Eaton Vance Short Duration Diversified Income Fund

 

 

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: 811-21563

 

 

Eaton Vance Short Duration Diversified Income Fund

(Exact Name of Registrant as Specified in Charter)

 

 

Two International Place, Boston, Massachusetts 02110

(Address of Principal Executive Offices)

 

 

Maureen A. Gemma

Two International Place, Boston, Massachusetts 02110

(Name and Address of Agent for Services)

 

 

(617) 482-8260

(Registrant’s Telephone Number)

October 31

Date of Fiscal Year End

October 31, 2014

Date of Reporting Period

 

 

 


Item 1. Reports to Stockholders


LOGO

 

 

Eaton Vance

Short Duration Diversified Income Fund (EVG)

Annual Report

October 31, 2014

 

 

 

 

LOGO


 

Commodity Futures Trading Commission Registration. Effective December 31, 2012, the Commodity Futures Trading Commission (“CFTC”) adopted certain regulatory changes that subject registered investment companies and advisers to regulation by the CFTC if a fund invests more than a prescribed level of its assets in certain CFTC-regulated instruments (including futures, certain options and swap agreements) or markets itself as providing investment exposure to such instruments. The Fund is considered to be a commodity pool operator under CFTC regulations. The Fund’s adviser is registered with the CFTC as a commodity pool operator and a commodity trading advisor. The CFTC has neither reviewed nor approved the Fund’s investment strategies.

Managed Distribution Plan. Pursuant to an exemptive order issued by the Securities and Exchange Commission (Order), the Fund is authorized to distribute long-term capital gains to shareholders more frequently than once per year. Pursuant to the Order, the Fund’s Board of Trustees approved a Managed Distribution Plan (MDP) pursuant to which the Fund makes monthly cash distributions to common shareholders, stated in terms of a fixed amount per common share.

The Fund currently distributes monthly cash distributions equal to $0.09 per share in accordance with the MDP. You should not draw any conclusions about the Fund’s investment performance from the amount of these distributions or from the terms of the MDP. The MDP will be subject to regular periodic review by the Fund’s Board of Trustees and the Board may amend or terminate the MDP at any time without prior notice to Fund shareholders. However, at this time there are no reasonably foreseeable circumstances that might cause the termination of the MDP.

The Fund may distribute more than its net investment income and net realized capital gains and, therefore, a distribution may include a return of capital. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.” With each distribution, the Fund will issue a notice to shareholders and a press release containing information about the amount and sources of the distribution and other related information. The amounts and sources of distributions contained in the notice and press release are only estimates and are not provided for tax purposes. The amounts and sources of the Fund’s distributions for tax purposes will be reported to shareholders on Form 1099-DIV for each calendar year.

Fund shares are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Shares are subject to investment risks, including possible loss of principal invested.


Annual Report October 31, 2014

Eaton Vance

Short Duration Diversified Income Fund

 

Table of Contents

Management’s Discussion of Fund Performance

     2   

Performance

     3   

Fund Profile

     3   

Endnotes and Additional Disclosures

     4   

Consolidated Financial Statements

     5   

Report of Independent Registered Public Accounting Firm

     46   

Federal Tax Information

     47   

Dividend Reinvestment Plan

     48   

Management and Organization

     50   

Important Notices

     52   


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Management’s Discussion of Fund Performance1

 

 

Economic and Market Conditions

Central bank activity was the major driver of the mortgage-backed securities (MBS) market over the 12-month period ended October 31, 2014. The Federal Reserve (the Fed) announced in December 2013 that it would taper its monthly bond purchases (a program known as quantitative easing). As the U.S. economy strengthened, the Fed ultimately ended its bond purchases in October 2014. While Fed members debated the timing of the first rate hike, markets began to price in the Fed’s likely move to reflect a likely tightening of monetary conditions in 2015.

Emerging markets were influenced during the 12-month period by election results and geopolitical news. Indonesia and Turkey elected new presidents, while Brazil re-elected President Rousseff, who is unpopular with investors. Additional headlines out of emerging markets caused asset price volatility. These included tensions over Russia’s annexation of the Crimean Peninsula and its ongoing involvement in parts of eastern and southern Ukraine, as well as continued instability in the Middle East.

