund's
high yield bond exposure in favor of bank loans, and maintained exposure to the
sector slightly below one-third of the portfolio through period-end.

The bank loan market was strong during the first half of the reporting period,
with record new-issue volume driven by large mergers and acquisitions (M&A) and
LBO transactions. The large new-issue volume was easily absorbed by investors,
primarily driven by demand from CLOs. As a result of this strong demand,
transactions were aggressively structured to favor the borrower, with higher
total leverage ratios, weaker collateral packages and "covenant-lite"
transactions (those without maintenance covenants) dominating the new-issue
market. Additionally, yield spreads remained tight and below historical
averages.

By July the forward calendar for new supply ballooned to $220 billion, as
arrangers and borrowers became more aggressive in underwriting. At the same
time, however, demand declined dramatically, as subprime mortgage market woes
impacted risk premiums for structured credit products, including CLOs. As a
result, yield spreads widened significantly in the new-issue market, which also
put pressure on the secondary market, causing loan prices to fall substantially.
In fact, the loan market suffered its worst month ever in July, and

3. Source: Credit Suisse (CS). The CS High Yield Index is designed to mirror the
investible universe of the U.S. dollar-denominated high yield debt market.

4 | Semiannual Report

returned -3.3%, as measured by the CS Leveraged Loan Index. 4 The sell-off in
July was largely viewed as technical in nature, as underlying corporate
fundamentals remained strong and companies in the loan universe generally had
adequate liquidity on their balance sheets. Finally, default rates remained
below historical lows throughout the reporting period. With this recent
technical sell-off, we continued to find attractive investment opportunities and
further increased the Fund's exposure to loans, which at period-end remained the
Fund's largest sector weighting.

During the six-month period, MBS and asset-backed securities (ABS) generally
outperformed the high yield corporate and bank loan sectors. While tightening
credit conditions caused credit spreads to widen in the high yield and bank loan
markets, MBS issues from the country's three largest mortgage lenders -- GNMA,
FNMA and FHLMC -- benefited somewhat from the recent flight to quality, owing
largely to the perceived safety of their government backing or sponsorship. At
the same time, securities from privately issued companies, as well as ABS,
generally generated lower returns. In this environment, we found opportunities
in higher-coupon MBS as they became less susceptible to early prepayments. We
also found an opportunity to invest in those sectors that experienced yield
spread widening and were hampered by low liquidity. We found what we believed
were attractive opportunities in securitized loan sectors with strong credit
fundamentals, specifically those related to commercial real estate. At
period-end, these investments were rated AAA and sat at the senior-most portion
of the capital structure. The Fund had minimal exposure to subprime mortgage
loans at period-end. It is important to note that the sub-prime bonds held by
the Fund were all issued before 2005, when lending standards were higher than in
2006 and the first nine months of 2007. At period-end, the Fund had not
experienced defaults on any of its subprime investments.

4. Source: CS. The CS Leveraged Loan Index is designed to mirror the investible
universe of the U.S. dollar-denominated leveraged loan market.

Semiannual Report | 5

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

Sincerely,

[PHOTO OMITTED] /s/ Christopher J. Molumphy, CFA

Christopher J. Molumphy, CFA

[PHOTO OMITTED] /s/ Eric G. Takaha, CFA

Eric G. Takaha, CFA

[PHOTO OMITTED] /s/ Glenn I. Voyles, CFA

Glenn I. Voyles, CFA

[PHOTO OMITTED] /s/ Richard S. Hsu, CFA

Richard S. Hsu, CFA

[PHOTO OMITTED] /s/ Roger A. Bayston, CFA

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, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.

6 | Semiannual Report

Performance Summary as of 9/30/07

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. Total return reflects reinvestment of the Fund's dividends and
capital gain distributions, if any, and any unrealized gains or losses. Total
returns do not reflect any sales charges paid at inception or brokerage
commissions paid on secondary market purchases. The performance table does not
reflect any taxes that a shareholder would pay on Fund dividends, capital gain
distributions, if any, or any realized gains on the sale of Fund shares.

PRICE AND DISTRIBUTION INFORMATION

-------------------------------------------------------------------------------------------------
SYMBOL:FTF Change 9/30/07 3/31/07

-------------------------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.45 $13.79 $14.24
-------------------------------------------------------------------------------------------------
Market Price (AMEX) -$1.87 $12.40 $14.27
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS (4/1/07-9/30/07)
-------------------------------------------------------------------------------------------------
Dividend Income $0.5040
-------------------------------------------------------------------------------------------------

PERFORMANCE 1

-------------------------------------------------------------------------------------------------
COMMENCEMENT OF
6-MONTH 1-YEAR 3-YEAR OPERATIONS (8/27/03)

-------------------------------------------------------------------------------------------------
Cumulative Total Return 2
-------------------------------------------------------------------------------------------------
Based on change in NAV 3 +0.41% +5.42% +18.31% +30.69%
-------------------------------------------------------------------------------------------------
Based on change in market -9.62% +1.16% +8.19% +13.79%
price 4
-------------------------------------------------------------------------------------------------
Average Annual Total Return 2
-------------------------------------------------------------------------------------------------
Based on change in NAV 3 +0.41% +5.42% +5.76% +6.76%
-------------------------------------------------------------------------------------------------
Based on change in market -9.62% +1.16% +2.66% +3.21%
price 4
-------------------------------------------------------------------------------------------------
Distribution Rate 5 8.13%
-------------------------------------------------------------------------------------------------

PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.

ENDNOTES

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

1. Figures are for common shares. As of 9/30/07, the Trust had leverage in the
amount of 33.98% of the Trust's total assets. The Trust employs leverage through
the issuance of Auction Preferred Shares. The use of financial leverage creates
an opportunity for increased income but, at the same time, creates special risks
(including the likelihood of greater volatility of net asset value and market
price of common shares). The cost of leverage rises and falls with changes in
short-term interest rates. Such increases/decreases in the cost of the Trust's
leverage may be offset by increased/decreased income from the Trust's floating
rate investments.

2. Total return calculations represent the cumulative and average annual changes
in value of an investment over the periods indicated. Six-month return has not
been annualized.

3. Assumes reinvestment of distributions at net asset value.

4. Assumes reinvestment of distributions based on the dividend reinvestment
plan.

5. Distribution rate is based on an annualization of the Fund's 8.4 cent per
share September dividend and the AMEX closing price of $12.40 on 9/30/07.

Semiannual Report | 7

Annual Shareholders' Meeting

SEPTEMBER 26, 2007

At an annual Meeting of Shareholders of Franklin Templeton Limited Duration
Income Trust (Fund) held on September 26, 2007, shareholders approved the
following:

Regarding the proposal to elect Trustees:

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

Harris J. Ashton 23,912,942.927 89.31% 98.64% 330,774.000 1.24% 1.36%
-------------------------------------------------------------------------------------------------
Sam Ginn 23,920,371.927 89.34% 98.67% 323,345.000 1.21% 1.33%
-------------------------------------------------------------------------------------------------
Edith E. Holiday 23,923,413.927 89.35% 98.68% 320,303.000 1.20% 1.32%
-------------------------------------------------------------------------------------------------
Larry D. Thompson 23,936,935.927 89.40% 98.73% 306,781.000 1.15% 1.27%
-------------------------------------------------------------------------------------------------
John B. Wilson 23,940,198.927 89.42% 98.75% 303,518.000 1.13% 1.25%
-------------------------------------------------------------------------------------------------

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

Harris J. Ashton 6,877.000 90.49% 99.77% 16.000 0.21% 0.23%
-------------------------------------------------------------------------------------------------
Sam Ginn 6,878.000 90.50% 99.78% 15.000 0.20% 0.22%
-------------------------------------------------------------------------------------------------
Edith E. Holiday 6,870.000 90.39% 99.67% 23.000 0.30% 0.33%
-------------------------------------------------------------------------------------------------
Larry D. Thompson 6,868.000 90.37% 99.64% 25.000 0.33% 0.36%
-------------------------------------------------------------------------------------------------
John B. Wilson 6,871.000 90.41% 99.68% 22.000 0.29% 0.32%
-------------------------------------------------------------------------------------------------

8 | Semiannual Report

Dividend Reinvestment Plan

The Fund's Dividend Reinvestment Plan (Plan) offers you a prompt and simple way
to reinvest dividends and capital gain distributions (Distributions) in shares
of the Fund. PFPC, Inc. (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 it 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, may be on such terms as to price, delivery and
otherwise as the Agent shall determine.

Semiannual Report | 9

The market price of shares on a particular date shall be
the last sales price on 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 in the same Fund.

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

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

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

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

10 | Semiannual Report

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.

