Edgar Filing: FRANKLIN TEMPLETON LTD DURATION INCOME TRUST

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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

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

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

CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: (650) 312-2000
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Date of fiscal year end: 3/31
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Date of reporting period: 3/31/06
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ITEM 1. REPORTS TO STOCKHOLDERS.

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MARCH 31, 2006
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ANNUAL REPORT INCOME
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FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

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[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.

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

CONTENTS

ANNUAL REPORT

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

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

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

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

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

Financial Statements ...................................................... 22

Notes to Financial Statements ............................................. 25

Report of Independent Registered Public
Accounting Firm ........................................................... 34

Tax Designation ........................................................... 35

Board Members and Officers ................................................ 36

Shareholder Information ................................................... 42

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ANNUAL 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 annual report for Franklin Templeton Limited Duration Income Trust covers
the fiscal year ended March 31, 2006.

PERFORMANCE OVERVIEW

For the year under review, Franklin Templeton Limited Duration Income Trust
posted cumulative total returns of +5.90% based on net asset value and +0.60%
based on market price. Net asset value decreased from $14.41 per share on March
31, 2005, to $14.14 on March 31, 2006, and the market price fell from $13.89 to
$12.87 over the same period. You can find the Fund's performance data in the
Performance Summary on page 6.

ECONOMIC AND MARKET OVERVIEW

The U.S. economy continued to grow during the 12 months under review. After
gross domestic product growth decelerated from an annualized rate of 4.1% in
third quarter 2005 to 1.7% in the fourth quarter, it rebounded to an

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

Annual Report | 1

PORTFOLIO BREAKDOWN
Based on Total Investments as of 3/31/06*

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

Floating Rate Loans ................................................... 34.1%
High Yield Corporate Bonds ............................................ 32.1%
Mortgage-Backed Securities ............................................ 22.0%
Other Asset-Backed Securities ......................................... 6.1%
Foreign Government & Agency Securities ................................ 1.8%
Investment Grade Corporate Bonds ...................................... 1.7%
Short-Term Investments & Other Net Assets ............................. 2.2%

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

estimated 4.8% annualized rate in first quarter 2006. Over the reporting period,
nonfarm payroll data, as well as other indexes, showed growing employment.
Consumer spending increased 6.4% (not adjusted for inflation) in March 2006
compared with the same month a year earlier, which supported the nation's
economic progress. 1

Business spending also rose during the reporting period, contributing to
economic growth. Historically low interest rates allowed many companies easy
access to capital, and ample cash also helped some companies to support their
spending plans.

Oil prices climbed to $70 a barrel during the period, which was historically
high. Prices were elevated partially by concerns about potential long-term
supply limitations in the face of expected strong growth in global demand,
especially from China and India, and the potential for supply disruptions
stemming from geopolitical turmoil in several major oil-producing countries.
Although sustained high commodity prices contributed to some headline
inflationary increases, overall pricing pressures in the economy, particularly
excluding energy costs, remained subdued. The Personal Consumption Expenditures
(PCE) deflator, the Federal Reserve Board's (Fed's) preferred measure of
inflation, reported inflation of 2.0% for core prices, and 2.9% overall for the
12 months ended March 31, 2006. 2 A more widely reported inflation index, the
core Consumer Price Index (CPI), rose 2.1% for the same period. 3

During the 12-month period, the Fed raised the federal funds target rate to
4.75% from 2.75%. In March, at the first meeting of the Fed conducted by newly
appointed Fed Chairman Ben Bernanke, the Fed acknowledged the economy's strength
and mentioned it might still raise rates to balance the risks of sustainable
economic growth and price stability. The market reacted to the statement by
increasing yields (and lowering prices) across intermediate- and longer-term
bonds.

The 10-year Treasury note fluctuated over the past 12 months, but overall its
yield rose from 4.50% at the beginning of the period to 4.86% on March 31, 2006.
The yield on the 30-year Treasury rose from 4.76% to 4.89% during the

1. Source: Bureau of Economic Analysis.

2. Source: Bureau of Economic Analysis. The chain-type price index (or deflator)
measures the inflation rate for individual expenditures on goods and services as
measured by PCE. The PCE is included in the BEA's report on gross domestic
product. The core PCE deflator excludes food and energy costs.

3. Source: Bureau of Labor Statistics. Core CPI excludes food and energy costs.

2 | Annual Report

same period. Short-term interest rates rose more than intermediate- and
long-term rates, and the yield curve flattened as the spread between short-term
and long-term rates generally narrowed and even inverted at some points along
the yield curve.

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
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 Fund's fiscal year was characterized by moderate, though somewhat uneven,
economic growth, higher commodity prices and rising interest rates. This
environment favored asset classes that benefit from economic growth yet are less
sensitive to interest rates increases. Among the Fund's three core investment
areas, high yield corporate bonds and bank loans benefited most from this
backdrop. The positive economic environment supported high yield bond
fundamentals, and their high coupons helped cushion against the rise in rates.
Bank loans' income increased in response to rising short-term interest rates.
While the fixed-rate mortgage and other asset-backed securities sector still
generated positive total returns, it trailed the other areas where the Fund
invests given its lower initial yield and greater sensitivity to the rise in
intermediate- and longer-term interest rates.

DIVIDEND DISTRIBUTIONS*
4/1/05-3/31/06

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MONTH DIVIDEND PER COMMON SHARE
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April 9.10 cents
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May 9.10 cents
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June 9.10 cents
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July 9.10 cents
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August 9.10 cents
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September 9.10 cents
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October 9.10 cents
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November 9.10 cents
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December 9.10 cents
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January 9.10 cents
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February 9.10 cents
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March 9.10 cents
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TOTAL $1.092
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*All Fund distributions will vary depending upon current market conditions, and
past distributions are not indicative of future trends.

Annual Report | 3

High yield corporate bonds represented the Fund's largest sector weighting at
the beginning of the fiscal year as strong corporate earnings, a low default
rate and good balance sheet liquidity led to a favorable fundamental credit
environment. Despite some volatility caused by the credit rating downgrades of
General Motors' and Ford's corporate bonds to noninvestment-grade status, high
yield bonds provided the best returns among the Fund's three main asset classes.
While we remain positive toward the fundamental trends for high yield corporate
bonds, by period-end valuations had further richened. As a result, high yield
corporate bond yield spreads over Treasuries, as measured by the CS High Yield
Index, narrowed from 3.7 percentage points at the beginning of the period to 3.3
percentage points by March 31, 2006.4 In response, we gradually reduced the
Fund's exposure to high yield corporate bonds as valuations became more
expensive. At period-end, we held a somewhat neutral weighting in the high yield
sector when compared with the Fund's other asset classes, as our concerns about
richer valuations were mitigated by a favorable fundamental outlook for the
sector.

The bank loan market benefited from a combination of favorable credit
fundamentals, rising interest rates and strong demand for the asset class. As
short-term rates rose during the reporting period, demand for bank loan new
issuance remained strong, supporting the overall supply. Leveraged buyout and
merger and acquisition activity was also robust, with average transaction sizes
getting larger over the year. Strong loan demand caused yield spreads to
tighten, particularly in the new-issue market. Similar to the high yield
corporate bond market, low default rates, corporate earnings growth, as well as
support for asset valuations (as a result of private equity buyout transactions)
provided a positive fundamental backdrop for bank loans throughout the year.
With short-term rates significantly higher than at year-end 2004, we believed
the bank loan sector could provide the opportunity for additional income. We
increased the Fund's bank loan market exposure during the period as we were
attracted to the combination of floating interest rates, short durations and the
positive credit environment. Bank loans represented the Fund's largest sector
weighting at period-end.

During the year under review, mortgage-backed securities (MBS) and asset-backed
securities (ABS) outperformed the broader fixed income indexes, but due to their
greater interest-rate sensitivity they trailed the Fund's other primary asset
classes in terms of total return. Generally speaking, strong performance in GNMA
(Ginnie Mae) pass-throughs over the past 12 months drove up valuations in that
marketplace and, as a result, we looked for value in FNMA (Fannie Mae) and FHLMC
(Freddie Mac) mortgage securities. Overall, our exposure to the MBS and ABS
sector remained relatively flat for the Fund's fiscal year.

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

4 | Annual Report

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

Sincerely,

[PHOTO OMTTED] /s/ Christopher J. Molumphy

Christopher J. Molumphy, CFA

[PHOTO OMTTED] /s/ Richard S. Hsu

Richard S. Hsu, CFA

[PHOTO OMTTED] /s/ Eric G. Takaha

Eric G. Takaha, CFA

[PHOTO OMTTED] /s/ Roger A. Bayston

Roger A. Bayston, CFA

Portfolio Management Team
Franklin Templeton Limited Duration Income Trust

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF MARCH 31, 2006, 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.

Annual Report | 5

PERFORMANCE SUMMARY AS OF 3/31/06

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 realized gains on the sale of Fund shares.

PRICE AND DISTRIBUTION INFORMATION

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SYMBOL: FTF CHANGE 3/31/06 3/31/05
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Net Asset Value (NAV) -$0.27 $14.14 $14.41
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Market Price (AMEX) -$1.02 $12.87 $13.89
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DISTRIBUTIONS (4/1/05-3/31/06)
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Dividend Income $1.092
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PERFORMANCE 1

COMMENCEMENT OF
1-YEAR OPERATIONS (8/27/03)
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Cumulative Total Return 2
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Based on change in NAV 3 +5.90% +20.19%
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Based on change in market price 4 +0.60% +5.22%
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Average Annual Total Return 2
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Based on change in NAV 3 +5.90% +7.35%
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Based on change in market price 4 +0.60% +1.98%
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Distribution Rate 5 8.48%
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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.

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

3. Assumes reinvestment of distributions based on 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 9.1 cent per
share March dividend and the AMEX closing price of $12.87 on 3/31/06.