The U.S. floating-rate loan market began the 12-month period ended October 31, 2014 on strong footing, as robust new issue supply was overcome by investor demand amid strong appetite for risk and a global search for yield. Amid an increasing number of negative headlines surrounding the asset class, retail investor demand began to wane, turning net negative after nearly two straight years of positive demand. Sluggish technical conditions followed, modestly weighing on loan prices in the final stretch of the period.

Fund Performance

For the fiscal year ended October 31, 2014, Eaton Vance Short Duration Diversified Income Fund (the Fund) had a total return of 4.10% at net asset value (NAV).

Investments in mortgage-backed securities (MBS) had a positive contribution to the Fund’s performance. The Fund maintained its focus on high-coupon seasoned agency MBS, due to the prepay protection of loans originated more than a decade ago. Despite the Fed winding down its agency MBS purchases during the year, mortgage spreads actually finished the year tighter than where they began, as net issuance came in below expectations and created a favorable supply-demand imbalance. The Fund benefited from its investments in more prepayment sensitive collateralized mortgage obligations

structures, which outperformed as mortgage refinancing activity slowed significantly during the period.

The Fund’s exposure to foreign currency instruments around the world also contributed to Fund performance during the 12-month period. Asia was the top contributing region, led by allocations to the Sri Lankan rupee, Bangladesh taka and the Indian rupee. Allocations to Eastern Europe, Latin America, Sub-Saharan Africa and Western Europe were relatively flat, while those across the Middle East and North Africa detracted. From within these regions, notable gains were driven by allocations to the Serbian dinar, Dominican peso, Kenyan shilling, Icelandic krona and Lebanese pound and were largely offset by losses on exposures to the Kazakhstani tenge, Chilean peso, Ghanaian cedi and Norwegian krone.

Investments in senior secured loans also aided Fund performance. Lower-quality loans outpaced their higher-quality counterparts during the 12-month period; loans rated BB, B, CCC and D (defaulted)7 returned 2.40%, 3.49%, 8.41% and 15.10%, respectively, for the period as measured by the S&P/LSTA Leveraged Loan Index8. As a result of management’s longstanding bias toward higher-quality credit tiers, the Fund underweighted segments rated CCC and D (defaulted) and overweighted loans rated BB. On the positive side, in terms of industry weightings, exposures to the air transport, lodging and casinos, health care and insurance sectors aided performance.

 

 

See Endnotes and Additional Disclosures in this report.

Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested and includes management fees and other expenses. Fund performance at market price will differ from its results at NAV due to factors such as changing perceptions about the Fund, market conditions, fluctuations in supply and demand for Fund shares, or changes in Fund distributions. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, current Fund performance may be lower or higher than the quoted return. For performance as of the most recent month-end, please refer to eatonvance.com.

 

  2  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Performance2

 

Portfolio Managers Scott H. Page, CFA, Payson F. Swaffield, CFA, Catherine C. McDermott, Andrew Szczurowski, CFA and Eric Stein, CFA

 

% Average Annual Total Returns   Inception Date     One Year     Five Years     Since
Inception
 

Fund at NAV

    02/28/2005        4.10     5.37     5.98

Fund at Market Price

           2.05        5.41        4.63   
       
% Premium/Discount to NAV3                            
          –11.67
       
Distributions4                            

Total Distributions per share for the period

        $ 1.080   

Distribution Rate at NAV

          6.57

Distribution Rate at Market Price

          7.43
       
% Total Leverage5                            

Derivatives

          24.32

Borrowings

          22.31   

Fund Profile

 

 

Asset Allocation (% of total leveraged assets)6

 

 

LOGO

    

 

 

See Endnotes and Additional Disclosures in this report.

Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested and includes management fees and other expenses. Fund performance at market price will differ from its results at NAV due to factors such as changing perceptions about the Fund, market conditions, fluctuations in supply and demand for Fund shares, or changes in Fund distributions. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, current Fund performance may be lower or higher than the quoted return. For performance as of the most recent month-end, please refer to eatonvance.com.

 

  3  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Endnotes and Additional Disclosures

 

 

1 

The views expressed in this report are those of the portfolio manager(s) and are current only through the date stated at the top of this page. These views are subject to change at any time based upon market or other conditions, and Eaton Vance and the Fund(s) disclaim any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. This commentary may contain statements that are not historical facts, referred to as “forward looking statements”. The Fund’s actual future results may differ significantly from those stated in any forward looking statement, depending on factors such as changes in securities or financial markets or general economic conditions, the volume of sales and purchases of Fund shares, the continuation of investment advisory, administrative and service contracts, and other risks discussed from time to time in the Fund’s filings with the Securities and Exchange Commission.

 

2 

Performance results reflect the effects of leverage. Absent an expense waiver by the investment adviser, if applicable, the returns would be lower.

 

3 

The shares of the Fund often trade at a discount or premium from their net asset value. The discount or premium of the Fund may vary over time and may be higher or lower than what is quoted in this report. For up-to-date premium/discount information, please refer to http://eatonvance.com/closedend.

 

4 

The Distribution Rate is based on the Fund’s last regular distribution per share in the period (annualized) divided by the Fund’s NAV or market price at the end of the period. The Fund’s distributions may be comprised of amounts characterized for federal income tax purposes as qualified and non-qualified ordinary dividends, capital gains and nondividend distributions, also known as return of capital. For additional information about nondividend distributions, please refer to Eaton Vance Closed-End Fund Distribution Notices (19a) posted on our website, eatonvance.com. The Fund will determine the federal income tax character of distributions paid to a shareholder after the end of the calendar year. This is reported on the IRS form 1099-DIV and provided to the shareholder shortly after each year-end. For information about the tax character of distributions made in prior calendar years, please refer to Performance-Tax Character of Distributions on the Fund’s webpage available at eatonvance.com. The Fund’s distributions are determined by the investment adviser based on its current assessment of the Fund’s long-term return potential. As portfolio and market conditions change, the rate of distributions paid by the Fund could change.

5

The Fund employs leverage through derivatives and borrowings. Total leverage is shown as a percentage of the Fund’s aggregate net assets plus the absolute notional value of long and short derivatives and borrowings outstanding. Use of leverage creates an opportunity for income, but creates risks including greater price volatility. The cost of borrowings rises and falls with changes in short-term interest rates. The Fund may be required to maintain prescribed asset coverage for its leverage and may be required to reduce its leverage at an inopportune time.

 

6 

Total leveraged assets include all assets of the Fund (including those acquired with financial leverage) and derivatives held by the Fund. Asset Allocation as a percentage of the Fund’s net assets amounted to 187.4%. Please refer to the definition of total leveraged assets within the Notes to Consolidated Financial Statements included herein.

 

7 

Ratings are based on Moody’s, S&P or Fitch, as applicable. If securities are rated differently by the ratings agencies, the higher rating is applied. Ratings, which are subject to change, apply to the creditworthiness of the issuers of the underlying securities and not to the Fund or its shares. Credit ratings measure the quality of a bond based on the issuer’s creditworthiness, with ratings ranging from AAA, being the highest, to D, being the lowest based on S&P’s measures. Ratings of BBB or higher by S&P or Fitch (Baa or higher by Moody’s) are considered to be investment-grade quality. Credit ratings are based largely on the ratings agency’s analysis at the time of rating. The rating assigned to any particular security is not necessarily a reflection of the issuer’s current financial condition and does not necessarily reflect its assessment of the volatility of a security’s market value or of the liquidity of an investment in the security.

 

8 

S&P/LSTA Leveraged Loan Index is an unmanaged index of the institutional leveraged loan market. Unless otherwise stated, index returns do not reflect the effect of any applicable sales charges, commissions, expenses, taxes or leverage, as applicable. It is not possible to invest directly in an index.