Semiannual Report | 11

Franklin Templeton
Limited Duration Income Trust

FINANCIAL HIGHLIGHTS

----------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2007 YEAR ENDED MARCH 31,
(UNAUDITED) 2007 2006 2005 2004 g
----------------------------------------------------------------------

PER COMMON SHARE OPERATING PERFORMANCE
(for a common share outstanding throughout the period)
Net asset value, beginning of period ..................... $ 14.24 $ 14.14 $ 14.41 $ 14.75 $ 14.33
----------------------------------------------------------------------
Income from investment operations a:
Net investment income b ............................... 0.65 1.32 1.18 1.10 0.53
Net realized and unrealized gains (losses) ............ (0.41) 0.16 (0.10) (0.12) 0.63
Dividends to preferred shareholders from net investment
income ............................................. (0.19) (0.35) (0.26) (0.13) (0.03)
----------------------------------------------------------------------
Total from investment operations ......................... 0.05 1.13 0.82 0.85 1.13
----------------------------------------------------------------------
Less distributions to common shareholders from net
investment income ..................................... (0.50) (1.03) (1.09) (1.19) (0.59)
----------------------------------------------------------------------
Offering costs charged to capital:
Common shares ......................................... -- -- -- -- (0.03)
Preferred shares ...................................... -- -- -- -- (0.09)
----------------------------------------------------------------------
Total offering costs ..................................... -- -- -- -- (0.12)
----------------------------------------------------------------------
Net asset value, end of period ........................... $ 13.79 $ 14.24 $ 14.14 $ 14.41 $ 14.75
======================================================================
Market value, end of period c ............................ $ 12.40 $ 14.27 $ 12.87 $ 13.89 $ 14.87
======================================================================

Total return (based on market value per share) d ......... (9.62)% 19.66% 0.60% 1.38% 3.16%

RATIOS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHARES e
Expenses ................................................. 1.27% 1.27% 1.26% 1.21% 1.11%
Expenses net of expense reduction ........................ 1.27% f 1.26% 1.26% f 1.21% f 1.11% f
Net investment income .................................... 9.27% 9.32% 8.24% 7.50% 6.12%

SUPPLEMENTAL DATA
Net assets applicable to common shares, end of period
(000's) ............................................... $ 369,106 $380,813 $378,080 $385,344 $393,125
Portfolio turnover rate .................................. 28.71% 52.17% 46.55% 55.02% 45.08%
Asset coverage per preferred share ....................... $ 73,567 $ 75,107 $ 74,747 $ 75,703 $ 76,727
Liquidation preference per preferred share ............... $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000

a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.

b Based on average daily common shares outstanding.

c Based on the last sale on the American Stock Exchange.

d Total return is not annualized for periods less than one year.

e Ratios are annualized for periods less than one year.

f Benefit of expense reduction rounds to less than 0.01%.

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

12 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED)

--------------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT a VALUE
--------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS 148.5%
CORPORATE BONDS 46.4%
COMMERCIAL SERVICES 2.7%
b ARAMARK Corp., senior note, FRN, 8.856%, 2/01/15 ..................... United States 1,800,000 $ 1,827,000
Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 ................ United States 4,000,000 4,275,000
JohnsonDiversey Holdings Inc., senior disc. note, 10.67%,
5/15/13 ............................................................ United States 2,000,000 2,030,000
Rental Service Corp., 9.50%, 12/01/14 ................................ United States 2,000,000 1,920,000
-------------
10,052,000
-------------
COMMUNICATIONS 4.2%
c Digicel Group Ltd., senior note, 144A, 8.875%, 1/15/15 ............... Jamaica 2,000,000 1,885,000
Dobson Cellular Systems Inc., senior secured note, 9.875%,
11/01/12 ........................................................... United States 1,400,000 1,519,000
Intelsat Subsidiary Holding Co. Ltd., senior note, 8.25%,
1/15/13 ............................................................ Bermuda 3,000,000 3,060,000
c MetroPCS Wireless Inc., senior note, 144A, 9.25%, 11/01/14 ........... United States 1,500,000 1,537,500
Millicom International Cellular SA, senior note, 10.00%,
12/01/13 ........................................................... Luxembourg 2,000,000 2,135,000
Qwest Communications International Inc., senior note, B, 7.50%,
2/15/14 ............................................................ United States 2,000,000 2,035,000
c Wind Acquisition Finance SA, senior note, 144A, 10.75%,
12/01/15 ........................................................... Italy 3,000,000 3,337,500
-------------
15,509,000
-------------
CONSUMER DURABLES 3.8%
Beazer Homes USA Inc., senior note, 8.375%, 4/15/12 .................. United States 2,000,000 1,580,000
Ford Motor Credit Co. LLC,
b FRN, 9.81%, 4/15/12 .............................................. United States 1,000,000 1,035,933
senior note, 5.80%, 1/12/09 ...................................... United States 4,000,000 3,864,612
senior note, 9.875%, 8/10/11 ..................................... United States 500,000 506,834
Jarden Corp., senior sub. note, 7.50%, 5/01/17 ....................... United States 2,000,000 1,945,000
Jostens IH Corp., senior sub. note, 7.625%, 10/01/12 ................. United States 1,400,000 1,431,500
KB Home, senior note, 6.375%, 8/15/11 ................................ United States 4,000,000 3,700,000
-------------
14,063,879
-------------
CONSUMER NON-DURABLES 1.4%
Reynolds American Inc., senior secured note, 7.25%, 6/01/13 .......... United States 2,000,000 2,121,416
Smithfield Foods Inc., senior note, 8.00%, 10/15/09 .................. United States 3,000,000 3,112,500
-------------
5,233,916
-------------
CONSUMER SERVICES 8.1%
CanWest Media Inc., senior sub. note, 8.00%, 9/15/12 ................. Canada 3,000,000 2,955,000
CCH II LLC, senior note, 10.25%, 9/15/10 ............................. United States 4,000,000 4,110,000
Clear Channel Communications Inc., senior note, 7.65%,
9/15/10 ............................................................ United States 2,000,000 1,983,178
CSC Holdings Inc., senior note, 8.125%, 7/15/09 ...................... United States 1,000,000 1,020,000
DIRECTV Holdings LLC, senior note, 8.375%, 3/15/13 ................... United States 2,000,000 2,087,500
Liberty Media Corp., senior note, 7.875%, 7/15/09 .................... United States 2,000,000 2,068,370

Semiannual Report | 13

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
CONSUMER SERVICES (CONTINUED)
LIN Television Corp., senior sub. note, 6.50%, 5/15/13 ............... United States 1,000,000 $ 977,500
MGM MIRAGE, senior note, 6.75%, 4/01/13 .............................. United States 3,000,000 2,947,500
c Outback Steakhouse Inc., senior note, 144A, 10.00%, 6/15/15 .......... United States 1,500,000 1,335,000
Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 ....... United States 2,000,000 2,070,000
Quebecor Media Inc.,
c,d 144A, 7.75%, 3/15/16 ............................................. Canada 500,000 479,375
senior note, 7.75%, 3/15/16 ...................................... Canada 2,000,000 1,917,500
Radio One Inc., senior sub. note, B, 8.875%, 7/01/11 ................. United States 2,000,000 1,985,000
c Rainbow National Services LLC, senior sub. deb., 144A, 10.375%,
9/01/14 ............................................................ United States 665,000 733,162
Royal Caribbean Cruises Ltd., senior note, 8.00%, 5/15/10 ............ United States 3,000,000 3,138,366
-------------
29,807,451
-------------
ELECTRONIC TECHNOLOGY 2.3%
b Freescale Semiconductor Inc., senior note, FRN, 9.569%,
12/15/14 ........................................................... United States 3,000,000 2,842,500
NXP BV/NXP Funding LLC, senior secured note, 7.875%,
10/15/14 ........................................................... Netherlands 1,000,000 966,250
Sanmina-SCI Corp.,
b,c senior note, 144A, FRN, 8.444%, 6/15/14 .......................... United States 1,300,000 1,248,000
senior sub. note, 6.75%, 3/01/13 ................................. United States 1,700,000 1,470,500
TransDigm Inc., senior sub. note, 7.75%, 7/15/14 ..................... United States 2,000,000 2,030,000
-------------
8,557,250
-------------
ENERGY MINERALS 2.3%
Chesapeake Energy Corp., senior note, 7.50%, 6/15/14 ................. United States 4,000,000 4,120,000
Mariner Energy Inc., senior note, 7.50%, 4/15/13 ..................... United States 2,000,000 1,950,000
c Petroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14 ............ Switzerland 2,500,000 2,418,750
-------------
8,488,750
-------------
FINANCE 3.6%
Cit Group Co of Canada, 4.65%, 7/01/10 ............................... Canada 1,100,000 1,057,580
E*TRADE Financial Corp., senior note, 8.00%, 6/15/11 ................. United States 1,400,000 1,400,000
GMAC LLC,
7.25%, 3/02/11 ..................................................... United States 2,000,000 1,940,264
6.875%, 8/28/12 .................................................... United States 3,000,000 2,816,802
d ICICI Bank Ltd., 6.625%,10/03/12 ..................................... India 1,000,000 1,004,490
Lehman Brothers Holdings Inc., senior note, 6.20%, 9/26/14 ........... United States 3,000,000 3,016,104
United Rentals North America Inc., senior sub. note, 7.75%,
11/15/13 ........................................................... United States 2,000,000 2,070,000
-------------
13,305,240
-------------
HEALTH SERVICES 5.3%
Coventry Health Care Inc., senior note, 5.875%, 1/15/12 .............. United States 3,000,000 3,018,837
DaVita Inc.,
senior note, 6.625%, 3/15/13 ....................................... United States 900,000 897,750
senior sub. note, 7.25%, 3/15/15 ................................... United States 1,000,000 1,007,500