6 | Annual Report

ANNUAL SHAREHOLDERS' MEETING

SEPTEMBER 22, 2005

At an annual Meeting of Shareholders of Franklin Templeton Limited Duration
Income Trust (the "Fund") held on September 22, 2005, shareholders approved the
following:

Regarding the proposal to elect nominees for Trustees:

COMMON % OF % OF
SHARES OUTSTANDING % OF WITHHELD OR OUTSTANDING % OF
TRUSTEES FOR SHARES VOTED ABSTAIN SHARES VOTED
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Robert F. Carlson 21,363,378.074 79.894% 98.886% 240,590.000 0.900% 1.114%
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S. Joseph Fortunato 21,346,827.074 79.833% 98.810% 257,141.000 0.962% 1.190%
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Edith E. Holiday 21,362,348.074 79.891% 98.882% 241,620.000 0.904% 1.118%
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Frank A. Olson 21,354,239.074 79.860% 98.844% 249,729.000 0.934% 1.156%
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PREFERRED % OF % OF
SHARES OUTSTANDING % OF WITHHELD OR OUTSTANDING % OF
TRUSTEES FOR SHARES VOTED ABSTAIN SHARES VOTED
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Robert F. Carlson 5,618.000 73.931% 99.98% 1.000 0.013% 0.02%
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S. Joseph Fortunato 5,618.000 73.931% 99.98% 1.000 0.013% 0.02%
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Edith E. Holiday 5,618.000 73.931% 99.98% 1.000 0.013% 0.02%
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Frank A. Olson 5,618.000 73.931% 99.98% 1.000 0.013% 0.02%
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Rupert H. Johnson, Jr. 5,618.000 73.931% 99.98% 1.000 0.013% 0.02%
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Annual Report | 7

DIVIDEND REINVESTMENT PLAN

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

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

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

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

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

8 | Annual Report

The market price of shares on a particular date shall be the last sales price on
the American stock exchange, or, if there is no sale on the exchange on that
date, then the mean between the closing bid and asked quotations on the exchange
on such date. The net asset value per share on a particular date shall be the
amount most recently calculated by or on behalf of the Fund as required by law.

The Agent shall at all times act in good faith and agree to use its best efforts
within reasonable limits to ensure the accuracy of all services performed under
this agreement and to comply with applicable law, but assumes no responsibility
and shall not be liable for loss or damage due to errors unless such error is
caused by the Agent's negligence, bad faith, or willful misconduct or that of
its employees. Your uninvested funds held by the Agent will not bear interest.
The Agent shall have no responsibility for the value of shares acquired. For the
purpose of cash investments, the Agent may commingle your funds with those of
other participants 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 your 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

Annual Report | 9

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

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

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

10 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

FINANCIAL HIGHLIGHTS

---------------------------------------------
YEAR ENDED MARCH 31,
2006 2005 2004 d
---------------------------------------------
PER COMMON SHARE OPERATING PERFORMANCE
(for a common share outstanding throughout the year)

Net asset value, beginning of year ........................................... $ 14.41 $ 14.75 $ 14.33
---------------------------------------------

Income from investment operations:
Net investment incomea ...................................................... 1.18 1.10 0.53

Net realized and unrealized gains (losses) .................................. (0.10) (0.12) 0.63

Dividends to preferred shareholders from net investment income .............. (0.26) (0.13) (0.03)
---------------------------------------------
Total from investment operations ............................................. 0.82 0.85 1.13
---------------------------------------------
Less distributions to common shareholders from net investment income ......... (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 year ................................................. $ 14.14 $ 14.41 $ 14.75
=============================================
Market value, end of year b .................................................. $ 12.87 $ 13.89 $ 14.87
=============================================

Total return [based on market value per share] ............................... 0.60% 1.38% 3.16% e

RATIOS/SUPPLEMENTAL DATA

Net assets applicable to common shares, end of year (000's) .................. $ 378,080 $ 385,344 $ 393,125

Ratios to average net assets applicable to common shares:

Expenses c .................................................................. 1.26% 1.21% 1.11% f

Net investment income ....................................................... 8.24% 7.50% 6.12% f

Portfolio turnover rate ...................................................... 46.55% 55.02% 45.08%

Asset coverage per preferred share ........................................... $ 74,747 $ 75,703 $ 76,727

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

a Based on average daily common shares outstanding.

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

c Benefit of waiver is less than 0.01%.

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

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

f Annualized.

Annual Report | See notes to financial statements. | 11

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006

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COUNTRY PRINCIPAL AMOUNT c VALUE
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BONDS 50.8%
COMMERCIAL SERVICES 1.0%
JohnsonDiversey Holdings Inc., senior disc. note, zero cpn. to
5/17/07, 10.67% thereafter, 5/15/13 ..................................... United States 4,300,000 $ 3,741,000
-------------
COMMUNICATIONS 6.4%
Dobson Cellular Systems Inc., senior secured note, 9.875%,
11/01/12 ................................................................ United States 3,000,000 3,292,500
Inmarsat Finance PLC, senior note, 7.625%, 6/30/12 ........................ United Kingdom 1,924,000 1,981,720
a Intelsat Bermuda Ltd., senior note, FRN, 9.614%, 1/15/12 .................. Bermuda 4,000,000 4,085,000
Millicom International Cellular SA, senior note, 10.00%,
12/01/13 ................................................................ Luxembourg 3,000,000 3,337,500
Qwest Communications International Inc., senior note, 7.50%,
2/15/14 ................................................................. United States 3,000,000 3,105,000
a Rogers Wireless Communications Inc., senior secured note, FRN,
8.035%, 12/15/10 ........................................................ Canada 3,000,000 3,112,500
Time Warner Telecom Holdings Inc., senior note, 9.25%, 2/15/14 ............ United States 2,000,000 2,155,000
b Wind Acquisition Finance SA, senior note, 144A, 10.75%,
12/01/15 ................................................................ Italy 3,000,000 3,255,000
-------------
24,324,220
-------------
CONSUMER DURABLES 3.7%
Ford Motor Credit Co., 5.625%, 10/01/08 ................................... United States 3,000,000 2,745,024
General Motors Acceptance Corp.,
7.25%, 3/02/11 ......................................................... United States 2,000,000 1,897,196
6.875%, 8/28/12 ........................................................ United States 3,500,000 3,232,841
KB Home, 6.375%, 8/15/11 .................................................. United States 4,000,000 3,944,956
Simmons Bedding Co., senior sub. note, 7.875%, 1/15/14 .................... United States 2,000,000 1,945,000
-------------
13,765,017
-------------
CONSUMER NON-DURABLES 2.4%
Smithfield Foods Inc., senior note, 8.00%, 10/15/09 ....................... United States 4,000,000 4,190,000
Spectrum Brands Inc., senior sub. note, 8.50%, 10/01/13 ................... United States 3,000,000 2,790,000
Tyson Foods Inc., senior note, 8.25%, 10/01/11 ............................ United States 2,000,000 2,137,582
-------------
9,117,582
-------------
CONSUMER SERVICES 12.5%
Advanstar Communications Inc., senior secured note, 10.75%,
8/15/10 ................................................................. United States 1,100,000 1,201,750
a AMC Entertainment Inc., senior note, FRN, 8.998%, 8/15/10 ................. United States 3,000,000 3,112,500
Boyd Gaming Corp., senior sub. note, 8.75%, 4/15/12 ....................... United States 2,000,000 2,145,000
CanWest Media Inc., senior sub. note, 8.00%, 9/15/12 ...................... Canada 300,000 309,000
CCH II LLC, senior note, 10.25%, 9/15/10 .................................. United States 4,000,000 3,950,000
Clear Channel Communications Inc., senior note, 7.65%,
9/15/10 ................................................................. United States 4,000,000 4,206,132
CSC Holdings Inc., senior note, 8.125%, 7/15/09 ........................... United States 4,000,000 4,155,000
Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 ..................... United States 4,000,000 4,445,000
DIRECTV Holdings LLC, senior note, 8.375%, 3/15/13 ........................ United States 2,000,000 2,145,000
b Hertz Corp., senior note, 144A, 8.875%, 1/01/14 ........................... United States 2,000,000 2,085,000
Liberty Media Corp., senior note, 7.875%, 7/15/09 ......................... United States 4,000,000 4,229,072

12 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

BONDS (CONTINUED)
CONSUMER SERVICES (CONTINUED)
LIN Television Corp., senior sub. note, 6.50%, 5/15/13 .................. United States 4,000,000 $ 3,780,000
b,d MGM MIRAGE Inc., senior note, 144A, 6.75%, 4/01/13 ...................... United States 3,000,000 3,000,000
Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 .......... United States 3,000,000 3,247,500
b Quebecor Media Inc., senior note, 144A, 7.75%, 3/15/16 .................. Canada 1,000,000 1,032,500
Royal Caribbean Cruises Ltd., senior note, 8.00%, 5/15/10 ............... United States 4,000,000 4,297,376
-------------
47,340,830
-------------
ELECTRONIC TECHNOLOGY 1.9%
Sanmina-SCI Corp., senior sub. note, 6.75%, 3/01/13 ..................... United States 2,000,000 1,915,000
b Solectron Corp., senior sub. note, 144A, 8.00%, 3/15/16 ................. United States 3,000,000 3,022,500
Xerox Corp., senior note, 9.75%, 1/15/09 ................................ United States 2,000,000 2,197,500
-------------
7,135,000
-------------
ENERGY MINERALS 1.6%
Chesapeake Energy Corp., senior note, 7.50%, 6/15/14 .................... United States 4,000,000 4,210,000
b Massey Energy Co., senior note, 144A, 6.875%, 12/15/13 .................. United States 2,000,000 1,970,000
-------------
6,180,000
-------------
HEALTH SERVICES 4.5%
DaVita Inc.,
senior note, 6.625%, 3/15/13 .......................................... United States 1,900,000 1,904,750
senior sub. note, 7.25%, 3/15/15 ...................................... United States 1,000,000 1,010,000
Fresenius Medical Care Capital Trust II, 7.875%, 2/01/08 ................ Germany 4,000,000 4,100,000
HCA Inc., senior note, 8.75%, 9/01/10 ................................... United States 2,000,000 2,179,326
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11 ................... United States 4,000,000 3,630,000
Vanguard Health Holding Co. II LLC, senior sub. note, 9.00%,
10/01/14 ............................................................... United States 4,000,000 4,110,000
-------------
16,934,076
-------------
INDUSTRIAL SERVICES 1.8%
Allied Waste North America Inc., senior note, B, 8.50%,
12/01/08 ............................................................... United States 2,000,000 2,112,500
El Paso Natural Gas Co., senior note, A, 7.625%, 8/01/10 ................ United States 4,000,000 4,190,000
d United Rentals North America Inc., senior sub. note, 7.75%,
11/15/13 ............................................................... United States 500,000 502,500
-------------
6,805,000
-------------
NON-ENERGY MINERALS 0.8%
a Ispat Inland ULC, senior secured note, FRN, 11.28%, 4/01/10 ............. United States 3,000,000 3,097,500
-------------
PROCESS INDUSTRIES 4.2%
b Crown Americas Inc., senior note, 144A, 7.625%, 11/15/13 ................ United States 3,000,000 3,120,000
Graphic Packaging International Corp., senior note, 8.50%,
8/15/11 ................................................................ United States 3,000,000 2,985,000
JSG Funding PLC, senior sub. note, 7.75%, 4/01/15 ....................... Ireland 3,000,000 2,835,000
Nalco Co.,
senior note, 7.75%, 11/15/11 ......................................... United States 2,000,000 2,035,000
senior sub. note, 8.875%, 11/15/13 ................................... United States 2,000,000 2,090,000

