Fitch Ratings has affirmed the 'AAA' ratings assigned to the auction
market preferred shares (AMPS) issued by Eaton Vance Limited Duration
Income Fund (NYSE AMEX:EVV), a closed-end fund managed by Eaton Vance
--$266,625,000 of AMPS series A, B, C, D and E each with a liquidation
preference of $25,000 per share at 'AAA'.
KEY RATING DRIVERS
The affirmation follows Fitch's annual review of EVV and reflects:
--Sufficient asset coverage relative to Fitch's published criteria;
--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 Eaton Vance Management as the investment advisor.
Fitch's ratings on AMPS speak only to timely repayment of interest and
principal in accordance with the governing documents and not to
potential liquidity in the secondary market.
As of Jan. 31, 2013, the fund had total assets of approximately $2.8
billion and leverage of $805 million or 29% of assets. Leverage
consisted of $480.2 million from a conduit credit facility, $59.1
million from reverse repurchase agreements and $266.6 million from rated
As of the same date, 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. The governing documents require the fund to restore
compliance within a 28 business-day period if asset coverage declines
Additionally, the fund's asset coverage ratios for total outstanding
AMPS and senior borrowings from the credit facility, as calculated in
accordance with the Investment Company Act of 1940, were in excess of
200%, which is also a minimum asset coverage required by the fund's
Eaton Vance Limited Duration Income Fund is a non-diversified,
closed-end management investment company, registered under the
Investment Company Act of 1940, as amended. The fund commenced
operations in May 2003 with the investment objective of seeking a high
level of current income with a secondary objective of seeking capital
appreciation. The fund invests primarily in two investment categories,
U.S. government agency mortgage-backed securities and investments rated
below investment grade including senior loans and bonds.
As of Jan. 31, 2013, the portfolio consisted mainly of high-yield
corporate securities, mortgages-backed securities guaranteed by U.S.
government agencies and senior loans. EVV's top sector concentrations
were in the Fitch sector categories of U.S. government agencies; and
computer and electronics, telecommunications. Given the high levels of
issuer and sector diversification of the fund's assets, in accordance
with Fitch's applicable rating criteria, no additional haircuts were
added to the asset specific discount factors used for calculating asset
The fund may purchase senior loans that may be fully or partially
unfunded and the commitments of which the fund is obligated to fulfill
at the borrower's discretion. Fitch reviewed the size of unfunded loan
commitments as of Jan. 31, 2013 and found them to be less than 1% of
As of the same date, the fund invested in foreign currency denominated
securities and utilized forward foreign currency exchange contracts to
hedge the potential exchange rate risk associated with such investments.
Fitch notes that for unhedged positions, exchange rate risk is included
as part of Fitch's assessment of the sufficiency of asset coverage
available to rated AMPS. The fund also used derivatives such as interest
rate futures to manage exposure to interest rate risk.
Eaton Vance Management, a subsidiary of Eaton Vance Corp. acts as the
investment adviser to the fund. As of Dec. 31, 2012, Eaton Vance Corp.
and affiliates managed approximately $252 billion in assets.
The ratings may be sensitive to material changes in the credit quality
or market risk profiles 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 closed-end fund
ratings guidelines, please review the criteria referenced below, which
can be found on Fitch's website.
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 this rating were the public
domain and Eaton Vance Management.
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
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