14 | Semiannual Report

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
HEALTH SERVICES (CONTINUED)
c FMC Finance III SA, senior note, 144A, 6.875%, 7/15/17 ............... Germany 1,000,000 $ 1,000,000
Fresenius Medical Care Capital Trust II, 7.875%, 2/01/08 ............. Germany 2,000,000 2,010,000
c HCA Inc., senior secured note, 144A, 9.125%, 11/15/14 ................ United States 3,000,000 3,172,500
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11 ................ United States 3,000,000 2,640,000
b,c U.S. Oncology Holdings Inc., senior note, 144A, FRN, 10.759%,
3/15/12 ............................................................ United States 2,000,000 1,790,000
United Surgical Partners International Inc., senior sub. note, PIK,
9.25%, 5/01/17 ..................................................... United States 1,100,000 1,105,500
Vanguard Health Holding Co. II LLC, senior sub. note, 9.00%,
10/01/14 ........................................................... United States 3,000,000 2,925,000
-------------
19,567,087
-------------
INDUSTRIAL SERVICES 1.7%
Compagnie Generale de Geophysique-Veritas, senior note, 7.50%,
5/15/15 ............................................................ France 2,000,000 2,070,000
El Paso Corp., senior note, 6.875%, 6/15/14 .......................... United States 2,000,000 2,028,482
Williams Co. Inc., 8.125%, 3/15/12 ................................... United States 2,000,000 2,165,000
-------------
6,263,482
-------------
NON-ENERGY MINERALS 0.8%
b Freeport-McMoRan Copper & Gold Inc., senior note, FRN, 8.564%,
4/01/15 ............................................................ United States 3,000,000 3,123,750
-------------
PROCESS INDUSTRIES 5.2%
Buckeye Technologies Inc., senior sub. note, 8.00%, 10/15/10 ......... United States 1,735,000 1,778,375
Crown Americas Inc., senior note, 7.625%, 11/15/13 ................... United States 3,000,000 3,093,750
Huntsman International LLC, senior sub. note, 7.875%,
11/15/14 ............................................................. United States 2,000,000 2,140,000
c Ineos Group Holdings PLC, 144A, 8.50%, 2/15/16 ....................... United Kingdom 3,000,000 2,887,500
JSG Funding PLC, senior sub. note, 7.75%, 4/01/15 .................... Ireland 3,000,000 2,940,000
Lyondell Chemical Co., senior note, 8.00%, 9/15/14 ................... United States 2,000,000 2,210,000
c MacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17 ............... United States 2,000,000 1,940,000
Nalco Co., senior sub. note, 8.875%, 11/15/13 ........................ United States 2,000,000 2,110,000
-------------
19,099,625
-------------
PRODUCER MANUFACTURING 0.6%
RBS Global & Rexnord Corp., senior note, 9.50%, 8/01/14 .............. United States 2,000,000 2,080,000
-------------
REAL ESTATE INVESTMENT TRUST 0.8%
Host Marriott LP, senior note, K, 7.125%, 11/01/13 ................... United States 3,000,000 3,037,500
-------------
RETAIL TRADE 0.6%
c Michaels Stores Inc., senior note, 144A, 10.00%, 11/01/14 ............ United States 2,000,000 2,060,000
-------------
TECHNOLOGY SERVICES 1.1%
SunGard Data Systems Inc., senior note, 9.125%, 8/15/13 .............. United States 4,000,000 4,180,000
-------------

Semiannual Report | 15

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
CORPORATE BONDS (CONTINUED)
UTILITIES 1.9%
Aquila Inc., senior note, 9.95%, 2/01/11 ............................. United States 2,000,000 $ 2,188,516
c Dynegy Holdings Inc., senior note, 144A, 7.50%, 6/01/15 .............. United States 2,000,000 1,940,000
NRG Energy Inc., senior note, 7.25%, 2/01/14 ......................... United States 2,800,000 2,814,000
-------------
6,942,516
-------------
TOTAL CORPORATE BONDS (COST $171,512,980) ............................ 171,371,446
-------------
MORTGAGE-BACKED SECURITIES 33.9%
b FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) ADJUSTABLE RATE 0.3%
FHLMC, 5.235%, 5/01/34 ............................................... United States 1,262,714 1,272,729
-------------
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) FIXED RATE 11.7%
FHLMC Gold 15 Year, 4.50%, 6/01/18 - 9/01/18 ......................... United States 2,791,135 2,696,134
FHLMC Gold 15 Year, 5.00%, 9/01/18 ................................... United States 3,887,948 3,822,465
FHLMC Gold 15 Year, 5.00%, 11/01/18 .................................. United States 2,063,812 2,029,052
FHLMC Gold 15 Year, 5.50%, 7/01/19 ................................... United States 283,115 282,632
FHLMC Gold 15 Year, 6.00%, 5/01/22 ................................... United States 1,450,015 1,468,566
FHLMC Gold 30 Year, 5.50%, 8/01/33 ................................... United States 4,878,394 4,791,327
FHLMC Gold 30 Year, 5.50%, 12/01/34 - 2/01/37 ........................ United States 4,608,899 4,518,743
FHLMC Gold 30 Year, 6.00%, 7/01/28 - 10/01/36 ........................ United States 11,130,942 11,172,365
FHLMC Gold 30 Year, 6.00%, 7/01/36 ................................... United States 5,639,399 5,647,999
FHLMC Gold 30 Year, 6.50%, 1/01/35 ................................... United States 2,996,971 3,060,624
FHLMC Gold 30 Year, 7.00%, 9/01/27 ................................... United States 977,389 1,016,639
FHLMC Gold 30 Year, 8.00%, 1/01/31 ................................... United States 156,918 166,325
FHLMC Gold 30 Year, 8.50%, 7/01/31 ................................... United States 2,200,950 2,364,736
-------------
43,037,607
-------------
b FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) ADJUSTABLE RATE 0.6%
FNMA, 4.598%, 7/01/34 ................................................ United States 2,235,901 2,221,520
FNMA, 5.99%, 6/01/32 ................................................. United States 106,717 108,325
-------------
2,329,845
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) FIXED RATE 18.7%
FNMA 15 Year, 5.00%, 10/01/17 ........................................ United States 1,575,227 1,550,090
FNMA 15 Year, 5.50%, 10/01/17 - 1/01/21 .............................. United States 9,211,137 9,200,409
FNMA 15 Year, 6.00%, 8/01/21 ......................................... United States 5,692,095 5,769,280
FNMA 15 Year, 6.00%, 9/01/21 ......................................... United States 4,805,676 4,870,842
FNMA 15 Year, 6.50%, 7/01/20 ......................................... United States 783,143 792,537
FNMA 30 Year, 5.00%, 3/01/37 ......................................... United States 2,976,711 2,839,869
FNMA 30 Year, 5.50%, 8/01/33 - 1/01/36 ............................... United States 9,274,168 9,101,363
FNMA 30 Year, 5.50%, 9/01/33 ......................................... United States 4,145,654 4,072,861
FNMA 30 Year, 6.00%, 4/01/33 - 1/01/36 ............................... United States 11,044,045 11,084,806
FNMA 30 Year, 6.50%, 8/01/32 - 6/01/36 ............................... United States 8,922,410 9,096,418
FNMA 30 Year, 6.50%, 6/01/36 ......................................... United States 8,989,148 9,155,506
FNMA 30 Year, 7.00%, 9/01/18 ......................................... United States 358,047 373,788
FNMA 30 Year, 8.00%, 10/01/29 ........................................ United States 297,423 314,452
FNMA 30 Year, 8.50%, 8/01/26 ......................................... United States 597,220 641,180
-------------
68,863,401
-------------