Annual Report | 13

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

BONDS (CONTINUED)
PROCESS INDUSTRIES (CONTINUED)
Rhodia SA, senior note, 10.25%, 6/01/10 ............................... France 2,574,000 $ 2,898,968
-------------
15,963,968
-------------
PRODUCER MANUFACTURING 2.9%
Case New Holland Inc., senior note, 9.25%, 8/01/11 .................... United States 4,000,000 4,290,000
b Invensys PLC, senior note, 144A, 9.875%, 3/15/11 ...................... United Kingdom 3,000,000 3,202,500
Milacron Escrow Corp., senior secured note, 11.50%, 5/15/11 ........... United States 1,100,000 1,012,000
TRW Automotive Inc., senior note, 9.375%, 2/15/13 ..................... United States 2,000,000 2,172,500
-------------
10,677,000
-------------
REAL ESTATE INVESTMENT TRUSTS 1.1%
Host Marriott LP, senior note, 9.25%, 10/01/07 ....................... United States 4,000,000 4,210,000
-------------
RETAIL TRADE 0.8%
a,b GSC Holdings Corp., 144A, FRN, 8.405%, 10/01/11 ....................... United States 3,000,000 3,082,500
-------------
TECHNOLOGY SERVICES 0.9%
a,b SunGard Data Systems Inc., senior note, 144A, FRN, 9.431%,
8/15/13 .............................................................. United States 3,000,000 3,180,000
-------------
UTILITIES 4.3%
Aquila Inc., senior note, 9.95%, 2/01/11 .............................. United States 2,000,000 2,225,000
b,e,f Calpine Corp., senior secured note, 144A, 8.50%, 7/15/10 .............. United States 2,000,000 1,845,000
b Dynegy Holdings Inc., secured note, 144A, 9.875%, 7/15/10 ............. United States 3,000,000 3,303,240
Edison Mission Energy, senior note, 9.875%, 4/15/11 ................... United States 2,000,000 2,270,000
NRG Energy Inc., senior note, 7.25%, 2/01/14 .......................... United States 2,800,000 2,852,500
TXU Corp., 4.80%, 11/15/09 ............................................ United States 4,000,000 3,862,840
-------------
16,358,580
-------------
TOTAL BONDS (COST $188,831,179) ....................................... 191,912,273
-------------
MORTGAGE-BACKED SECURITIES 33.0%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) FIXED RATE 14.1%
FHLMC Gold 15 Year, 4.50%, 6/01/18 - 9/01/18 .......................... United States 3,515,747 3,364,743
FHLMC Gold 15 Year, 5.00%, 9/01/18 - 11/01/18 ......................... United States 7,625,134 7,448,060
FHLMC Gold 15 Year, 5.50%, 7/01/19 .................................... United States 367,048 364,788
FHLMC Gold 30 Year, 5.00%, 8/01/33 - 6/01/34 .......................... United States 13,554,813 12,929,985
FHLMC Gold 30 Year, 5.50%, 8/01/33 - 2/01/35 .......................... United States 9,456,808 9,251,826
FHLMC Gold 30 Year, 6.00%, 7/01/28 - 4/01/35 .......................... United States 10,091,320 10,107,914
FHLMC Gold 30 Year, 6.50%, 1/01/35 .................................... United States 4,467,370 4,555,700
FHLMC Gold 30 Year, 7.00%, 9/01/27 .................................... United States 1,292,751 1,334,532
FHLMC Gold 30 Year, 8.00%, 1/01/31 .................................... United States 300,537 320,034
FHLMC Gold 30 Year, 8.50%, 7/01/31 .................................... United States 3,355,495 3,622,293
-------------
53,299,875
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) ADJUSTABLE RATE 1.0%
a FNMA, 4.632%, 7/01/34 ................................................. United States 3,502,932 3,448,149
a FNMA, 5.942%, 6/01/32 ................................................. United States 168,082 166,230
-------------
3,614,379
-------------

14 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

MORTGAGE-BACKED SECURITIES (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) FIXED RATE 13.0%
FNMA 15 Year, 5.00%, 10/01/17 ............................................. United States 1,981,421 $ 1,937,731
FNMA 15 Year, 5.50%, 10/01/17 - 1/01/21 ................................... United States 11,415,567 11,355,311
FNMA 15 Year, 7.00%, 9/01/18 .............................................. United States 502,919 519,816
FNMA 30 Year, 5.00%, 10/01/35 ............................................. United States 2,193,399 2,089,347
FNMA 30 Year, 5.50%, 8/01/33 - 1/01/36 .................................... United States 16,489,267 16,120,484
FNMA 30 Year, 6.00%, 4/01/33 - 1/01/36 .................................... United States 14,059,691 14,070,608
FNMA 30 Year, 6.50%, 8/01/32 .............................................. United States 2,067,380 2,114,354
FNMA 30 Year, 8.00%, 10/01/29 ............................................. United States 385,500 409,872
FNMA 30 Year, 8.50%, 8/01/26 .............................................. United States 633,749 680,336
-------------
49,297,859
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) FIXED RATE 4.9%
GNMA I SF 30 Year, 5.50%, 4/15/33 - 12/15/34 .............................. United States 8,290,450 8,217,404
GNMA I SF 30 Year, 6.50%, 6/15/31 - 12/15/33 .............................. United States 3,257,339 3,378,855
GNMA II SF 30 Year, 5.00%, 10/20/33 ....................................... United States 4,262,994 4,120,745
GNMA II SF 30 Year, 7.00%, 1/20/24 - 12/20/30 ............................. United States 2,080,845 2,154,206
GNMA II SF 30 Year, 8.00%, 1/20/28 - 2/20/32 .............................. United States 730,658 778,014
-------------
18,649,224
-------------
TOTAL MORTGAGE-BACKED SECURITIES
(COST $127,533,561) ...................................................... 124,861,337
-------------
ASSET-BACKED SECURITIES AND COMMERCIAL
MORTGAGE-BACKED SECURITIES 9.2%
FINANCE 9.2%
a Argent Securities Inc., 2003-W5, M4, FRN, 8.57%, 10/25/33 ................. United States 4,000,000 4,076,921
a GSR Mortgage Trust, 2003-AHL, B1, FRN, 8.82%, 10/25/33 .................... United States 5,000,000 5,068,873
a Merrill Lynch Mortgage Investors Inc., 2003-OPT1, B2, FRN, 7.57%,
7/25/34 .................................................................. United States 1,000,000 1,019,369
Morgan Stanley ABS Capital,
a 2003-HE3, B1, FRN, 8.12%, 10/25/33 ..................................... United States 3,500,000 3,540,526
a 2003-NC10, B1, FRN, 8.12%, 10/25/33 .................................... United States 3,000,000 3,052,030
b Morgan Stanley Auto Loan Trust, 2003-HB1, D, 144A, 5.50%,
4/15/11 .................................................................. United States 227,683 227,060
a Morgan Stanley Dean Witter Capital I, 2003-NC3, B1, FRN, 7.82%,
3/25/33 .................................................................. United States 1,306,571 1,318,232
a New Century Home Equity Loan Trust, 2003-2, M3, FRN, 8.52%,
1/25/33 .................................................................. United States 5,000,000 5,085,934
a Option One Mortgage Loan Trust, 2003-6, M5, FRN, 8.12%,
11/25/33 ................................................................. United States 3,500,000 3,587,243
a Residential Asset Securities Corp., 2003-KS10, MII3, FRN, 7.37%,
12/25/33 ................................................................. United States 1,500,000 1,521,005

Annual Report | 15

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

ASSET-BACKED SECURITIES AND COMMERCIAL
MORTGAGE-BACKED SECURITIES (CONTINUED)
FINANCE (CONTINUED)
a Specialty Underwriting & Residential Finance, 2003-BC4, B2, FRN,
7.32%, 11/25/34 ........................................................ United States 1,500,000 $ 1,527,553
a Structured Asset Investment Loan Trust, 2003-BC2, M3, FRN,
8.07%, 4/25/33 ......................................................... United States 1,471,000 1,478,521
a Structured Asset Investment Loan Trust, 2003-BC13, M4, FRN,
7.57%, 11/25/33 ........................................................ United States 3,340,000 3,400,559
-------------
TOTAL ASSET-BACKED SECURITIES AND COMMERCIAL
MORTGAGE-BACKED SECURITIES (COST $34,052,813) .......................... 34,903,826
-------------
a,g SENIOR FLOATING RATE INTERESTS 51.2%
COMMERCIAL SERVICES 0.7%
Affiliated Computer Services Inc., Term Loan B, 8.25%, 3/20/13 .......... United States 500,000 504,445
JohnsonDiversey Inc., Term Loan B, 7.19 - 7.32%, 12/09/11 ............... United States 521,967 524,994
Workflow Mgmt Inc., Term Loan B, 8.66%, 11/30/11 ........................ United States 1,410,714 1,420,970
-------------
2,450,409
-------------
COMMUNICATIONS 5.9%
AAT Communications Corp., First Lien Term Loan, 6.56%,
7/27/12 ................................................................ United States 3,000,000 3,015,060
Alaska Communications Systems Holdings Inc.,
Incremental Term Loan, 6.729%, 2/01/12 ............................... United States 100,000 100,464
Term Loan, 6.729%, 2/01/12 ........................................... United States 4,000,000 4,018,560
Fairpoint Communications Inc., Term Loan B, 6.75%, 2/08/12 .............. United States 2,500,000 2,517,600
Hawaiian Telecom Communications Inc., Term Loan B, 7.23%,
10/31/12 ............................................................... United States 3,370,000 3,387,255
Iowa Telecommunications Services Inc., Term Loan B, 6.40 - 6.73%,
11/23/11 ............................................................... United States 4,000,000 4,044,320
Panamsat Corp., Term Loan B1, 6.81 - 6.90%, 8/01/11 ..................... United States 3,950,000 3,986,063
Valor Telecommunications Enterprises LLC, Term Loan,
6.579 - 6.729%, 2/24/12 ................................................ United States 1,160,000 1,160,974
-------------
22,230,296
-------------
CONSUMER DURABLES 4.5%
Eastman Kodak Co., Term Loan B1, 6.61 - 7.19%, 10/18/12 ................. United States 2,323,588 2,352,122
Jarden Corp., Term Loan B2, 6.74 - 8.50%, 1/24/12 ....................... United States 3,733,054 3,758,663
Sealy Mattress Co., Term Loan D, 6.50 - 6.57%, 4/13/13 .................. United States 3,254,821 3,286,425
Solo Cup Co., Term Loan B, 7.416 - 7.61%, 2/27/11 ....................... United States 1,964,912 1,987,175
Stile Acquisition Corp. (Masonite), Canadian Term Loan,
6.63 - 6.979%, 4/05/13 ................................................. Canada 1,832,427 1,817,291
Stile U.S. Acquisition Corp. (Masonite), U.S. Term Loan,
6.206 - 6.979%, 4/05/13 ................................................ United States 1,835,548 1,820,387
Tupperware Corp., Term Loan B, 6.39%, 12/05/12 .......................... United States 1,973,154 1,976,153
-------------
16,998,216
-------------