 

   Fund profile subject to change due to active management.
 

 

  4  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments

 

 

Senior Floating-Rate Interests — 54.8%(1)   
     
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Aerospace and Defense — 0.6%

  

Atlantic Aviation FBO Inc.

     

Term Loan, 3.25%, Maturing June 1, 2020

      74      $ 73,168   

DAE Aviation Holdings, Inc.

     

Term Loan, 5.00%, Maturing November 2, 2018

      135        134,868   

Silver II US Holdings, LLC

     

Term Loan, 4.00%, Maturing December 13, 2019

      377        369,666   

Standard Aero Limited

     

Term Loan, 5.00%, Maturing November 2, 2018

      61        61,140   

Transdigm, Inc.

     

Term Loan, 3.75%, Maturing February 28, 2020

      910        896,965   

Term Loan, 3.75%, Maturing June 4, 2021

      324        319,663   
                     
  $ 1,855,470   
                     

Automotive — 2.4%

  

Affinia Group Intermediate Holdings Inc.

     

Term Loan, 4.75%, Maturing April 27, 2020

      81      $ 81,115   

Allison Transmission, Inc.

     

Term Loan, 3.75%, Maturing August 23, 2019

      618        614,086   

Chrysler Group LLC

     

Term Loan, 3.50%, Maturing May 24, 2017

      891        887,081   

Term Loan, 3.25%, Maturing December 31, 2018

      373        370,210   

CS Intermediate Holdco 2 LLC

     

Term Loan, 4.00%, Maturing April 4, 2021

      574        568,544   

Dayco Products, LLC

     

Term Loan, 5.25%, Maturing December 12, 2019

      174        174,234   

Federal-Mogul Holdings Corporation

     

Term Loan, 4.75%, Maturing April 15, 2021

      673        670,040   

Goodyear Tire & Rubber Company (The)

     

Term Loan - Second Lien, 4.75%, Maturing April 30, 2019

      1,150        1,154,312   

INA Beteiligungsgesellschaft GmbH

     

Term Loan, Maturing May 15, 2020(2)

      200        198,000   

MPG Holdco I Inc.

     

Term Loan, 4.50%, Maturing October 20, 2021

      525        524,508   

TI Group Automotive Systems, LLC

     

Term Loan, 4.25%, Maturing July 2, 2021

      648        643,512   

Tower Automotive Holdings USA, LLC

     

Term Loan, 4.00%, Maturing April 23, 2020

      645        638,264   

Veyance Technologies, Inc.

     

Term Loan, 5.25%, Maturing September 8, 2017

      528        526,309   

Visteon Corporation

     

Term Loan, 3.50%, Maturing April 9, 2021

      175        172,817   
                     
  $ 7,223,032   
                     
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Beverage and Tobacco — 0.0%(3)

  

Flavors Holdings Inc.

     

Term Loan, 6.75%, Maturing April 3, 2020

      150      $ 145,125   
                     
  $ 145,125   
                     

Brokerage / Securities Dealers / Investment Houses — 0.0%(3)

  

American Beacon Advisors, Inc.

     

Term Loan, 4.75%, Maturing November 22, 2019

      72      $ 71,395   
                     
  $ 71,395   
                     

Building and Development — 0.6%

  

ABC Supply Co., Inc.

     

Term Loan, 3.50%, Maturing April 16, 2020

      248      $ 242,272   

CPG International Inc.

     

Term Loan, 4.75%, Maturing September 30, 2020

      99        98,505   

Gates Global, Inc.

     

Term Loan, 4.25%, Maturing July 5, 2021

      250        247,567   

Ply Gem Industries, Inc.

     

Term Loan, 4.00%, Maturing February 1, 2021

      499        492,357   

Quikrete Holdings, Inc.

     

Term Loan, 4.00%, Maturing September 28, 2020

      167        165,116   

RE/MAX International, Inc.

     

Term Loan, 4.00%, Maturing July 31, 2020

      370        364,486   

WireCo WorldGroup, Inc.