16 | Semiannual Report

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
COUNTRY AMOUNT a VALUE
------------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS (CONTINUED)
MORTGAGE-BACKED SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) FIXED RATE 2.6%
GNMA I SF 30 Year, 5.50%, 4/15/33 - 12/15/34 ............................... United States 2,593,165 $ 2,560,586
GNMA I SF 30 Year, 5.50%, 12/15/34 ......................................... United States 3,904,675 3,854,957
GNMA I SF 30 Year, 6.50%, 6/15/31 - 12/15/33 ............................... United States 2,346,602 2,404,767
GNMA II SF 30 Year, 7.00%, 1/20/24 - 1/20/29 ............................... United States 245,769 256,949
GNMA II SF 30 Year, 8.00%, 1/20/28 - 2/20/32 ............................... United States 481,767 510,739
-------------
9,587,998
-------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $126,547,809) ....................... 125,091,580
-------------
ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED
SECURITIES 4.6%
COMMERCIAL SERVICES 1.3%
Banc of America Commercial Mortgage Inc., 2005-3, A2, 4.501%,
7/10/43 ................................................................. United States 5,000,000 4,932,699
-------------
FINANCE 3.3%
b Argent Securities Inc., 2003-W5, M4, FRN, 6.663%, 10/25/33 ................. United States 1,545,635 1,329,083
b Chase Funding Mortgage Loan Asset-Backed Certificates, 2004-2,
2A2, FRN, 5.381%, 2/25/35 ............................................... United States 1,922,951 1,882,897
b Citigroup/Deutsche Bank Commercial Mortgage Trust, 2005-CD1, A3,
FRN, 5.40%, 7/15/44 ..................................................... United States 3,000,000 2,995,553
b GSAMP Trust, 2003-AHL, B1, FRN, 9.131%, 10/25/33 ........................... United States 1,419,177 1,429,504
b Merrill Lynch Mortgage Investors Trust, 2003-OPT1, B2, FRN,
7.881%, 7/25/34 ......................................................... United States 330,831 55,251
b Morgan Stanley ABS Capital,
2003-HE3, B1, FRN, 8.431%, 10/25/33 ................................... United States 948,755 681,146
2003-NC10, B1, FRN, 8.431%, 10/25/33 .................................. United States 614,545 447,264
b Morgan Stanley Dean Witter Capital I, 2003-NC3, B1, FRN, 9.252%,
3/25/33 ................................................................. United States 696,328 555,338
b New Century Home Equity Loan Trust, 2003-2, M3, FRN, 10.169%,
1/25/33 ................................................................. United States 1,317,914 775,301
b Option One Mortgage Loan Trust, 2003-6, M5, FRN, 8.431%,
11/25/33 ................................................................ United States 1,135,679 818,787
b Specialty Underwriting & Residential Finance, 2003-BC4, B2, FRN,
7.631%, 11/25/34 ........................................................ United States 465,742 393,903
b Structured Asset Investment Loan Trust,
2003-BC2, M3, FRN, 8.381%, 4/25/33 .................................... United States 13,987 6,205
2003-BC13, M4, FRN, 7.881%, 11/25/33 .................................. United States 739,245 699,510
-------------
12,069,742
-------------
TOTAL ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED
SECURITIES (COST $18,973,442) ........................................... 17,002,441
-------------
b,e SENIOR FLOATING RATE INTERESTS 59.1%
COMMERCIAL SERVICES 8.8%
Acxiom Corp., Term Loan B, 7.503%, 9/14/12 ................................. United States 1,091,000 1,060,441
Affiliated Computer Services Inc.,
Additional Term Loan, 7.565% - 7.819%, 3/20/13 ........................ United States 1,782,000 1,763,253
Term Loan B, 7.129%, 3/20/13 .......................................... United States 492,500 487,319

Semiannual Report | 17

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
b,e SENIOR FLOATING RATE INTERESTS (CONTINUED)
COMMERCIAL SERVICES (CONTINUED)
ARAMARK Corp.,
Synthetic L/C, 5.20%, 1/26/14 ......................................... United States 244,796 $ 240,502
Term Loan B, 7.198%, 1/26/14 .......................................... United States 3,479,505 3,418,475
Cenveo Corp.,
Delayed Draw Term Loan, 6.988%, 6/21/13 ............................... United States 53,263 51,414
Term Loan C, 6.988%, 6/21/13 .......................................... United States 1,598,476 1,539,381
Corporate Express NV, Term Loan D-1 Add-On, 7.592% - 7.646%,
12/23/10 ................................................................ United States 2,481,250 2,444,801
Dealer Computer Services Inc. (Reynolds & Reynolds), First Lien Term
Loan, 7.198%, 10/26/12 .................................................. United States 3,615,574 3,499,008
Dex Media West LLC, Term Loan B2, 6.63% - 7.22%, 3/09/10 ................... United States 2,081,124 2,062,352
Emdeon Business Services LLC, First Lien Term Loan, 7.448% - 7.45%,
11/16/13 ................................................................ United States 2,681,614 2,638,145
d First Data Corp., Term Loan B-2, 9.50%, 10/01/14 ........................... United States 2,700,000 2,598,345
d Idearc Inc., Term Loan B, 7.36%, 11/17/14 .................................. United States 4,076,750 4,019,064
d Nielsen Finance LLC (VNU Inc.), Term Loan B, 7.36%, 8/09/13 ................ United States 4,070,004 3,962,597
R.H. Donnelley Inc., Term Loan D-2, 6.63% - 7.22%, 6/30/11 ................. United States 1,892,714 1,868,165
Workflow Management Inc., Term Loan B, 9.856%, 11/30/11 .................... United States 972,662 937,889
-------------
32,591,151
-------------
COMMUNICATIONS 2.4%
Alaska Communications Systems Holdings Inc.,
2005 Incremental Loan, 6.948%, 2/01/12 ................................ United States 100,000 98,180
Term Loan, 6.948%, 2/01/12 ............................................ United States 4,000,000 3,927,200
West Corp., Term Loan B-2, 7.504% - 7.88%, 10/24/13 ........................ United States 1,881,036 1,825,714
Windstream Corp., Tranche B-1, 6.86%, 7/17/13 .............................. United States 2,850,569 2,845,296
-------------
8,696,390
-------------
CONSUMER DURABLES 1.4%
Jarden Corp., Term Loan B2, 6.95%, 1/24/12 ................................. United States 2,934,781 2,848,998
Stile Acquisition Corp. (Masonite), Canadian Term Loan, 7.36%,
4/05/13 ................................................................. Canada 1,245,488 1,165,951
Stile U.S. Acquisition Corp. (Masonite), U.S. Term Loan, 7.36%,
4/05/13 ................................................................. United States 1,247,610 1,167,937
-------------
5,182,886
-------------
CONSUMER NON-DURABLES 2.9%
Acco Brands Corp., Term Loan B, 7.11% - 7.338%, 8/17/12 .................... United States 902,180 868,826
Bumble Bee Foods LLC, Term Loan B, 7.106% - 7.11%,
5/02/12 ................................................................. United States 500,000 480,515
CBRL Group (Cracker Barrel),
Term Loan B1, 6.86%, 4/27/13 .......................................... United States 853,333 829,704
f Term Loan B2 (Delayed Draw), 6.86%, 4/27/13 ........................... United States 66,970 65,115
Central Garden & Pet Co., Term Loan B, 6.63% - 7.31%,
9/30/12 ................................................................. United States 269,923 259,334

18 | Semiannual Report

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
b,e SENIOR FLOATING RATE INTERESTS (CONTINUED)
CONSUMER NON-DURABLES (CONTINUED)
Constellation Brands Inc., Term Loan B, 6.688% - 7.188%,
6/05/13 ................................................................. United States 1,280,000 $ 1,263,437
Dean Foods Co., Term Loan B, 6.70%, 4/02/14 ................................ United States 3,785,239 3,723,351
Del Monte Foods Co., Term Loan B, 6.649%, 2/08/12 .......................... United States 1,320,713 1,311,415
Michael Foods Inc., Term Loan B1, 7.361%, 11/21/10 ......................... United States 1,764,740 1,744,251
-------------
10,545,948
-------------
CONSUMER SERVICES 17.5%
Arby's Restaurant Holdings LLC, Term Loan B, 7.379% - 7.61%,
7/25/12 ................................................................. United States 1,571,048 1,538,779
Charter Communications Operating LLC,
New First Lien Term Loan, 7.13%, 3/06/14 .............................. United States 1,000,000 970,050
Refinance First Lien Term Loan, 7.36%, 3/06/14 ........................ United States 1,362,560 1,321,751
Cinram International, Term Loan B, 7.36%, 5/05/11 .......................... Canada 1,683,055 1,625,040
Citadel Broadcasting Corp., Term Loan B, 6.755% - 6.825%,
6/12/14 ................................................................. United States 4,000,000 3,855,560
CSC Holdings Inc. (Cablevision), Incremental Term Loan, 7.569%,
3/29/13 ................................................................. United States 790,000 780,204
d Education Management LLC, Term Loan C, 7.125%, 6/01/13 ..................... United States 2,920,826 2,837,554
Entravision Communications Corp., Term Loan B, 6.86%,
3/29/13 ................................................................. United States 1,978,466 1,942,596
Gatehouse Media Operating Inc.,
Delayed Draw Term Loan, 7.36% - 7.51%, 8/28/14 ........................ United States 177,507 162,305
Term Loan, 7.51%, 8/28/14 ............................................. United States 475,719 434,978
Gray Television Inc., Term Loan B, 6.86%, 12/31/14 ......................... United States 800,000 772,080
Insight Midwest Holdings, Term Loan B, 7.11%, 4/02/14 ...................... United States 3,200,000 3,163,328
Intelsat Corp. (Panamsat), Term Loan B2, 7.36%, 1/03/14 .................... United States 3,910,450 3,840,297
Intelsat Subsidiary Holding Co. Ltd., Term Loan B, 7.36%,
6/30/13 ................................................................. United States 1,885,190 1,849,014
d Laureate Education Inc.,
Delayed Draw Term Loan, 7.773%, 9/25/14 ............................... United States 348,387 340,043
Term Loan B, 7.773%, 9/25/2014 ........................................ United States 2,351,613 2,295,292
MCC Iowa,
Term Loan D-1, 6.88%, 1/31/15 ......................................... United States 2,516,271 2,447,501
Term Loan D-2 (Delayed Draw), 6.88%, 1/31/15 .......................... United States 58,558 56,957
MediaNews Group Inc., Term Loan B, 6.879%, 12/30/10 ........................ United States 2,243,362 2,173,145
Mission Broadcasting Inc., Term Loan B, 6.948%, 10/01/12 ................... United States 1,668,623 1,612,206
Nexstar Broadcasting Inc., Term Loan B, 6.948%, 10/01/12 ................... United States 1,580,265 1,526,836
d OSI Restaurant Partners LLC (Outback),
Pre-Funded Revolving Credit, 5.523%, 6/14/13 .......................... United States 296,204 284,432
Term Loan B, 7.438%, 6/14/14 .......................................... United States 3,872,889 3,721,110
Penn National Gaming Inc., Term Loan B, 6.95% - 7.11%,
10/03/12 ................................................................ United States 4,260,183 4,248,255
Regal Cinemas Corp., Term Loan, 6.70%, 10/27/13 ............................ United States 3,827,484 3,719,090
Tribune Co., Term Loan B, 8.36%, 5/16/14 ................................... United States 4,000,000 3,648,800