16 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

a,g SENIOR FLOATING RATE INTERESTS (CONTINUED)
CONSUMER NON-DURABLES 1.7%
Acco Brands Corp., Term Loan B, 6.352 - 6.68%, 8/17/12 .................. United States 1,056,350 $ 1,059,456
Central Garden & Pet Co., Term Loan B, 6.17 - 6.20%, 9/30/12 ............ United States 273,339 274,919
Constellation Brands Inc., Term Loan B, 6.31 - 6.375%, 12/22/11 ......... United States 1,565,556 1,583,121
Dole Food Co. Inc., Term Loan B, 5.938 - 8.25%, 4/18/12 ................. Bermuda 1,075,388 1,076,377
Meow Mix Co., Term Loan B, 8.03%, 7/13/11 ............................... United States 631,879 636,309
Michael Foods Inc., Term Loan B1, 6.671 - 7.032%, 11/21/10 .............. United States 638,926 644,127
Southern Wine & Spirits of America Inc., Term Loan B, 6.48%,
5/31/12 ................................................................ United States 1,154,559 1,165,412
-------------
6,439,721
-------------
CONSUMER SERVICES 12.9%
Arby's Restaurant Holdings LLC, Term Loan B, 6.918 - 7.229%,
7/25/12 ................................................................ United States 1,736,875 1,760,357
Century Theaters Inc., Term Loan B, 6.695%, 3/01/13 ..................... United States 500,000 505,030
Charter Communications Operating LLC, Term Loan B, 7.92%,
4/27/11 ................................................................ United States 1,962,560 1,976,847
Cinram International Inc., Term Loan D, 7.07%, 9/30/09 .................. Canada 2,579,510 2,581,806
d CSC Holdings Inc. (Cablevision), Incremental Term Loan, 8.50%,
3/29/13 ................................................................ United States 800,000 805,336
Dex Media West LLC, Term Loan B, 6.36 - 6.73%, 3/09/10 .................. United States 2,781,086 2,808,647
DIRECTV Holdings LLC, Term Loan B, 6.276%, 4/13/13 ...................... United States 1,133,333 1,147,387
Emmis Operating Co., Term Loan B, 6.53 - 8.50%, 11/10/11 ................ United States 431,368 433,935
Entravision Communications Corp., Term Loan B, 6.03%,
3/29/12 ................................................................ United States 1,097,250 1,108,168
Hertz Corp.,
Credit Link, 4.93%, 12/21/12 ......................................... United States 155,556 157,848
Term Loan B, 6.89 - 7.09%, 12/21/12 .................................. United States 1,059,478 1,075,095
Insight Midwest Holdings LLC,
Term Loan A, 5.813%, 6/30/09 ......................................... United States 1,062,898 1,068,031
Term Loan C, 7.00%, 12/31/09 ......................................... United States 1,989,400 2,014,626
Intelsat (Bermuda) Ltd., Senior Term Loan Facility, 6.75%,
7/28/11 ................................................................ Bermuda 2,400,689 2,408,948
Mediacom Broadband (MCC Iowa), Term Loan C, 6.64 - 6.98%,
1/31/14 ................................................................ United States 1,980,000 2,018,372
MediaNews Group Inc., Term Loan C, 6.079%, 12/30/10 ..................... United States 2,277,787 2,284,962
Metro-Goldwyn-Mayer Inc., Term Loan B, 7.229%, 4/08/12 .................. United States 2,900,000 2,942,340
Mission Broadcasting Inc., Term Loan B, 6.729%, 10/01/12 ................ United States 1,694,163 1,697,703
Nexstar Broadcasting Inc., Term Loan B, 6.729%, 10/01/12 ................ United States 1,685,137 1,688,658
Penn National Gaming Inc., Term Loan B, 6.26 - 6.73%, 10/03/12 .......... United States 1,791,000 1,817,131
R.H. Donnelley Inc., Term Loan D, 6.28 - 6.73%, 6/30/11 ................. United States 1,452,526 1,466,412
Rainbow National Services LLC, Term Loan B, 7.563%, 3/31/12 ............. United States 2,475,000 2,499,849
Regal Cinemas Inc., Term Loan B, 6.729%, 11/10/10 ....................... United States 3,875,576 3,895,768
UPC Financing Partnership, Term Loan H2, 7.28%, 9/30/12 ................. Netherlands 4,000,000 4,002,040
WMG Acquisition Corp. (Warner Music), Term Loan B, 6.371 - 6.81%,
2/28/11 ................................................................ United States 4,891,892 4,925,792
-------------
49,091,088
-------------

Annual Report | 17

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

a,g SENIOR FLOATING RATE INTERESTS (CONTINUED)
ELECTRONIC TECHNOLOGY 0.2%
Onex Wind Finance LP (Mid-Western Aircraft), Term Loan B, 6.85%,
12/31/11 ............................................................... United States 847,000 $ 860,823
-------------
ENERGY MINERALS 0.6%
Citgo Petroleum Corp., Term Loan B, 6.219%, 11/15/12 .................... United States 1,695,750 1,710,673
Walter Industries Inc., Term Loan B, 6.216 - 6.979%, 10/03/12 ........... United States 613,501 617,016
-------------
2,327,689
-------------
FINANCE 5.6%
Ameritrade Holding Corp., Term Loan B, 6.08%, 1/13/13 ................... United States 2,100,000 2,111,109
Capital Automotive REIT, Term Loan B, 6.34%, 12/10/10 ................... United States 2,910,000 2,935,142
Conseco Inc., Term Loan, 6.753%, 6/22/10 ................................ United States 395,648 399,763
Fidelity National Information Services Inc., Term Loan B, 6.47%,
3/09/13 ................................................................ United States 4,418,237 4,466,794
General Growth Properties Inc., Term Loan A-1, 6.06%, 2/24/10 ........... United States 3,500,000 3,504,480
Kyle Acquisition Group,
Term Loan B, 6.813%, 7/08/10 ......................................... United States 311,573 313,797
Term Loan C, 6.813%, 7/20/10 ......................................... United States 288,427 290,712
LandSource Communities Development LLC, Term Loan B, 7.25%,
4/27/10 ................................................................ United States 1,000,000 1,007,830
Lion Gables Realty LP, Term Loan B, 6.42%, 9/30/06 ...................... United States 283,768 284,549
d London Arena and Waterfront Finance LLC, Term Loan A, 8.38%,
3/08/12 ................................................................ United States 600,000 607,488
Maguire Properties Inc., Term Loan B, 6.441%, 3/15/10 ................... United States 1,211,780 1,219,185
Nasdaq Stock Market Inc., Term Loan B, 6.188 - 6.563%,
12/08/11 ............................................................... United States 1,695,750 1,709,163
Newkirk Master LP, Term Loan B, 6.377%, 8/11/08 ......................... United States 675,572 679,085
Yellowstone Club, Term Loan, 7.204%, 9/30/10 ............................ United States 1,879,280 1,886,703
-------------
21,415,800
-------------
HEALTH SERVICES 2.6%
DaVita Inc., Term Loan B, 6.53 - 7.11%, 10/05/12 ........................ United States 2,824,559 2,861,786
d Fresenius Medical Care Holdings Inc., Term Loan B, 8.25%,
3/31/13 ................................................................ United States 2,500,000 2,509,125
LifePoint Hospitals Inc., Term Loan B, 6.185%, 4/15/12 .................. United States 2,893,383 2,921,217
Matria Healthcare Inc.,
Term Loan B, 7.02 - 7.229%, 1/19/12 ................................... United States 745,567 753,493
Term Loan C, 7.02%, 1/19/07 ........................................... United States 352,564 352,998
d Quintiles Transnational Corp., Term Loan B, 8.75%, 3/31/13 .............. United States 500,000 505,250
-------------
9,903,869
-------------
INDUSTRIAL SERVICES 1.4%
Allied Waste North America Inc.,
Credit Link, 4.608%, 1/15/12 .......................................... United States 802,703 803,706
Term Loan B, 6.62 - 6.97%, 1/15/12 .................................... United States 2,067,516 2,070,100
Epco Holdings Inc., Term Loan C, 6.353 - 6.829%, 8/18/10 ................ United States 594,000 602,168

