Fitch Affirms Preferred Share Ratings of Franklin Templeton Limited Duration
Income Trust at 'AAA'
CHICAGO -- March 13, 2013
Fitch Ratings has affirmed the ratings assigned to the auction preferred
shares (APS) issued by Franklin Templeton Limited Duration Income Trust (NYSE
AMEX: FTF), a closed-end fund managed by Franklin Advisers, Inc. (Franklin):
--Series M, 1200 shares outstanding, with a liquidation preference of $25,000
per share at 'AAA';
--Series W, 1200 shares outstanding, with a liquidation preference of $25,000
per share at 'AAA';
--Series F, 1200 shares outstanding, with a liquidation preference of $25,000
per share at 'AAA';
KEY RATING DRIVERS
The 'AAA' rating affirmation reflects:
--Sufficient asset coverage provided to the APS by the underlying portfolios
--The structural protections afforded by mandatory de-leveraging provisions in
the event of asset coverage declines;
--The legal and regulatory parameters that govern the fund's operations;
--The capabilities of Franklin as investment advisor.
As of Feb. 22, 2013, FTF's total assets were approximately $571 million and
total leverage consisted of $90 million of rated APS and $85 million of
mortgage dollar rolls, or 31% of total assets.
At the time of the rating affirmations, the fund's asset coverage ratios, as
calculated in accordance with the Fitch total and net overcollateralization
tests (Fitch OC tests) per the 'AAA' rating guidelines outlined in Fitch's
applicable criteria, were in excess of 100%, which is the minimum asset
coverage amount deemed consistent with an 'AAA' rating. These tests serve as
minimum asset coverage covenants required by the fund's governing documents.
Should the asset coverage for the notes decline below 100%, the governing
documents require the fund to restore compliance within 30 days.
Additionally, the fund's asset coverage ratio for preferred shares, as
calculated in accordance with the Investment Company Act of 1940, was in
excess of 200%, which is also a minimum asset coverage required by the fund's
Franklin Templeton Limited Duration Income Trust is a diversified, closed-end
management investment company, registered under the 1940 Act, as amended, that
commenced investment operations in August 2003. The fund's primary investment
objective is to seek high current income. The fund's secondary investment
objective is to seek capital appreciation to the extent it is possible and is
consistent with the fund's primary objective.
Under normal market conditions, the fund seeks to achieve its investment
objectives by investing primarily in the following three investment
categories: (1) mortgage-backed securities and other asset-backed securities;
(2) bank loans made to corporate and other business entities; and (3) below
investment grade debt securities and other income-producing instruments. The
fund's operating documents do not include parameters on the percentage of the
fund's assets that may be allocated to each of these investment categories,
other than that under normal market conditions, the fund will invest at least
25% of its total assets in each category. Under normal circumstances, the
fund's allocation to mortgage-backed and other asset-backed securities is
primarily composed of investments in mortgage-backed securities.
At the time of the rating affirmations, the portfolio was comprised of 35%
leveraged loans, 33% corporate securities, 23% U.S. government agency
securities, 3% cash and short-term investments and 5% structured finance
securities. A small portion, representing approximately 1% of net assets, was
invested in short-term emerging market sovereign securities. The structured
finance portion of the portfolio consisted primarily of senior collateralized
loan obligation securities and senior commercial mortgage-backed securities.
Franklin Advisers, Inc., a subsidiary of Franklin Resources, Inc. (NYSE: BEN)
acts as the investment adviser to the fund. As of Sept. 30, 2012, Franklin
Advisers, Inc. managed approximately $432 billion in assets.
The assigned rating may be sensitive to material changes in the leverage
composition, portfolio credit quality or market risk of the fund. A material
adverse deviation from Fitch guidelines for any key rating driver could cause
the rating to be lowered by Fitch.
For additional information about Fitch's rating guidelines applicable to debt
and preferred stock issued by closed-end funds, please review the criteria
referenced below, which can be found on Fitch's web site at
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
The sources of information used to assess these ratings were the public
domain, and Franklin.
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 15, 2012);
--'2013 Outlook: Closed-End Funds' (Dec. 14, 2012).
Applicable Criteria and Related Research
Rating Closed-End Fund Debt and Preferred Stock
2013 Outlook: Closed-End Funds
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.
Russ Thomas, +1-312-368-3189
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
Viktoria Baklanova, CFA, PhD, +1-212-908-9162
Ralph Aurora, +1-212-908-0528
Brian Bertsch, New York, +1 212-908-0549
Press spacebar to pause and continue. Press esc to stop.