Semiannual Report | 19

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
b,e SENIOR FLOATING RATE INTERESTS (CONTINUED)
CONSUMER SERVICES (CONTINUED)
d Univision Communications Inc., Term Loan B, 7.61%, 9/29/14 ................. United States 2,630,872 $ 2,512,878
UPC Financing Partnership, Term Loan N-1, 7.13%, 12/31/14 .................. Netherlands 4,000,000 3,824,640
VML U.S. Finance LLC (Venetian Macau),
d Delay Draw, 7.45%, 5/25/12 ............................................ Macau 1,319,221 1,296,663
New Project Term Loans, 7.45%, 5/25/13 ................................ Macau 700,000 684,278
d Term Loan B, 7.45%, 5/24/13 ........................................... Macau 1,828,927 1,790,483
WMG Acquisition Corp. (Warner Music), Term Loan B,
7.36% - 7.541%, 2/28/11 ................................................. United States 3,323,602 3,232,701
-------------
64,508,846
-------------
ELECTRONIC TECHNOLOGY 1.2%
Marvell Technology Group Ltd., Term Loan, 7.698%, 11/09/09 ................. Bermuda 3,166,000 3,119,207
Spirit Aerosystems Inc. (Onex Wind Finance LP), Term Loan B,
7.11%, 12/31/11 ......................................................... United States 1,276,301 1,258,050
-------------
4,377,257
-------------
ENERGY MINERALS 0.6%
Citgo Petroleum Corp., Term Loan B, 6.446%, 11/15/12 ....................... United States 924,766 918,700
Western Refining Inc., Term Loan B, 6.879%, 5/30/14 ........................ United States 1,207,143 1,164,844
-------------
2,083,544
-------------
FINANCE 1.3%
Conseco Inc., Term Loan, 7.129%, 10/10/13 .................................. United States 2,191,476 2,096,234
Hertz Corp.,
Credit Link, 5.238%, 12/21/12 ......................................... United States 155,556 152,855
Term Loan B, 7.55% - 7.56%, 12/21/12 .................................. United States 866,761 851,714
TD Ameritrade Holding Corp., Term Loan B, 6.63%, 12/31/12 .................. United States 1,611,114 1,584,611
-------------
4,685,414
-------------
HEALTH SERVICES 5.0%
Community Health Systems Inc., Term Loan, 7.755% - 7.76%,
7/25/14 ................................................................. United States 2,532,947 2,494,573
DaVita Inc., Term Loan B-1, 6.70% - 7.01%, 10/05/12 ........................ United States 2,717,434 2,649,063
Fresenius Medical Care Holdings Inc., Term Loan B,
6.573% - 6.973%, 3/31/13 ................................................ United States 4,004,464 3,935,468
HCA Inc., Term Loan B-1, 7.448%, 11/18/13 .................................. United States 4,121,917 4,023,238
Health Management Associates Inc., Term Loan B,
6.879% - 6.948%, 2/28/14 ................................................ United States 4,065,998 3,855,542
d Vanguard Health Holding Co. II LLC, Replacement Term Loan,
7.763%, 9/23/11 ......................................................... United States 1,600,000 1,559,472
-------------
18,517,356
-------------
INDUSTRIAL SERVICES 0.7%
Allied Waste North America Inc.,
Credit Link, 5.43%, 3/28/14 ........................................... United States 975,814 965,851
Term Loan B, 6.65% - 6.89%, 1/15/12 ................................... United States 1,795,649 1,777,315
-------------
2,743,166
-------------

20 | Semiannual Report

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
b,e SENIOR FLOATING RATE INTERESTS (CONTINUED)
PROCESS INDUSTRIES 6.9%
Borden Chemicals and Plastics LP, Term Loan C-2, 7.50%,
5/03/13 ................................................................. Netherlands 706,858 $ 694,248
d Domtar Corp., Term Loan, 7.185%, 3/07/14 ................................... United States 1,564,468 1,518,003
Georgia-Pacific Corp.,
Additional Term Loan, 6.948% - 7.474%, 12/20/12 ....................... United States 1,690,972 1,661,245
Term Loan B, 6.948% - 7.474%, 12/20/12 ................................ United States 2,462,500 2,424,676
Graham Packaging Co. LP, New Term Loan, 7.50% - 8.00%,
10/07/11 ................................................................ United States 2,028,193 1,990,570
Hexion Specialty Chemicals Inc., Term Loan C-1, 7.625%,
5/03/13 ................................................................. United States 3,262,223 3,204,025
Huntsman International, Term Loan B, 6.886%, 4/21/14 ....................... United States 2,887,039 2,865,184
Ineos U.S. Finance LLC,
Term Loan B2, 7.357% - 7.451%, 12/16/13 ............................... United States 396,000 385,645
Term Loan C2, 7.857% - 7.951%, 12/23/14 ............................... United States 396,000 384,215
Lyondell Chemical Co., Term Loan, 6.63% - 6.856%, 8/16/13 .................. United States 2,673,000 2,651,616
Nalco Co., Term Loan B, 6.95% - 7.57%, 11/04/10 ............................ United States 1,343,428 1,340,862
NewPage Corp., Term Loan, 7.625%, 5/02/11 .................................. United States 2,000,000 1,999,420
d Oxbow Carbon LLC,
Delayed Draw Term Loan, 7.76%, 5/08/14 ................................ United States 241,611 226,416
Term Loan B, 7.76%, 5/08/14 ........................................... United States 2,746,896 2,574,144
d Verso Paper Holdings LLC, Term Loan B, 7.756%, 8/01/13 ..................... United States 1,416,667 1,369,959
-------------
25,290,228
-------------
PRODUCER MANUFACTURING 5.7%
Allison Transmission, Term Loan B, 8.48% - 8.57%, 8/07/14 .................. United States 2,500,000 2,428,275
Cooper Standard Automotive Inc., Term Loan D, 7.75%,
12/23/11 ................................................................ United States 884,250 858,412
Dresser Inc., Term Loan B, 7.629% - 8.01%, 5/04/14 ......................... United States 1,583,692 1,562,138
d GPS CCMP Merger Corp. (Generac), Term Loan B, 9.25%,
11/09/13 ................................................................ United States 3,215,333 2,926,532
Nortek Inc., Term Loan, 7.61%, 8/27/11 ..................................... United States 1,447,426 1,416,886
Oshkosh Truck Corp.,
Term Loan A, 7.20%, 12/06/11 .......................................... United States 950,000 939,407
Term Loan B, 7.45%, 12/06/13 .......................................... United States 2,885,500 2,854,510
d RBS Global Inc. (Rexnord Corp.), Term Loan, 7.765%, 7/22/13 ................ United States 3,000,000 2,920,830
Sensus Metering Systems Inc.,
Term Loan B1, 7.36% - 7.495%, 12/17/10 ................................ United States 2,212,955 2,171,019
Term Loan B2, 7.36% - 7.383%, 12/17/10 ................................ Luxembourg 208,108 204,164
TriMas Co. LLC,
Term Loan B, 7.61%, 8/02/13 ........................................... United States 1,600,755 1,564,370
Tranche B-1 L/C, 8.048%, 8/02/13 ...................................... United States 373,136 367,092
TRW Automotive Inc., Tranche B-1 Term Loan, 6.875%, 2/09/14 ................ United States 922,339 895,518
-------------
21,109,153
-------------