18 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

a,g SENIOR FLOATING RATE INTERESTS (CONTINUED)
INDUSTRIAL SERVICES (CONTINUED)
Petroleum Geo-Services ASA and PGS Finance Inc., Term Loan,
7.48%, 12/17/12 ......................................................... Norway 798,000 $ 802,485
Washington Group International Inc., Synthetic Term Loan, 4.879%,
6/13/10 ................................................................. United States 900,000 902,457
-------------
5,180,916
-------------
NON-ENERGY MINERALS 1.4%
Novelis Corp., U.S. Term Loan, 6.44%, 1/09/12 ............................ United States 1,369,305 1,386,079
Novelis Inc., Canadian Term Loan, 6.44%, 1/09/12 ......................... Canada 788,388 798,045
St. Marys Cement Inc., Term Loan B, 6.979%, 12/04/09 ..................... Canada 2,944,799 2,990,811
-------------
5,174,935
-------------
PROCESS INDUSTRIES 6.3%
Berry Plastics Corp., Term Loan, 6.84%, 12/02/11 ......................... United States 2,883,225 2,930,048
Boise Cascade LLC, Term Loan D, 6.594 - 6.75%, 10/28/11 .................. United States 595,108 604,058
Brenntag,
Acquisition Facility, 7.44%, 12/22/12 ................................. Germany 98,182 99,773
Term Loan B2, 7.44%, 12/22/13 ......................................... United States 401,818 408,356
Georgia-Pacific Corp.,
Second Lien Term Loan, 7.698 - 7.92%, 12/23/13 ........................ United States 1,000,000 1,021,180
Term Loan B, 6.88 - 6.979%, 12/20/12 .................................. United States 2,493,750 2,500,059
Graham Packaging Co., First Lien Term Loan, 6.813 - 7.25%,
10/07/11 ................................................................ United States 1,682,556 1,702,965
Hexion Specialty Chemicals Inc.,
Tranche B-1, 7.50%, 5/31/12 ........................................... United States 454,745 460,039
Tranche B-3 Credit Link, 4.558%, 5/31/12 .............................. United States 109,091 110,361
Huntsman International LLC, Term Loan B, 6.53%, 8/16/12 .................. United States 3,907,549 3,923,140
Ineos U.S. Finance LLC,
Term Loan B2, 7.339%, 12/16/13 ........................................ United States 400,000 405,000
Term Loan C2, 7.839%, 12/16/14 ........................................ United States 400,000 405,088
ISP Chemco Inc., Term Loan, 6.50%, 2/16/13 ............................... United States 500,000 505,160
Nalco Co., Term Loan B, 6.44 - 6.60, 11/04/10 ............................ United States 3,314,025 3,350,645
NewPage Corp., Term Loan, 7.96%, 5/02/11 ................................. United States 2,985,000 3,028,163
Polymer Group Inc., Term Loan, 7.215%, 11/22/10 .......................... United States 798,000 803,323
Resolution Europe BV (Hexion), Tranche B-2, 7.50%, 5/31/12 ............... Netherlands 627,982 635,292
Rockwood Specialties Group Inc., Term Loan E, 6.668%,
7/30/12 ................................................................. United States 990,000 999,959
-------------
23,892,609
-------------
PRODUCER MANUFACTURING 3.5%
Cooper Standard Automotive Inc., Term Loan D, 7.50%, 12/23/11 ............ Canada 897,750 905,094
Day International Group Inc., Term Loan B, 7.48%, 12/05/12 ............... United States 767,464 776,981
Euramax International Inc., Domestic Term Loan, 7.688%,
6/29/12 ................................................................. United States 1,040,916 1,045,871
Headwaters Inc., Term Loan B, 6.61%, 4/30/11 ............................. United States 973,404 985,454
Nortek Inc., Term Loan, 6.69 - 8.75%, 8/27/11 ............................ United States 1,974,937 1,994,944

Annual Report | 19

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

a,g SENIOR FLOATING RATE INTERESTS (CONTINUED)
PRODUCER MANUFACTURING (CONTINUED)
Sensus Metering Systems Inc.,
Term Loan B1, 7.101 - 7.44%, 12/17/10 ................................ United States 2,341,615 $ 2,360,605
Term Loan B2, 7.22 - 7.44%, 12/17/10 ................................. Luxembourg 311,036 313,559
TriMas Corp., Term Loan B, 8.375%, 12/06/09 ............................. United States 2,032,016 2,054,029
TRW Automotive Inc., Term Loan B, 6.25%, 6/30/12 ........................ United States 2,962,500 2,965,166
-------------
13,401,703
-------------
RETAIL TRADE 1.4%
Neiman Marcus Group Inc., Term Loan, 7.34%, 4/06/13 ..................... United States 1,139,241 1,160,373
Pantry Inc., Term Loan, 6.58%, 1/02/12 .................................. United States 636,404 644,187
Travelcenters of America Inc., Term Loan, 6.44 - 6.86%,
12/01/11 ............................................................... United States 2,493,750 2,522,703
The William Carter Co., Term Loan B, 6.418 - 6.541%, 7/14/12 ............ United States 839,903 851,754
-------------
5,179,017
-------------
TECHNOLOGY SERVICES 0.8%
Sungard Data Systems Inc., Term Loan, 7.215%, 2/11/13 ................... United States 2,862,370 2,897,234
-------------
TRANSPORTATION 0.2%
United Air Lines Inc.,
Delay Draw, 8.625%, 1/31/12 .......................................... United States 87,500 88,881
Term Loan B, 8.625%, 1/31/12 ......................................... United States 612,500 622,165
-------------
711,046
-------------
UTILITIES 1.5%
AES Corp., Term Loan B, 5.69 - 6.75%, 4/30/08 ........................... United States 571,431 577,413
Astoria Generating Co. Acquisitions LLC,
L/C Term Loan, 6.94%, 2/23/11 ........................................ United States 106,599 108,047
Term Loan B, 6.94%, 2/23/13 .......................................... United States 493,401 500,383
NRG Energy Inc.,
Credit Link, 6.979%, 2/01/13 ......................................... United States 798,351 807,325
Term Loan B, 6.82%, 2/01/13 .......................................... United States 3,501,649 3,540,937
-------------
5,534,105
-------------
TOTAL SENIOR FLOATING RATE INTERESTS
(COST $192,588,000) .................................................... 193,689,476
-------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 2.8%
a,h Government of Argentina, FRN, 4.89%, 8/03/12 ............................ Argentina 3,950,000 3,217,653
Government of Norway, 6.75%, 1/15/07 .................................... Norway 8,300,000 NOK 1,302,899
Government of Poland, 8.50%, 11/12/06 ................................... Poland 8,750,000 PLN 2,771,325
Government of Singapore, 5.625%, 7/01/08 ................................ Singapore 2,150,000 SGD 1,399,626
Government of Sweden, 8.00%, 8/15/07 .................................... Sweden 8,300,000 SEK 1,141,201
New South Wales Treasury Corp., 6.50%, 5/01/06 .......................... Australia 800,000 AUD 572,977
-------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES
(COST $10,130,313) ..................................................... 10,405,681
-------------
TOTAL LONG TERM INVESTMENTS (COST $553,135,866) ......................... 555,772,593
-------------

20 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

STATEMENT OF INVESTMENTS, MARCH 31, 2006 (CONTINUED)

SHORT TERM INVESTMENTS 3.9%
GOVERNMENT BOND 1.8%
Korea Treasury Note, 6.90%, 1/16/07 South Korea 3,600,000,000 KRW $ 3,772,955
i Thailand Treasury Bill, 7/27/06 Thailand 64,000,000 THB 1,624,836
i Thailand Treasury Bill, 9/07/06 Thailand 65,000,000 THB 1,639,640
--------------
7,037,431
--------------

-----------
SHARES
-----------
MONEY MARKET FUND 2.1%
j Franklin Institutional Fiduciary Trust Money Market Portfolio,
4.36% United States 7,812,989 7,812,989
--------------
TOTAL SHORT TERM INVESTMENTS (COST $14,071,645) 14,850,420
--------------
TOTAL INVESTMENTS (COST $567,207,511) 150.9% 570,623,013
PREFERRED SHARES (50.3)% (190,000,000)
OTHER ASSETS, LESS LIABILITIES (0.6)% (2,543,114)
--------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0% $ 378,079,899
==============

CURRENCY ABBREVIATIONS

AUD - Australian Dollar
KRW - South Korean Won
NOK - Norwegian Krone
PLN - Polish Zloty
SEK - Swedish Krona
SGD - Singapore Dollar
THB - Thai Baht

SELECTED PORTFOLIO ABBREVIATIONS

FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note
GNMA - Government National Mortgage Association
L/C - Letters of Credit
REIT - Real Estate Investment Trust
SF - Single Family

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

b 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 March 31, 2006, the aggregate value of these
securities was $32,325,300, representing 8.55% of net assets.

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

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

e See Note 9 regarding defaulted securities.

f See Note 11 regarding other considerations.

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

h The principal amount is stated in original face, and scheduled paydowns are
reflected in the market price on ex-date.

i A portion or all of this security is traded on a discount basis with no stated
coupon rate. jSee 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.

Annual Report | See notes to financial statements. | 21

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
March 31, 2006

Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................................................................... $ 559,394,522
Cost - Sweep Money Fund (Note 8) .............................................................................. 7,812,989
-------------
Total cost of investments ..................................................................................... $ 567,207,511
=============
Value - Unaffiliated issuers .................................................................................. $ 562,810,024
Value - Sweep Money Fund (Note 8) ............................................................................. 7,812,989
-------------
Total value of investments .................................................................................... 570,623,013
Cash ........................................................................................................... 1,686,055
Receivables:
Investment securities sold .................................................................................... 675,927
Interest ...................................................................................................... 5,709,663
Unrealized gain on unfunded loan commitments (Note 10) ......................................................... 2,391
-------------
Total assets ............................................................................................ 578,697,049
-------------
Liabilities:
Payables:
Investment securities purchased ............................................................................... 7,707,264
Affiliates .................................................................................................... 350,334
Distributions to shareholders ................................................................................. 2,433,295
Accrued expenses and other liabilities ......................................................................... 126,257
-------------
Total liabilities ....................................................................................... 10,617,150
-------------
Preferred shares at redemption value [$25,000 liquidation preference per share (7,600 shares outstanding)] ...... 190,000,000
-------------
Net assets applicable to common shares ................................................................ $ 378,079,899
-------------
Net assets applicable to common shares consist of:
Paid-in capital ................................................................................................ $ 380,014,364
Distributions in excess of net investment income ............................................................... (4,058,057)
Net unrealized appreciation (depreciation) ..................................................................... 3,417,710
Accumulated net realized gain (loss) ........................................................................... (1,294,118)
-------------
Net assets applicable to common shares ................................................................ $ 378,079,899
=============
Common shares outstanding ....................................................................................... 26,739,511
=============
Net asset value per common share ................................................................................ $ 14.14
=============

22 | See notes to financial statements. | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended March 31, 2006