     

Term Loan, 6.00%, Maturing February 15, 2017

      97        97,406   
                     
  $ 1,707,709   
                     

Business Equipment and Services — 4.7%

  

Acosta Holdco, Inc.

     

Term Loan, 5.00%, Maturing September 26, 2021

      650      $ 650,675   

Altisource Solutions S.a.r.l.

     

Term Loan, 4.50%, Maturing December 9, 2020

      321        288,916   

AVSC Holding Corp.

     

Term Loan, 4.50%, Maturing January 24, 2021

      75        74,283   

Brickman Group Ltd. LLC

     

Term Loan, 4.00%, Maturing December 18, 2020

      149        146,387   

Ceridian LLC

     

Term Loan, 4.12%, Maturing May 9, 2017

      596        596,377   

Term Loan, 4.50%, Maturing September 15, 2020

      622        617,541   

ClientLogic Corporation

     

Term Loan, 7.48%, Maturing January 30, 2017

      165        160,371   

Corporate Capital Trust, Inc.

     

Term Loan, 4.00%, Maturing May 15, 2019

      174        174,230   

CPM Acquisition Corp.

     

Term Loan, 6.25%, Maturing August 29, 2017

      94        94,180   
 

 

  5   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Business Equipment and Services (continued)

  

Education Management LLC

     

Term Loan, 5.25%, Maturing June 1, 2016(19)

      247      $ 112,261   

Term Loan, 9.25%, Maturing March 29, 2018(19)

      374        170,093   

EIG Investors Corp.

     

Term Loan, 5.00%, Maturing November 9, 2019

      467        467,280   

Emdeon Business Services, LLC

     

Term Loan, 3.75%, Maturing November 2, 2018

      269        267,105   

Expert Global Solutions, Inc.

     

Term Loan, 8.50%, Maturing April 3, 2018

      115        115,288   

Extreme Reach, Inc.

     

Term Loan, 6.75%, Maturing February 10, 2020

      143        143,358   

Garda World Security Corporation

     

Term Loan, 4.00%, Maturing November 6, 2020

      61        59,338   

Term Loan, 4.00%, Maturing November 6, 2020

      237        231,958   

Genpact International, Inc.

     

Term Loan, 3.50%, Maturing August 30, 2019

      319        318,534   

IG Investment Holdings, LLC

     

Term Loan, 5.25%, Maturing October 31, 2019

      271        271,127   

IMS Health Incorporated

     

Term Loan, 3.50%, Maturing March 17, 2021

      997        985,649   

Information Resources, Inc.

     

Term Loan, 4.75%, Maturing September 30, 2020

      223        222,472   

ION Trading Technologies S.a.r.l.

     

Term Loan, 4.50%, Maturing June 10, 2021

  EUR     200        248,941   

Term Loan - Second Lien, 7.25%, Maturing May 15, 2022

      200        197,500   

KAR Auction Services, Inc.

     

Term Loan, 3.50%, Maturing March 11, 2021

      547        542,168   

Kronos Incorporated

     

Term Loan, 4.50%, Maturing October 30, 2019

      443        442,161   

Term Loan - Second Lien, 9.75%, Maturing April 30, 2020

      200        205,328   

MCS AMS Sub-Holdings LLC

     

Term Loan, 7.00%, Maturing October 15, 2019

      94        85,409   

Monitronics International Inc.

     

Term Loan, 4.25%, Maturing March 23, 2018

      220        219,844   

PGX Holdings, Inc.

     

Term Loan, 6.25%, Maturing September 29, 2020

      100        99,750   

Quintiles Transnational Corporation

     

Term Loan, 3.75%, Maturing June 8, 2018

      822        815,827   

RCS Capital Corporation

     

Term Loan, 6.50%, Maturing April 29, 2019

      173        171,408   

Sensus USA Inc.

     

Term Loan, 4.50%, Maturing May 9, 2017

      121        117,613   

ServiceMaster Company

     

Term Loan, 4.25%, Maturing July 1, 2021

      425        421,720   
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Business Equipment and Services (continued)

  

SGS Cayman, L.P.