Semiannual Report | 21

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
b,e SENIOR FLOATING RATE INTERESTS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS 1.2%
d Capital Automotive REIT, Term Loan B, 7.758%, 12/15/10 ..................... United States 2,163,496 $ 2,118,258
CB Richard Ellis Services Inc., Term Loan B, 6.996%, 12/20/13 .............. United States 2,545,409 2,493,712
-------------
4,611,970
-------------
RETAIL TRADE 0.4%
Neiman Marcus Group Inc., Term Loan, 7.448%, 4/06/13 ....................... United States 987,342 973,509
The William Carter Co., Term Loan B, 6.629% - 6.858%,
7/14/12 ................................................................. United States 684,809 676,934
-------------
1,650,443
-------------
TECHNOLOGY SERVICES 1.0%
SunGard Data Systems Inc., New U.S. Term Loan, 7.356%,
2/28/14 ................................................................. United States 3,843,341 3,768,473
-------------
UTILITIES 2.1%
d Dynegy Holdings Inc.,
Term L/C Facility, 6.629%, 4/02/13 .................................... United States 2,923,913 2,809,939
Term Loan B, 7.76%, 4/02/13 ........................................... United States 76,087 73,121
Knight Inc. (Kinder Morgan), Term Loan B, 6.63% - 7.24%,
5/30/14 ................................................................. United States 2,321,273 2,266,792
NRG Energy Inc.,
Credit Link, 6.85%, 2/01/13 ........................................... United States 819,782 804,797
Term Loan, 6.948%, 2/01/13 ............................................ United States 1,969,718 1,933,712
-------------
7,888,361
-------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $222,337,333) ................... 218,250,586
-------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 4.5%
b Government of Argentina, FRN, 5.475%, 8/03/12 .............................. Argentina 3,950,000 2,211,547
Government of Malaysia,
8.60%, 12/01/07 ....................................................... Malaysia 8,000,000 MYR 2,366,986
6.45%, 7/01/08 ........................................................ Malaysia 1,400,000 MYR 419,629
7.00%, 3/15/09 ........................................................ Malaysia 1,500,000 MYR 461,996
Government of Norway, 5.50%, 5/15/09 ....................................... Norway 2,330,000 NOK 436,546
Government of Poland, 6.00%, 5/24/09 ....................................... Poland 5,645,000 PLN 2,159,309
Government of Singapore, 5.625%, 7/01/08 ................................... Singapore 2,150,000 SGD 1,484,971
Government of Sweden,
6.50%, 5/05/08 ........................................................ Sweden 15,600,000 SEK 2,457,755
5.00%, 1/28/09 ........................................................ Sweden 2,800,000 SEK 440,353
g Strip, 9/17/08 ........................................................ Sweden 1,500,000 SEK 224,523
Korea Treasury Note, 4.75%, 3/12/08 ........................................ South Korea 3,600,000,000 KRW 3,924,678
-------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES
(COST $15,791,272) ...................................................... 16,588,293
-------------
TOTAL LONG TERM INVESTMENTS (COST $555,162,836) ............................ 548,304,346
-------------

22 | Semiannual Report

Franklin Templeton
Limited Duration Income Trust

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

SHORT TERM INVESTMENTS 5.8%
FOREIGN GOVERNMENT SECURITIES 1.0%
g Egypt Treasury Bill, 11/13/07 - 7/01/08 .................................... Egypt 8,550,000 EGP $ 1,515,933
g Government of Sweden, Strip, 6/18/08 ....................................... Sweden 4,050,000 SEK 612,133
g Malaysia Treasury Bill, 6/06/08 ............................................ Malaysia 800,000 MYR 229,399
g Norway Treasury Bill, 12/19/07 - 9/17/08 ................................... Norway 7,350,000 NOK 1,347,247
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES (COST $3,419,427) ...................... 3,704,712
-------------
TOTAL INVESTMENTS BEFORE MONEY MARKET FUND
(COST $558,582,263) ..................................................... 552,009,058
-------------

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

MONEY MARKET FUND (COST $17,641,592) 4.8%
h Franklin Institutional Fiduciary Trust Money Market Portfolio,
4.95% ................................................................... United States 17,641,592 17,641,592
-------------
TOTAL SHORT TERM INVESTMENTS (COST $21,061,019) ............................ 21,346,304
-------------
TOTAL INVESTMENTS (COST $576,223,855) 154.3% ............................... 569,650,650
PREFERRED SHARES (51.5)% ................................................... (190,000,000)
OTHER ASSETS, LESS LIABILITIES (2.8)% ...................................... (10,544,751)
-------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0% .............................. $ 369,105,899
=============

CURRENCY ABBREVIATIONS

EGP - Egyptian Pounds
KRW - South Korean Won
MYR - Malaysian Ringgit
NOK - Norwegian Krone
PLN - Polish Zloty
SEK - Swedish Krona
SGD - Singapore Dollar

SELECTED PORTFOLIO ABBREVIATIONS

FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note
GNMA - Government National Mortgage Association
L/C - Letter of Credit
PIK - Payment-In-Kind
REIT - Real Estate Investment Trust
SF - Single Family

a The principal amount is stated in U.S. dollars unless otherwise indicated.

b The coupon rate shown represents the rate at period end.

c Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and may be sold in transactions exempt from registration only to qualified
institutional buyers or in a public offering registered under the Securities Act
of 1933. These securities have been deemed liquid under guidelines approved by
the Fund's Board of Trustees. At September 30, 2007, the aggregate value of
these securities was $27,764,287, representing 7.52% of net assets.

d See Note 1(c) regarding securities purchased on a when-issued or delayed
delivery basis.

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

f See Note 10 regarding unfunded loan commitments.

g The security is traded on a discount basis with no stated coupon rate.

h See Note 8 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio. The rate shown is the annualized seven-day yield at
period end.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 23

Franklin Templeton
Limited Duration Income Trust

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
September 30, 2007 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................................... $ 558,582,263
Cost - Sweep Money Fund (Note 8) .......................................... 17,641,592
--------------
Total cost of investments ................................................. $ 576,223,855
==============
Value - Unaffiliated issuers .............................................. $ 552,009,058
Value - Sweep Money Fund (Note 8) ......................................... 17,641,592
--------------
Total value of investments ................................................ 569,650,650
Cash ........................................................................ 6,454,264
Receivables:
Investment securities sold ................................................ 4,858,446
Interest .................................................................. 6,121,645
--------------
Total assets ............................................................ 587,085,005
--------------
Liabilities:
Payables:
Investment securities purchased ........................................... 25,224,188
Affiliates ................................................................ 324,210
Distributions to common shareholders ...................................... 2,248,997
Unrealized loss on unfunded loan commitments (Note 10) ...................... 24,146
Accrued expenses and other liabilities ...................................... 157,565
--------------
Total liabilities ....................................................... 27,979,106
--------------
Preferred shares at redemption value [$25,000 liquidation preference per
share (7,600 shares outstanding)] ............................................. 190,000,000
--------------
Net assets applicable to common shares .................................. $ 369,105,899
==============
Net assets applicable to common shares consist of:
Paid-in capital ............................................................. $ 380,504,435
Distributions in excess of net investment income ............................ (4,060,090)
Net unrealized appreciation (depreciation) .................................. (6,584,216)
Accumulated net realized gain (loss) ........................................ (754,230)
--------------
Net assets applicable to common shares .................................. $ 369,105,899
==============
Common shares outstanding ...................................................... 26,773,772
==============
Net asset value per common share ............................................... $ 13.79
==============

24 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Templeton
Limited Duration Income Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended September 30, 2007 (unaudited)

Investment income:
Dividends - Sweep Money Fund (Note 8) ....................................... $ 234,963
Interest .................................................................... 19,463,097
--------------
Total investment income ................................................. 19,698,060
--------------
Expenses:
Management fees (Note 4) .................................................... 1,401,480
Administrative fees (Note 4) ................................................ 563,994
Transfer agent fees ......................................................... 35,744
Custodian fees (Note 5) ..................................................... 11,698
Reports to shareholders ..................................................... 28,828
Professional fees ........................................................... 22,362
Trustees' fees and expenses ................................................. 28,373
Auction agent fees and expenses ............................................. 241,021
Other ....................................................................... 46,917
--------------
Total expenses .......................................................... 2,380,417
Expense reductions (Note 5) ............................................. (7,512)
--------------
Net expenses .......................................................... 2,372,905
--------------
Net investment income ............................................... 17,325,155
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................... 972,573
Foreign currency transactions ............................................. 248,099
--------------
Net realized gain (loss) ............................................ 1,220,672
--------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................... (12,200,505)
Translation of assets and liabilities denominated in foreign currencies ... 8,230
--------------
Net change in unrealized appreciation (depreciation) ................ (12,192,275)
--------------
Net realized and unrealized gain (loss) ........................................ (10,971,603)
--------------
Net increase (decrease) in net assets resulting from operations ................ 6,353,552
Distributions to preferred shareholders from net investment income ............. (5,058,378)
--------------
Net increase (decrease) in net assets applicable to common shares
resulting from operations ..................................................... $ 1,295,174
==============