Investment income:
Dividends - Sweep Money Fund (Note 8) ................................................................ $ 305,540
Interest ............................................................................................. 36,008,275
------------
Total investment income ....................................................................... 36,313,815
------------
Expenses:
Management fees (Note 4a) ............................................................................ 2,828,164
Administrative fees (Note 4b) ........................................................................ 1,144,586
Transfer agent fees .................................................................................. 84,459
Custodian fees (Note 5) .............................................................................. 42,359
Reports to shareholders .............................................................................. 61,403
Professional fees .................................................................................... 54,015
Trustees' fees and expenses .......................................................................... 51,490
Auction agent fees and expenses ...................................................................... 478,851
Other ................................................................................................ 83,662
------------
Total expenses ................................................................................ 4,828,989
Expense reductions (Note 5) ................................................................... (12,435)
------------
Net expenses ................................................................................ 4,816,554
------------
Net investment income ...................................................................... 31,497,261
------------
Realized and unrealized losses:
Net realized gain (loss) from:
Investments ......................................................................................... 1,872,279
Foreign currency transactions ....................................................................... (30,455)
------------
Net realized gain (loss) ................................................................... 1,841,824
------------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................................................................... (4,448,768)
Translation of assets and liabilities denominated in foreign currencies ............................. (111)
------------
Net change in unrealized appreciation (depreciation) ....................................... (4,448,879)
------------
Net realized and unrealized gain (loss) ............................................................... (2,607,055)
------------
Net increase (decrease) in net assets resulting from operations ....................................... 28,890,206
Distributions to preferred shareholders from net investment income .................................... (6,954,398)
------------
Net increase (decrease) in net assets applicable to common shares resulting from operations ........... $ 21,935,808
------------

Annual Report | See notes to financial statements. | 23

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

------------------------------
YEAR ENDED MARCH 31,
2006 2005
------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .......................................................................... $ 31,497,261 $ 29,243,836
Net realized gain (loss) from investments and foreign currency transactions .................... 1,841,824 3,873,734
Net change in unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currencies ............................................ (4,448,879) (6,977,032)
Distribution to preferred shareholders from net investment income .............................. (6,954,398) (3,540,329)
------------------------------
Net increase (decrease) in net assets applicable to common shares resulting
from operations ........................................................................ 21,935,808 22,600,209
Distribution to common shareholders from net investment income .................................. (29,199,546) (31,639,542)
Capital share transactions:
Reinvestment of distributions (Note 2) ......................................................... -- 1,258,261
------------------------------
Net increase (decrease) in net assets .................................................... (7,263,738) (7,781,072)
Net assets applicable to common shares:
Beginning of year ............................................................................... 385,343,637 393,124,709
------------------------------
End of year ..................................................................................... $ 378,079,899 $ 385,343,637
==============================
Distributions in excess of net investment income included in net assets:
End of year ..................................................................................... $ (4,058,057) $ (1,890,002)
==============================

24 | See notes to financial statements. | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

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

The 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 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.

Annual Report | 25

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, 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.

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

The Fund may purchase securities on a when-issued or delayed delivery 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

26 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS (CONTINUED)

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 on a specified 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. 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.

F. INCOME TAXES

No provision has been made for U.S. income taxes because the Fund's policy is to
continue 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.

G. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. 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

Annual Report | 27

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)

accordance with accounting principles generally accepted in the United States.
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.

H. 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.

I. 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. However, based on experience, the
Fund expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At March 31, 2006, there were 28,290,900 shares authorized (no par value).
During the year ended March 31, 2006, there were no share transactions; all
reinvested distributions were satisfied with previously issued shares purchased
in the open market.

During the year ended March 31, 2005, 85,573 shares were issued for $1,258,261
from reinvested distributions.

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 (the Preferred
Shares). Dividends to preferred shareholders are cumulative and are declared
weekly, at rates established through an auction process. During the year ended
March 31, 2006, the dividends on Preferred Shares ranged from 2.75% to 4.76%.

28 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. AUCTION RATE PREFERRED SHARES (CONTINUED)

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 year ended March 31, 2006, all requirements were met.

4. TRANSACTIONS WITH AFFILIATES

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

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

A. MANAGEMENT FEES

The Fund pays an investment management fee to Advisers of 0.50% per year of the
average daily net assets of the Fund plus the liquidation value of the Preferred
Shares.

B. ADMINISTRATIVE FEES

The Fund pays an administrative fee to FT Services of 0.20% per year of the
average daily net assets of the Fund plus the liquidation value of the Preferred
Shares.

5. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended March 31, 2006, the
custodian fees were reduced as noted in the Statement of Operations.

Annual Report | 29

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES

At March 31, 2006, the Fund had tax basis capital losses of $601,751 expiring on
March 31, 2014, which may be carried over to offset future capital gains, if
any.

For tax purposes, realized capital losses and realized currency 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, 2006, the Fund deferred realized
capital losses and realized currency losses of $666,686 and $23,148,
respectively.

The tax character of distributions paid during the years ended March 31, 2006
and 2005, were as follows:

---------------------------
2006 2005
---------------------------
Distributions paid from ordinary income ........ $36,153,944 $35,179,871

At March 31, 2006, the cost of investments, net unrealized appreciation
(depreciation), and undistributed ordinary income for income tax purposes were
as follows:

Cost of investments ......................................... $ 569,251,098
=============

Unrealized appreciation ..................................... $ 7,572,156
Unrealized depreciation ..................................... (6,200,241)
-------------
Net unrealized appreciation (depreciation) .................. $ 1,371,915
=============
Distributable earnings - undistributed ordinary income ...... $ 536,710
=============

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

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

7. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
year ended March 31, 2006, aggregated $262,553,822 and $262,561,932,
respectively.

30 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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 AND DEFAULTED SECURITIES

The Fund has 66.48% 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.

The Fund held one defaulted security for which the income has been deemed
uncollectible. At March 31, 2006, the value of this security was $1,845,000,
representing 0.32% of the Fund's portfolio. The Fund discontinues accruing
income on securities for which income has been deemed uncollectible and provides
an estimate for losses on interest receivable. The security has been identified
on the accompanying Statement of Investments.

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 March 31, 2006, unfunded commitments were as follows:

--------------------------------------------------------------------------------
UNFUNDED
BORROWER COMMITMENT
--------------------------------------------------------------------------------
Eastman Kodak Co., Term Loan B2 ........................... $ 970,588
Hertz Corp., Delay Draw ................................... 182,311
JohnsonDiversey Inc., Delay Draw .......................... 178,033
----------
$1,330,932
==========

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.

Annual Report | 31

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. OTHER CONSIDERATIONS

Directors or employees of Franklin Advisers, Inc., as the Fund's Investment
Manager, may serve as members of various bondholders' steering committees, on
credit committees, or may represent the Fund in certain corporate restructuring
negotiations. At March 31, 2006, such individuals serve in one or more of these
capacities for Calpine Corp. As a result of this involvement, such individuals
may be in possession of certain material non-public information. If the Fund's
Investment Manager, while in possession of such information, seeks to buy or
sell any of these securities, it will comply with all applicable federal
securities laws.

12. REGULATORY MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, 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, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.

Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds in March 2005. The
Fund did not participate in the CAGO Settlement. The SEC has not yet approved
the distribution plan pertaining to the December 13, 2004 SEC Order. When
approved, disbursements of settlement monies will be made promptly to the
relevant funds, in accordance with the terms and conditions of that order. The
IDC has also prepared and submitted to the SEC for its approval a plan of
distribution under the August 2, 2004 SEC Order that resolved the SEC's market
timing investigation.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
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.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.

32 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

12. REGULATORY MATTERS (CONTINUED)

The Company and fund management strongly 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 Fund or its shareholders whole, as appropriate.

Annual Report | 33

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
FRANKLIN TEMPLETON LIMITED DURATION INCOME TRUST

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Templeton Limited Duration
Income Trust (the "Fund") at March 31, 2006, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 2006 by correspondence with the custodian, agent banks and brokers, provide
a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
May 9, 2006

34 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

TAX DESIGNATION (UNAUDITED)

Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $28,798,664 as interest
related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of
the Code for the fiscal year ended March 31, 2006.

Annual Report | 35

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

BOARD MEMBERS AND OFFICERS

The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Each board member will serve
until that person's successor is elected and qualified.

INDEPENDENT BOARD MEMBERS

------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
------------------------------------------------------------------------------------------------------------------------------------

HARRIS J. ASHTON (1932) Trustee Since 2003 140 Director, Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since 2003 56 None
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS);
and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and
Chief Counsel, California Department of Transportation.
------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (1932) Trustee Since 2003 141 None
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch (until 2002) (Consultant (2003)).
------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since June 2005 136 Director, Amerada Hess Corporation
One Franklin Parkway (exploration and refining of oil
San Mateo, CA 94403-1906 and gas), H.J. Heinz Company
(processed foods and allied
products), RTI International
Metals, Inc. (manufacture and
distribution of titanium), Canadian
National Railway (railroad) and
White Mountains Insurance Group,
Ltd. (holding company).
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
------------------------------------------------------------------------------------------------------------------------------------

36 | Annual Report

FRANK W.T. LAHAYE (1929) Trustee Since 2003 114 Director, Center for Creative Land
One Franklin Parkway Recycling (redevelopment).
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (1928) Trustee Since 2003 140 Director, Martek Biosciences
One Franklin Parkway Corporation, MedImmune, Inc.
San Mateo, CA 94403-1906 (biotechnology) and Overstock.com
(Internet services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known as
MCI WorldCom, Inc. and WorldCom,
Inc.) (communications services)
(1988-2002), White Mountains
Insurance Group, Ltd. (holding
company) (1987-2004) and Spacehab,
Inc. (aerospace services)
(1994-2003).
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company) (2001-2004);
Chairman, White River Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and
President, National Association of Securities Dealers, Inc. (1970-1987).
------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since June 2005 103 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company),
San Mateo, CA 94403-1906 Amerada Hess Corporation
(exploration and refining of oil
and gas) and Sentient Jet (private
jet service); and FORMERLY,
Director, Becton Dickinson and
Company (medical technology),
Cooper Industries, Inc. (electrical
products and tools and hardware),
Health Net, Inc. (formerly,
Foundation Health) (integrated
managed care), The Hertz
Corporation, Pacific Southwest
Airlines, The RCA Corporation,
Unicom (formerly, Commonwealth
Edison) and UAL Corporation
(airlines).
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 37

JOHN B. WILSON (1959) Trustee Since February 37 None
One Franklin Parkway 2006
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); and FORMERLY, Chief Operating Officer
and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer and Executive Vice President - Finance and
Strategy, Staples, Inc. (office supplies) (1992-1996); Executive Vice President - Corporate Planning, Northwest Airlines, Inc.
(airlines) (1990-1992); Vice President and Partner, Bain & Company (1986-1990); and served on private and non-profit boards.
------------------------------------------------------------------------------------------------------------------------------------