     

Term Loan, 6.00%, Maturing April 23, 2021

      38      $ 37,859   

SunGard Data Systems, Inc.

     

Term Loan, 3.90%, Maturing February 28, 2017

      32        32,339   

Term Loan, 4.00%, Maturing March 8, 2020

      1,482        1,477,244   

Sutherland Global Services Inc.

     

Term Loan, 6.00%, Maturing April 23, 2021

      162        162,641   

TNS, Inc.

     

Term Loan, 5.00%, Maturing February 14, 2020

      189        189,505   

TransUnion, LLC

     

Term Loan, 4.00%, Maturing April 9, 2021

      721        711,907   

Travelport Finance (Luxembourg) S.a.r.l.

     

Term Loan, 6.00%, Maturing September 2, 2021

      225        224,634   

West Corporation

     

Term Loan, 3.25%, Maturing June 30, 2018

      1,301        1,283,932   

Zebra Technologies Corporation

     

Term Loan, 4.75%, Maturing September 30, 2021

      425        428,719   
                     
      $ 14,283,872   
                     

Cable and Satellite Television — 2.1%

  

Atlantic Broadband Finance, LLC

     

Term Loan, 3.25%, Maturing December 2, 2019

      135      $ 132,936   

Cequel Communications, LLC

     

Term Loan, 3.50%, Maturing February 14, 2019

      757        749,918   

Charter Communications Operating, LLC

     

Term Loan, 3.00%, Maturing July 1, 2020

      247        243,429   

Term Loan, 3.00%, Maturing January 3, 2021

      612        603,704   

CSC Holdings, Inc.

     

Term Loan, 2.65%, Maturing April 17, 2020

      366        358,506   

ION Media Networks, Inc.

     

Term Loan, 5.00%, Maturing December 18, 2020

      273        274,388   

MCC Iowa LLC

     

Term Loan, 3.25%, Maturing January 29, 2021

      173        169,500   

Term Loan, 3.75%, Maturing June 30, 2021

      150        147,310   

Mediacom Illinois, LLC

     

Term Loan, 3.75%, Maturing June 30, 2021

      75        74,141   

Numericable U.S. LLC

     

Term Loan, 4.50%, Maturing May 21, 2020

      174        174,548   

Term Loan, 4.50%, Maturing May 21, 2020

      201        201,758   

UPC Financing Partnership

     

Term Loan, 3.76%, Maturing March 31, 2021

  EUR     1,394        1,748,517   

Virgin Media Bristol LLC

     

Term Loan, 3.50%, Maturing June 7, 2020

      800        790,500   

Virgin Media Investment Holdings Limited

     

Term Loan, 4.25%, Maturing June 30, 2023

  GBP     300        477,248   
 

 

  6   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Cable and Satellite Television (continued)

  

Ziggo B.V.

     

Term Loan, 3.00%, Maturing January 15, 2022(4)

  EUR     5      $ 6,493   

Term Loan, 3.00%, Maturing January 15, 2022(4)

  EUR     76        93,928   

Term Loan, 3.00%, Maturing January 15, 2022(4)

  EUR     107        132,884   

Term Loan, 3.50%, Maturing January 15, 2022

  EUR     6        6,925   

Term Loan, 3.50%, Maturing January 15, 2022

  EUR     60        74,233   

Term Loan, 3.50%, Maturing January 15, 2022

  EUR     96        118,383   
                     
  $ 6,579,249   
                     

Chemicals and Plastics — 2.7%

  

Arysta LifeScience SPC, LLC

     

Term Loan, 4.50%, Maturing May 29, 2020

      420      $ 419,228   

Axalta Coating Systems US Holdings Inc.

     

Term Loan, 3.75%, Maturing February 1, 2020

      519        511,748   

AZ Chem US Inc.