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 25

Franklin Templeton
Limited Duration Income Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2007 YEAR ENDED
(UNAUDITED) MARCH 31, 2007
------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 17,325,155 $ 35,221,748
Net realized gain (loss) from investments and foreign currency transactions ............ 1,220,672 2,328,409
Net change in unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies .............................. (12,192,275) 2,190,349
Distribution to preferred shareholders from net investment income ...................... (5,058,378) (9,492,218)
------------------------------------
Net increase (decrease) in net assets applicable to common shares resulting
from operations .................................................................... 1,295,174 30,248,288
Distributions to common shareholders from net investment income .......................... (13,492,575) (27,514,958)
Capital share transactions (Note 2) ...................................................... 490,071 --
Net increase (decrease) in net assets ................................................ (11,707,330) 2,733,330
Net assets applicable to common shares:
Beginning of period ...................................................................... 380,813,229 378,079,899
------------------------------------
End of period ............................................................................ $ 369,105,899 $ 380,813,229
====================================
Distributions in excess of net investment income included in net assets:
End of period ............................................................................ $ (4,060,090) $ (5,843,485)
====================================

26 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Templeton
Limited Duration Income Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton Limited Duration Income Trust (the Fund) is registered under
the Investment Company Act of 1940, as amended, (the 1940 Act) as a diversified,
closed-end investment company.

The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.

Corporate debt securities, government securities, mortgage pass-through
securities, other mortgage-backed securities, and asset-backed securities
generally trade in the over-the-counter market rather than on a securities
exchange. The Fund may utilize independent pricing services, quotations from
bond dealers, and information with respect to bond and note transactions, to
assist in determining a current market value for each security. The Fund's
pricing services may use valuation models or matrix pricing which considers
information with respect to comparable bond and note transactions, quotations
from bond dealers, or by reference to other securities that are considered
comparable in such characteristics as rating, interest rate and maturity date,
option adjusted spread models, prepayment projections, interest rate spreads and
yield curves, to determine current value.

Senior secured corporate loans with floating or variable interest rates
generally trade in the over-the-counter market rather than on a securities
exchange. The Fund may utilize independent pricing services, quotations from
loan dealers and other financial institutions, and information with respect to
bond and note transactions, to assist in determining a current market value for
each security. The Fund's pricing services use independent market quotations
from loan dealers or financial institutions and may incorporate valuation
methodologies that consider multiple bond characteristics such as dealer quotes,
issuer type, coupon, maturity, weighted average maturity, interest rate spreads
and yield curves, cash flow and credit risk/quality analysis, to determine
current value.

Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask

Semiannual Report | 27

Franklin Templeton
Limited Duration Income Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

prices. The value is then converted into its U.S. dollar equivalent at the
foreign exchange rate in effect at the close of the NYSE on the day that the
value of the foreign security is determined.

The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Fund's Board of
Trustees.

B. FOREIGN CURRENCY TRANSLATION

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Trustees.

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

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

28 | Semiannual Report

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. Sufficient assets have been segregated for these securities.

D. FOREIGN CURRENCY CONTRACTS

When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate at a future date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.

E. 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 mortgage-backed securities 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.

F. SENIOR FLOATING RATE INTERESTS

Senior secured corporate loans pay interest at rates which are periodically
reset by reference to a base lending rate plus a spread. These base lending
rates are generally the prime rate offered by a designated U.S. bank or the
London InterBank Offered Rate (LIBOR). Senior secured corporate loans often
require prepayment of principal from excess cash flows or at the discretion of
the borrower. As a result, actual maturity may be substantially less than the
stated maturity.

Senior secured corporate loans in which the Fund invests are generally readily
marketable, but may be subject to some restrictions on resale.

Semiannual Report | 29

Franklin Templeton
Limited Duration Income Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. INCOME TAXES

No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.

H. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Facility fees are recognized as income over the expected term of the
loan. Dividend income is recorded on the ex-dividend date. Distributions to
shareholders are recorded on the ex-dividend date and are determined according
to income tax regulations (tax basis). Distributable earnings determined on a
tax basis may differ from earnings recorded in accordance with accounting
principles generally accepted in the United States of America. These differences
may be permanent or temporary. Permanent differences are reclassified among
capital accounts to reflect their tax character. These reclassifications have no
impact on net assets or the results of operations. Temporary differences are not
reclassified, as they may reverse in subsequent periods.

I. ACCOUNTING ESTIMATES

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

J. GUARANTEES AND INDEMNIFICATIONS

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

30 | Semiannual Report

Franklin Templeton
Limited Duration Income Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST

At September 30, 2007, there were 28,290,900 shares authorized (without par).
During the period ended September 30, 2007, 34,261 shares were issued for
$490,071 from reinvested distributions. During the year ended March 31, 2007, no
shares were issued.

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. During the period ended September 30,
2007, the dividends on Preferred Shares ranged from 4.84% to 6.15%.

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, 2007, all requirements were met.

4. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:

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

The Fund pays an investment management fee and administrative fee to Advisers
and FT Services of 0.50% and 0.20%, respectively, per year of the average daily
managed assets. Managed assets are defined as the Fund's gross asset value minus
the sum of accrued liabilities, other than the liquidation value of the
preferred shares.

Semiannual Report | 31

Franklin Templeton
Limited Duration Income Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

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, 2007, the
custodian fees were reduced as noted in the Statement of Operations.

6. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At March 31, 2007, the capital loss carryforwards were as
follows:

Capital loss carryforwards expiring in:
2014 ....................................................... $ 601,751
2015 ....................................................... 895,576
-------------
$ 1,497,327
=============

For tax purposes, realized capital losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At March 31, 2007, the Fund deferred realized capital losses of
$476,898.

At September 30, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ........................................... $ 577,571,876
=============
Unrealized appreciation ....................................... $ 4,475,652
Unrealized depreciation ....................................... (12,396,878)
-------------
Net unrealized appreciation (depreciation) .................... $ (7,921,226)
=============

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 discounts and premiums.

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

32 | Semiannual Report

Franklin Templeton
Limited Duration Income Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended September 30, 2007, aggregated $162,719,462 and $159,088,264,
respectively.

8. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST 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 and administrative
fees paid by the Sweep Money Fund.

9. CREDIT RISK

The Fund has 64.97% 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 are generally unsecured and are
often subordinated to other creditors of the issuer.

10. UNFUNDED LOAN COMMITMENTS

The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund is obligated to fund these loan commitments at the
borrowers' discretion. Funded portions of credit agreements are presented on the
Statement of Investments.

At September 30, 2007, unfunded commitments were as follows:

--------------------------------------------------------------------------------
UNFUNDED
BORROWER COMMITMENT
--------------------------------------------------------------------------------
CBRL Group (Cracker Barrel), Term Loan B2 (Delayed Draw) ....... $ 67,138
Community Health Systems, Inc., Delayed Draw Term Loan ......... 167,053
NRG Holdings, Inc., Term Loan .................................. 630,602
Univision Communications, Inc, Delayed Draw Term Loan .......... 166,699
-------------
$ 1,031,492
=============

Unfunded loan commitments and funded portions of credit agreements are marked to
market daily and any unrealized gain or loss is included in the Statement of
Assets and Liabilities and Statement of Operations.

Semiannual Report | 33

Franklin Templeton
Limited Duration Income Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

11. REGULATORY AND LITIGATION MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.

On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Once the SEC approves the final
plan of distribution, disbursements of settlement monies will be made promptly
to individuals who were shareholders of the designated funds during the relevant
period, in accordance with the terms and conditions of the settlement and plan.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above.

The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Trust or its shareholders whole, as appropriate.

12. NEW ACCOUNTING PRONOUNCEMENTS

The Fund adopted Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" (FIN 48), on September 28, 2007. FIN
48 clarifies the accounting for uncertainty in tax positions taken or expected
to be taken in a tax return. FIN 48 provides guidance on the measurement,
recognition, classification and disclosure of tax positions, along with
accounting for the related interest and penalties. The Fund has reviewed the tax
positions for open tax years (tax years ended March 31, 2005-2007) and has
determined that the implementation of FIN 48 did not have a material impact on
the Fund's financial statements.

34 | Semiannual Report

Franklin Templeton
Limited Duration Income Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

12. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
(SFAS 157), which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Fund believes the adoption of SFAS 157
will have no material impact on its financial statements.

Semiannual Report | 35

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 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
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 year ended March 31, 2007.
Additionally, the Fund expects to file, on or about November 29, 2007, such
certifications with its Form N-CSRS for the six months ended September 30, 2007.