INTERESTED BOARD MEMBERS AND OFFICERS

**CHARLES B. JOHNSON (1933) Trustee and Since 2003 140 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (1940) Trustee and Since 2003 123 None
One Franklin Parkway Senior Vice
San Mateo, CA 94403-1906 President
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the
investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (1945) Vice Since 2003 Not Applicable Not Applicable
One Franklin Parkway President
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton
Investments.
------------------------------------------------------------------------------------------------------------------------------------

38 | Annual Report

JAMES M. DAVIS (1952) Chief Since 2004 Not Applicable Not Applicable
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 47 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 31 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the
investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2003 Not Applicable Not Applicable
500 East Broward Blvd. President
Suite 2100 and Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 47 of the investment
companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice Since 2003 Not Applicable Not Applicable
One Franklin Parkway President
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 47 of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
STEVEN J. GRAY (1955) Secretary Since October Not Applicable Not Applicable
One Franklin Parkway 2005
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 33 of the investment companies in Franklin
Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 39

BARBARA J. GREEN (1947) Vice President Since 2003 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
------------------------------------------------------------------------------------------------------------------------------------
GREGORY E. JOHNSON (1961) Vice President Since 2003 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Chief Executive Officer, Franklin Resources, Inc.; Chairman of the Board and Director, Franklin Templeton
Distributors, Inc.; President, Franklin Agency, Inc.; Vice President and Director, Franklin Advisers, Inc.; Director, Fiduciary
Trust Company International; and officer and/or director of some of the other subsidiaries of Franklin Resources, Inc.
------------------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER J. MOLUMPHY (1962) President and Since 2003 Not Applicable Not Applicable
One Franklin Parkway Chief
San Mateo, CA 94403-1906 Executive
Officer -
Investment
Management
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, Franklin Advisers, Inc.; and officer of six of the investment companies in Franklin Templeton Investments.
------------------------------------------------------------------------------------------------------------------------------------
CRAIG S. TYLE (1960) Vice President Since October Not Applicable Not Applicable
One Franklin Parkway 2005
San Mateo, CA 94403-1906
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of 47 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Partner, Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company
Institute (ICI) (1997-2004).
------------------------------------------------------------------------------------------------------------------------------------

40 | Annual Report

GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer
------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 47 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and
1991-2004).
------------------------------------------------------------------------------------------------------------------------------------

*We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments fund
complex. These portfolios have a common investment adviser or affiliated
investment advisers.

**Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be interested
persons of the Trust under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources, Inc.
(Resources), which is the parent company of the Fund's adviser and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the father
and uncle, respectively, of Gregory E. Johnson.

THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.

Annual Report | 41

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

SHAREHOLDER INFORMATION

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT

At a meeting held February 28, 2006, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for Franklin Templeton Limited Duration Income
Trust ("Fund"). In reaching this decision, the Board took into account
information furnished throughout the year at regular Board meetings, as well as
information prepared specifically in connection with the annual renewal review
process. Information furnished and discussed throughout the year included
investment performance reports on the Fund, information on its share price
discount to net asset value, and other related financial information, as well as
periodic reports on legal, compliance, pricing, brokerage commissions and
execution and other services provided by the Investment Manager ("Manager") and
its affiliates. Information furnished specifically in connection with the
renewal process included a report prepared by Lipper, Inc. ("Lipper"), an
independent organization, as well as a Fund profitability analysis report
prepared by management. The Lipper report compared the Fund's investment
performance and expenses with those of other funds deemed comparable to the Fund
as selected by Lipper. The Fund profitability analysis report discussed the
profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included with such
profitability analysis report was information on a fund-by-fund basis listing
portfolio managers and other accounts they manage, as well as information on
management fees charged by the Manager and its affiliates including management's
explanation of differences where relevant, and a three-year expense analysis
with an explanation for any increase in expense ratios. Additional information
accompanying such report was a memorandum prepared by management describing
enhancements to the services provided to the Fund by the Franklin Templeton
Investments organization, as well as a memorandum relating to economies of
scale.

In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.

NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
the Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the Board, and the accuracy

42 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

of net asset value calculations. Favorable consideration was given to
management's efforts and expenditures in establishing back-up systems and
recovery procedures to function in the event of a natural disaster, it being
noted by the Board that such systems and procedures had functioned smoothly
during the hurricanes and blackout experienced last year in Florida.
Consideration was also given to the experience of the Fund's portfolio
management team, the number of accounts managed and general method of
compensation. In this latter respect, the Board noted that a primary factor in
management's determination of the level of a portfolio manager's bonus
compensation was the relative investment performance of the funds he or she
managed so as to be aligned with the interests of Fund shareholders.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
performance was given to the Lipper report furnished for the agreement renewals.
The Lipper report prepared for the Fund showed its investment performance in
comparison with a performance universe consisting of all closed-end BBB
corporate debt funds as selected by Lipper during 2005 and 2004, being the
Fund's first two full years of operation. Such report considers total return on
a net asset value basis without regard to market discounts or premiums to
accurately reflect investment performance. The Lipper report showed the Fund's
income return was in the first or highest quintile of its performance universe
during 2005 and 2004, and its total return was in the second-highest quintile of
such universe during 2005 and 2004. The Board expressed its satisfaction with
such performance.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with a Lipper
expense group consisting of the Fund and four other non-leveraged closed-end
BBB-rated corporate debt funds as selected by Lipper. Prior to making such
comparison, the Board relied upon a survey showing that the scope of services
covered under the Fund's investment management agreement was similar to those
provided by fund managers to other fund groups that would be used as a basis of
comparison in the Lipper report. In reviewing comparative costs, emphasis was
given to each Fund's management fee expense ratio in comparison with the
effective management fee that would have been charged by other funds within its
Lipper expense group assuming they were the same size as the Fund, as well as
the actual total expense ratio of the Fund in comparison with those of its
Lipper expense group. The Lipper effective management fee includes
administrative charges as being part of management fees. The results of such
expense comparisons showed that the Fund's effective management fee was the next
to highest, and its total expenses were the highest in its Lipper expense group.
The Lipper report also showed that the Fund's effective management expense ratio
was 10 basis points above

Annual Report | 43

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

the Lipper expense group median, and its total expense ratio was less than 10
basis points above the Lipper expense group median. The Board found such
expenses to be acceptable.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the individual funds. The Board also considered the extent to which the
Manager and its affiliates might derive ancillary benefits from fund operations,
as well as potential benefits resulting from allocation of fund brokerage and
the use of "soft" commission dollars to pay for research. Specific attention was
given to the methodology followed in allocating costs to each fund, it being
recognized that allocation methodologies are inherently subjective and various
allocation methodologies may each be reasonable while producing different
results. In this respect, the Board noted that the cost allocation methodology
was consistent with that followed in profitability report presentations made in
prior years and that the Fund's independent registered public accounting firm
had been engaged by the Manager to perform certain procedures on a biennial
basis, specified and approved by the Manager and the Fund's Board solely for
their purposes and use in reference to the profitability analysis. Included in
the analysis were the revenue and related costs involved in providing services
to the Fund, as well as the Fund's relative contribution to the profitability of
the Manager's parent. In reviewing and discussing such analysis, management
discussed with the Board its belief that costs incurred in establishing the
infrastructure necessary to the type of fund operations conducted by the Manager
and its affiliates may not be fully reflected in the expenses allocated to each
Fund in determining its profitability, as well as the fact that the level of
profits, to a certain extent, reflected operational cost savings and
efficiencies initiated by management. In addition, the Board considered a
third-party study comparing the profitability of the Manager's parent on an
overall basis as compared to other publicly held managers broken down to show
profitability from management operations exclusive of distribution expenses, as
well as profitability including distribution expenses. Based upon its
consideration of all these factors, the Board determined that the level of
profits realized by the Manager and its affiliates from providing services to
the Fund was not excessive in view of the nature, quality and extent of services
provided.

ECONOMIES OF SCALE. The Board also considered whether the manager realizes
economies of scale as the Fund grows larger and the extent to which any such
benefit is shared with the Fund and its shareholders. The Board believed that a
manager's ability to realize economies of scale and the sharing of such benefit
is a more relevant consideration in the case of an open-end fund whose size
increases as a result of the continuous sale of its shares. A closed-end
investment company such as the Fund does not continuously offer shares and
growth following its initial public offering will primarily result from market
appreciation, which benefits its shareholders. While believing economies of
scale to be less of a factor in the context of a closed-end fund, the Board
believes at some point

44 | Annual Report

FRANKLIN TEMPLETON
LIMITED DURATION INCOME TRUST

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

an increase in size may lead to economies of scale that should be shared with
the Fund and its shareholders and intends to monitor future growth of the Fund
accordingly.

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the 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 U.S. Securities and Exchange Commission to provide certain certifications
with respect to the Fund's Form N-CSR and Form N-CSRS (which include the Fund's
annual and semiannual reports to shareholders) that are filed semiannually with
the Commission. The Fund has filed such certifications with its Form N-CSRS for
the six months ended September 30, 2005. Additionally, the Fund expects to file,
on or about May 31, 2006, such certifications with its Form N-CSR for the fiscal
year ended March 31, 2006.

Annual Report | 45

This page intentionally left blank.

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 INVESTMENTS

INTERNATIONAL

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

GLOBAL

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

GROWTH

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

VALUE

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

BLEND

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

SECTOR

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

ASSET ALLOCATION

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

TARGET FUNDS

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

INCOME

Franklin Adjustable U.S. Government Securities Fund 4
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
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 5

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 6

LIMITED-TERM FUNDS

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

INTERMEDIATE-TERM FUNDS

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

STATE-SPECIFIC

Alabama
Arizona
California 7
Colorado
Connecticut
Florida 7
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 6
Michigan 6
Minnesota 6
Missouri
New Jersey
New York 7
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 8

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

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

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

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

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

6. Portfolio of insured municipal securities.

7. 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).

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

09/05 Not part of the annual report

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

ANNUAL 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 A2006 05/06

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 Frank W. T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the
principal accountant in connection with statutory and regulatory filings or
engagements were $28,091 for the fiscal year ended March 31, 2006 and $23,225
for the fiscal year ended March 31, 2005.

(b) Audit-Related Fees
The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of Item 4 were
$10,500 for the fiscal year ended March 31, 2006 and $10,000 for the fiscal
year ended March 31, 2005. The services for which these fees were paid
included attestation services.