     

Term Loan, 4.50%, Maturing June 12, 2021

      120        119,717   

Colouroz Investment 1, GmbH

     

Term Loan, Maturing September 7, 2021(2)

      25        24,329   

Term Loan, Maturing September 7, 2021(2)

      150        147,171   

ECO Services Operations LLC

     

Term Loan, Maturing October 8, 2021(2)

      75        74,859   

Emerald Performance Materials, LLC

     

Term Loan, 4.50%, Maturing August 1, 2021

      350        345,187   

Term Loan - Second Lien, 7.75%, Maturing August 1, 2022

      100        98,667   

Gemini HDPE LLC

     

Term Loan, 4.75%, Maturing August 7, 2021

      374        372,505   

Huntsman International, LLC

     

Term Loan, 2.68%, Maturing April 19, 2017

      1,501        1,486,651   

Term Loan, 3.75%, Maturing August 12, 2021

      375        371,949   

Ineos US Finance LLC

     

Term Loan, 3.75%, Maturing May 4, 2018

      1,320        1,302,746   

Kronos Worldwide Inc.

     

Term Loan, 4.75%, Maturing February 18, 2020

      50        49,750   

MacDermid, Inc.

     

Term Loan, 4.00%, Maturing June 7, 2020

      248        243,085   

Minerals Technologies Inc.

     

Term Loan, 4.00%, Maturing May 9, 2021

      342        340,639   

Orion Engineered Carbons GmbH

     

Term Loan, 5.00%, Maturing July 25, 2021

      100        100,375   

Term Loan, 5.00%, Maturing July 25, 2021

  EUR     200        252,040   

OXEA Finance LLC

     

Term Loan, 4.25%, Maturing January 15, 2020

      124        120,966   

Polarpak Inc.

     

Term Loan, 4.50%, Maturing June 5, 2020

      210        207,297   
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Chemicals and Plastics (continued)

  

PQ Corporation

     

Term Loan, 4.00%, Maturing August 7, 2017

      221      $ 219,128   

Solenis International, LP

     

Term Loan, 4.50%, Maturing July 2, 2021

  EUR     175        220,261   

Tata Chemicals North America Inc.

     

Term Loan, 3.75%, Maturing August 7, 2020

      222        217,322   

Tronox Pigments (Netherlands) B.V.

     

Term Loan, 4.00%, Maturing March 19, 2020

      394        390,941   

Univar Inc.

     

Term Loan, 5.00%, Maturing June 30, 2017

      576        573,547   

WNA Holdings Inc.

     

Term Loan, 4.50%, Maturing June 7, 2020

      155        153,008   
                     
  $ 8,363,116   
                     

Conglomerates — 0.4%

  

RGIS Services, LLC

     

Term Loan, 5.50%, Maturing October 18, 2017

      737      $ 701,839   

Spectrum Brands Europe GmbH

     

Term Loan, 3.75%, Maturing September 4, 2019

  EUR     174        218,155   

Spectrum Brands, Inc.

     

Term Loan, 3.50%, Maturing September 4, 2019

      198        196,886   
                     
  $ 1,116,880   
                     

Containers and Glass Products — 1.3%

  

Berry Plastics Holding Corporation

     

Term Loan, 3.50%, Maturing February 8, 2020

      419      $ 410,645   

Term Loan, 3.75%, Maturing January 6, 2021

      875        862,126   

Crown Americas, LLC

     

Term Loan, Maturing October 22, 2021(2)

      300        301,438   

Libbey Glass Inc.

     

Term Loan, 3.75%, Maturing April 9, 2021

      50        49,345   

Pelican Products, Inc.

     

Term Loan, 5.25%, Maturing April 10, 2020

      436        433,868   

Reynolds Group Holdings Inc.

     

Term Loan, 4.00%, Maturing December 1, 2018

      1,534        1,527,879   

TricorBraun, Inc.

     

Term Loan, 4.00%, Maturing May 3, 2018

      404        399,982   
                     
  $ 3,985,283   
                     

Cosmetics / Toiletries — 0.2%

  

Prestige Brands, Inc.