36 | Semiannual Report

Literature Request

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 FUNDS

INTERNATIONAL

Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund 1

GLOBAL

Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund 1
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 2
Franklin Small-Mid Cap Growth Fund

VALUE

Franklin Balance Sheet Investment Fund 1
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 1
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND

Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate 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(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

INCOME

Franklin Adjustable U.S. Government
Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 4
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 4
Templeton Global Bond Fund
Templeton Income Fund

TAX-FREE INCOME 6

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 7

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 8
Colorado
Connecticut
Florida 8
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 7
Michigan 7
Minnesota 7
Missouri
New Jersey
New York 8
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 9

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

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

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

5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy remained the
same.

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

7. The fund invests primarily in insured municipal securities.

8. 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).

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

05/07 Not part of the semiannual report

[LOGO](R)
FRANKLIN TEMPLETON 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 S2007 11/07

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 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

Item 3. Audit Committee Financial Expert.

(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.

(2) The audit committee financial expert is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

Item 4. Principal Accountant Fees and Services. N/A

Item 5. Audit Committee of Listed Registrants.

Members of the Audit Committee are: Robert F. Carlson, Frank W.T. LaHaye,
Frank A. Olson and John B. Wilson.

Item 6. Schedule of Investments. N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.

The board of trustees of the Fund has delegated the authority to vote proxies
related to the portfolio securities held by the Fund to the Fund's manager
Franklin Advisers, Inc. in accordance with the Proxy Voting Policies and
Procedures (Policies) adopted by the manager.

The manager has delegated its administrative duties with respect to the voting
of proxies to the Proxy Group within Franklin Templeton Companies, LLC (Proxy
Group), an affiliate and wholly owned subsidiary of Franklin Resources, Inc. All
proxies received by the Proxy Group will be voted based upon the manager's
instructions and/or policies.

To assist it in analyzing proxies, the manager subscribes to RiskMetrics Group
(RiskMetrics), an unaffiliated third party corporate governance research service
that provides in-depth analyses of shareholder meeting agendas, vote
recommendations, recordkeeping and vote disclosure services. In addition, the
manager subscribes to Glass, Lewis & Co., LLC (Glass Lewis), an unaffiliated
third party analytical research firm, to receive analyses and vote
recommendations on the shareholder meetings of publicly held U.S. companies.
Although RiskMetrics' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from RiskMetrics, Glass Lewis or any other third party to be
determinative of the manager's ultimate decision. The manager votes proxies
solely in the interests of the Fund and its shareholders. As a matter of policy,
the officers, directors/trustees and employees of the Fund, the manager and the
Proxy Group will not be influenced by outside sources whose interests conflict
with the interests of the Fund and its shareholders. Efforts are made to resolve
all conflicts in the interests of the manager's clients. Material conflicts of
interest are identified by the Proxy Group based upon analyses of client, broker
and vendor lists, information periodically gathered from directors and officers,
and information derived from other sources, including public filings. In
situations where a material conflict of interest is identified, the Proxy Group
will refer the matter, along with the recommended course of action by the
manager to an interdepartmental Proxy Review Committee (which may include
portfolio managers and/or research analysts employed by the manager), for
evaluation and voting instructions. The Proxy Review Committee may defer to the
voting recommendation of RiskMetrics, Glass Lewis or those of another
independent third party provider of proxy services; or send the proxy directly
to the Fund with a recommendation regarding the vote for approval. Where the
Proxy Review Committee refers a matter to the Fund, it may rely upon the
instructions of a representative of the Fund, such as the board of trustees or a
committee of the board.

The recommendation of management on any issue is a factor which the manager
considers in determining how proxies should be voted, but is not determinative
of the manager's ultimate decision. As a matter of practice, the votes with
respect to most issues are cast in accordance with the position of the company's
management. Each issue, however, is considered on its own merits, and the
manager will not support the position of the company's management in any
situation where it deems that the ratification of management's position would
adversely affect the investment merits of owning that company's shares.

Manager's proxy voting policies and principles The manager has adopted general
proxy voting guidelines, which are summarized below. These guidelines are not an
exhaustive list of all the issues that may arise and the manager cannot
anticipate all future situations. In all cases, each proxy will be considered
based on the relevant facts and circumstances.

Board of directors. The manager supports an independent board of directors, and
prefers that key committees such as audit, nominating, and compensation
committees be comprised of independent directors. The manager will generally
vote against management efforts to classify a board and will generally support
proposals to declassify the board of directors. The manager may withhold votes
from directors who have attended less than 75% of meetings without a valid
reason. While generally in favor of separating Chairman and CEO positions, the
manager will review this issue as well as proposals to restore or provide for
cumulative voting on a case-by-case basis, taking into consideration factors
such as the company's corporate governance guidelines or provisions and
performance.

Ratification of auditors of portfolio companies. In light of several high
profile accounting scandals, the manager will closely scrutinize the role and
performance of auditors. On a case-by-case basis, the manager will examine
proposals relating to non-audit relationships and non-audit fees. The manager
will also consider, on a case-by-case basis, proposals to rotate auditors, and
will vote against the ratification of auditors when there is clear and
compelling evidence of accounting irregularities or negligence.

Management and director compensation. A company's equity-based compensation plan
should be in alignment with its shareholders' long-term interests. The manager
believes that executive compensation should be directly linked to the
performance of the company. The manager evaluates plans on a case-by-case basis
by considering several factors to determine whether the plan is fair and
reasonable, including the RiskMetrics quantitative model utilized to assess such
plans and/or the Glass Lewis evaluation of the plans. The manager will generally
oppose plans that have the potential to be excessively dilutive, and will almost
always oppose plans that are structured to allow the repricing of underwater
options, or plans that have an automatic share replenishment "evergreen"
feature. The manager will generally support employee stock option plans in which
the purchase price is at least 85% of fair market value, and when potential
dilution is 10% or less.

Severance compensation arrangements will be reviewed on a case-by-case basis,
although the manager will generally oppose "golden parachutes" that are
considered to be excessive. The manager will normally support proposals that
require a percentage of directors' compensation to be in the form of common
stock, as it aligns their interests with those of shareholders. The manager will
review on a case-by-case basis any shareholder proposals to adopt policies on
expensing stock option plans.

Anti-takeover mechanisms and related issues. The manager generally opposes
anti-takeover measures since they tend to reduce shareholder rights. On
occasion, the manager may vote with management when the research analyst has
concluded that the proposal is not onerous and would not harm the Fund or its
shareholders' interests. The manager generally supports proposals that require
shareholder rights' plans ("poison pills") to be subject to a shareholder vote
and will closely evaluate such plans on a case-by-case basis to determine
whether or not they warrant support. The manager will generally vote against any
proposal to issue stock that has unequal or subordinate voting rights. The
manager generally opposes any supermajority voting requirements as well as the
payment of "greenmail." The manager generally supports "fair price" provisions
and confidential voting.

Changes to capital structure. The manager will review, on a case-by-case basis,
proposals by companies to increase authorized shares and the purpose for the
increase and proposals seeking preemptive rights. The manager will generally not
vote in favor of dual-class capital structures to increase the number of
authorized shares where that class of stock would have superior voting rights.
The manager will generally vote in favor of the issuance of preferred stock in
cases where the company specifies the voting, dividend, conversion and other
rights of such stock and the terms of the preferred stock issuance are deemed
reasonable.

Mergers and corporate restructuring. Mergers and acquisitions will be subject to
careful review by the research analyst to determine whether each will be
beneficial to shareholders. The manager will analyze various economic and
strategic factors in making the final decision on a merger or acquisition.
Corporate restructuring and reincorporation proposals are also subject to a
thorough examination on a case-by-case basis.

Social and corporate policy issues. The manager will generally give management
discretion with regard to social, environmental and ethical issues, although the
manager may vote in favor of those that are believed to have significant
economic benefits or implications for the Fund and its shareholders.

Global corporate governance. Many of the tenets discussed above are applied to
proxy voting decisions for international companies. However, the manager must be
more flexible in these instances and must be mindful of the varied market
practices of each region.

The manager will attempt to process every proxy it receives for all domestic and
foreign issuers. However, there may be situations in which the manager cannot
process proxies, for example, where a meeting notice was received too late, or
sell orders preclude the ability to vote. If a security is on loan, the manager
may determine that it is not in the best interests of the Fund to recall the
security for voting purposes. Also, the manager may abstain from voting under
certain circumstances or vote against items such as "Other Business" when the
manager is not given adequate information from the company.

Shareholders may view the complete Policies online at franklintempleton.com.
Alternatively, shareholders may request copies of the Policies free of charge by
calling the Proxy Group collect at 1-954/527-7678 or by sending a written
request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite
1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Fund's
proxy voting records are available online at franklintempleton.com and posted on
the SEC website at www.sec.gov. The proxy voting records are updated each year
by August 31 to reflect the most recent 12-month period ended June 30.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

N/A

Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. N/A

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.

Item 11. Controls and Procedures.

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

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

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

Item 12. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(b) 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
-----------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 27, 2007

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
-----------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 27, 2007

By /s/GALEN G. VETTER
----------------------
Galen G. Vetter
Chief Financial Officer
Date November 27, 2007