There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control
with the investment adviser that provides ongoing services to the registrant
that are reasonably related to the performance of the audit of their
financial statements.

(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance,
tax advice and tax planning.

There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.

(d) All Other Fees
There were no fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant, other than the
services reported in paragraphs (a)-(c) of Item 4.

There were no fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant, other
than the services reported in paragraphs (a)-(c) of Item 4.

(e) (1) The registrant's audit committee is directly responsible for
approving the services to be provided by the auditors, including:

(i) pre-approval of all audit and audit related services;

(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;

(iii)pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to
any entity that controls, is controlled by or is under common control with
the registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and

(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a
designated member or members of the committee; provided the policies and
procedures are detailed as to the particular service and the committee is
informed of each service and such policies and procedures do not include
delegation of audit committee responsibilities, as contemplated under the
Securities Exchange Act of 1934, to management; subject, in the case of (ii)
through (iv), to any waivers, exceptions or exemptions that may be available
under applicable law or rules.

(e) (2) None of the services provided to the registrant described in
paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for
services rendered by the principal accountant to the registrant and the
registrant's investment adviser and any entity controlling, controlled by or
under common control with the investment adviser that provides ongoing
services to the registrant were $10,500 for the fiscal year ended March 31,
2006 and $10,000 for the fiscal year ended March 31, 2005.

(h) The registrant's audit committee of the board of trustees has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Member 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 has delegated the authority to vote
proxies related to the portfolio securities held by the Fund to the Fund's
manager Franklin Advisers, Inc. (Advisers) 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 Institutional
Shareholder Services (ISS), 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 ISS' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from ISS, 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, 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. All conflicts are resolved in
the interests of the manager's clients. In situations where the manager
perceives a material conflict of interest, the manager may: disclose the
conflict to the Fund's board of trustees; defer to the voting recommendation of
the Fund's board of trustees, ISS, Glass Lewis or those of another independent
third party provider of proxy services; or take such other action in good faith
(in consultation with counsel) which would protect the interests of the Fund and
its shareholders.

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. 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 & DIRECTOR COMPENSATION. A company's equity-based compensation plan
should be in alignment with its shareholders' long-term interests. 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 ISS
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 proxies. 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. 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 on-line at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954-847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are available on-line at
franklintempleton.com and posted on the SEC website at WWW.SEC.GOV and reflect
the twelve-month period beginning July 1, 2004, and ending June 30, 2005.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.

(a)(1) As of May 31, 2006, the portfolio managers of the Fund are as follows:

Roger Bayston, CFA, Richard Hsu, Christopher Molumphy, CFA and Eric G. Takaha,
CFA, serve as the portfolio management team responsible for managing the Fund's
portfolio investment. Each of them has experience managing Franklin mutual funds
and private accounts.

Mr. Bayston has been a portfolio manager of the Fund since inception. He joined
Franklin Templeton Investments in 1991.

Mr. Hsu has been a portfolio manager of the Fund since March 2006. He joined
Franklin Templeton Investments in 1996.

Mr. Molumphy has been a portfolio manager of the Fund since inception. He joined
Franklin Templeton Investments in 1988.

Mr. Takaha has been a portfolio manager of the Fund since inception. He joined
Franklin Templeton Investments in 1989.

(a)(2) This section reflects information about the portfolio managers as of the
fiscal year ended March 31, 2006

The following table shows the number of other accounts managed by each portfolio
manager and the total assets in the accounts managed within each category:

---------------------------------------------------------------------------------------------------
Assets of Assets of
Number Other Other Pooled Assets
of Other Registered Number of Investment of Other
Registered Investment Other Pooled Vehicles Number Accounts
Investment Companies Investment Managed of Other Managed
Companies Managed Vehicles (x $1 Accounts (x $1
Name Managed (x $1 million) Managed(1) million)(1) Managed million(1)
---------------------------------------------------------------------------------------------------

Roger Bayston 5 7,804.1 5 4,264.0 1 1,083.2
Richard Hsu 3 2,843.7 1 1,079.3 3 1,132.9
Christopher
Molumphy 7 6,274.3 3 198.8 0 0
Eric G. Takaha 6 5,880.4 3 162.4 3 71.1
-------------------------------------------------------------------- --------------- --------------

1. The various pooled investment vehicles and accounts listed are managed by a
team of investment professionals. Accordingly, the individual manager listed
would not be solely responsible for managing such listed amounts.

Portfolio managers that provide investment services to the Fund may also provide
services to a variety of other investment products, including other funds,
institutional accounts and private accounts. The advisory fees for some of such
other products and accounts may be different than that charged to the Fund and
may include performance based compensation. This may result in fees that are
higher (or lower) than the advisory fees paid by the Fund. As a matter of
policy, each fund or account is managed solely for the benefit of the beneficial
owners thereof. As discussed below, the separation of the trading execution
function from the portfolio management function and the application of
objectively based trade allocation procedures helps to mitigate potential
conflicts of interest that may arise as a result of the portfolio managers
managing accounts with different advisory fees.]

CONFLICTS. The management of multiple funds, including the Fund, and accounts
may also give rise to potential conflicts of interest if the funds and other
accounts have different objectives, benchmarks, time horizons, and fees as the
portfolio manager must allocate his or her time and investment ideas across
multiple funds and accounts. The manager seeks to manage such competing
interests for the time and attention of portfolio managers by having portfolio
managers focus on a particular investment discipline. Most other accounts
managed by a portfolio manager are managed using the same investment strategies
that are used in connection with the management of the Fund. Accordingly,
portfolio holdings, position sizes, and industry and sector exposures tend to be
similar across similar portfolios, which may minimize the potential for
conflicts of interest. The separate management of the trade execution and
valuation functions from the portfolio management process also helps to reduce
potential conflicts of interest. However, securities selected for funds or
accounts other than the Fund may outperform the securities selected for the
Fund. Moreover, if a portfolio manager identifies a limited investment
opportunity that may be suitable for more than one fund or other account, the
Fund may not be able to take full advantage of that opportunity due to an
allocation of that opportunity across all eligible funds and other accounts. The
manager seeks to manage such potential conflicts by using procedures intended to
provide a fair allocation of buy and sell opportunities among funds and other
accounts.

The structure of a portfolio manager's compensation may give rise to potential
conflicts of interest. A portfolio manager's base pay and bonus tend to increase
with additional and more complex responsibilities that include increased assets
under management. As such, there may be an indirect relationship between a
portfolio manager's marketing or sales efforts and his or her bonus.

Finally, the management of personal accounts by a portfolio manager may give
rise to potential conflicts of interest. While the funds and the manager have
adopted a code of ethics which they believe contains provisions reasonably
necessary to prevent a wide range of prohibited activities by portfolio managers
and others with respect to their personal trading activities, there can be no
assurance that the code of ethics addresses all individual conduct that could
result in conflicts of interest.

The manager and the Fund have adopted certain compliance procedures that are
designed to address these, and other, types of conflicts. However, there is no
guarantee that such procedures will detect each and every situation where a
conflict arises.

COMPENSATION. The manager seeks to maintain a compensation program that is
competitively positioned to attract, retain and motivate top-quality investment
professionals. Portfolio managers receive a base salary, a cash incentive bonus
opportunity, an equity compensation opportunity, and a benefits package.
Portfolio manager compensation is reviewed annually and the level of
compensation is based on individual performance, the salary range for a
portfolio manager's level of responsibility and Franklin Templeton guidelines.
Portfolio managers are provided no financial incentive to favor one fund or
account over another. Each portfolio manager's compensation consists of the
following three elements:

BASE SALARY Each portfolio manager is paid a base salary.

ANNUAL BONUS Annual bonuses are structured to align the interests of
the portfolio manager with those of the Fund's shareholders. Each
portfolio manager is eligible to receive an annual bonus. Bonuses
generally are split between cash (50% to 65%) and restricted shares of
Franklin Resources stock (17.5% to 25%) and mutual fund shares (17.5%
to 25%). The deferred equity-based compensation is intended to build a
vested interest of the portfolio manager in the financial performance
of both Franklin Resources and mutual funds advised by the manager. The
bonus plan is intended to provide a competitive level of annual bonus
compensation that is tied to the portfolio manager achieving
consistently strong investment performance, which aligns the financial
incentives of the portfolio manager and Fund shareholders. The Chief
Investment Officer of the manager and/or other officers of the manager,
with responsibility for the Fund, have discretion in the granting of
annual bonuses to portfolio managers in accordance with Franklin
Templeton guidelines. The following factors are generally used in
determining bonuses under the plan:

o INVESTMENT PERFORMANCE. Primary consideration is given to the
historic investment performance over the 1, 3 and 5
preceding years of all accounts managed by the portfolio
manager. The pre-tax performance of each fund managed is
measured relative to a relevant peer group and/or applicable
benchmark as appropriate.

o NON-INVESTMENT PERFORMANCE. The more qualitative contributions
of a portfolio manager to the manager's business and the
investment management team, including professional
knowledge, productivity, responsiveness to client needs and
communication, are evaluated in determining the amount of
any bonus award.

o RESPONSIBILITIES. The characteristics and complexity of funds
managed by the portfolio manager are factored in the
manager's appraisal.

ADDITIONAL LONG-TERM EQUITY-BASED COMPENSATION Portfolio managers may
also be awarded restricted shares or units of Franklin Resources stock
or restricted shares or units of one or more mutual funds, and options
to purchase common shares of Franklin Resources stock. Awards of such
deferred equity-based compensation typically vest over time, so as to
create incentives to retain key talent.

Portfolio managers also participate in benefit plans and programs available
generally to all employees of the manager.

OWNERSHIP OF FUND SHARES. The manager has a policy of encouraging portfolio
managers to invest in the funds they manage. Exceptions arise when, for example,
a fund is closed to new investors or when tax considerations or jurisdictional
constraints cause such an investment to be inappropriate for the portfolio
manager. The following is the dollar range of Fund shares beneficially owned by
each portfolio manager as of March 31, 2006 (such amounts may change from time
to time):

--------------------------------------------------------
Dollar Range of Fund Shares
Portfolio Manager Beneficially Owned
--------------------------------------------------------
Roger Bayston None
--------------------------------------------------------
Richard Hsu None
--------------------------------------------------------
Christopher Molumphy None
--------------------------------------------------------
Eric G. Takaha None
--------------------------------------------------------

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 May 22, 2006

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 May 22, 2006

By /s/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date May 22, 2006