     

Term Loan, 4.50%, Maturing September 3, 2021

      125      $ 125,443   

Revlon Consumer Products Corporation

     

Term Loan, 4.00%, Maturing October 8, 2019

      223        220,986   
 

 

  7   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Cosmetics / Toiletries (continued)

  

Sun Products Corporation (The)

     

Term Loan, 5.50%, Maturing March 23, 2020

      416      $ 373,962   
                     
  $ 720,391   
                     

Drugs — 1.2%

  

Alkermes, Inc.

     

Term Loan, 3.50%, Maturing September 18, 2019

      74      $ 72,686   

Auxilium Pharmaceuticals, Inc.

     

Term Loan, 6.25%, Maturing April 26, 2017

      93        92,977   

Endo Luxembourg Finance Company I S.a.r.l.

     

Term Loan, 3.25%, Maturing February 28, 2021

      50        49,253   

Ikaria, Inc.

     

Term Loan, 5.00%, Maturing February 12, 2021

      141        141,529   

Par Pharmaceutical Companies, Inc.

     

Term Loan, 4.00%, Maturing September 30, 2019

      1,045        1,028,394   

Valeant Pharmaceuticals International, Inc.

     

Term Loan, 3.50%, Maturing February 13, 2019

      340        337,902   

Term Loan, 3.50%, Maturing December 11, 2019

      341        338,498   

Term Loan, 3.50%, Maturing August 5, 2020

      717        712,098   

VWR Funding, Inc.

     

Term Loan, 3.40%, Maturing April 3, 2017

      769        763,319   
                     
  $ 3,536,656   
                     

Ecological Services and Equipment — 0.2%

  

ADS Waste Holdings, Inc.

     

Term Loan, 3.75%, Maturing October 9, 2019

      393      $ 385,042   

EnergySolutions, LLC

     

Term Loan, 6.75%, Maturing May 29, 2020

      150        150,872   
                     
  $ 535,914   
                     

Electronics / Electrical — 4.7%

  

Allflex Holdings III, Inc.

     

Term Loan, 4.25%, Maturing July 17, 2020

      124      $ 121,430   

Answers Corporation

     

Term Loan, 6.25%, Maturing September 23, 2021

      225        218,250   

Attachmate Corporation

     

Term Loan, 7.25%, Maturing November 22, 2017

      489        489,172   

Avago Technologies Cayman Ltd.

     

Term Loan, 3.75%, Maturing May 6, 2021

      1,322        1,319,327   

Blue Coat Systems, Inc.

     

Term Loan - Second Lien, 9.50%, Maturing June 28, 2020

      125        125,313   

Campaign Monitor Finance Pty Limited

     

Term Loan, 6.25%, Maturing March 18, 2021

      124        123,131   
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Electronics / Electrical (continued)

  

Carros Finance Luxembourg S.a.r.l.

     

Term Loan, 4.50%, Maturing September 30, 2021

      500      $ 500,416   

CommScope, Inc.

     

Term Loan, 3.25%, Maturing January 26, 2018

      198        197,876   

CompuCom Systems, Inc.

     

Term Loan, 4.25%, Maturing May 11, 2020

      143        136,397   

Dell Inc.

     

Term Loan, 3.75%, Maturing October 29, 2018

      132        130,775   

Term Loan, 4.50%, Maturing April 29, 2020

      1,807        1,812,153   

Eagle Parent, Inc.

     

Term Loan, 4.00%, Maturing May 16, 2018

      492        489,552   

Entegris, Inc.

     

Term Loan, 3.50%, Maturing April 30, 2021

      71        68,614   

Excelitas Technologies Corp.

     

Term Loan, 6.00%, Maturing October 31, 2020

      147        147,200   

FIDJI Luxembourg (BC4) S.a.r.l.

     

Term Loan, 6.25%, Maturing December 24, 2020

      146        146,981   

Freescale Semiconductor, Inc.

     

Term Loan, 4.25%, Maturing February 28, 2020

      368        363,481   

Go Daddy Operating Company, LLC

     

Term Loan, 4.75%, Maturing May 13, 2021

      1,159        1,156,059   

GXS Group, Inc.

     

Term Loan, 3.25%, Maturing January 16, 2021

      174        172,037   

Infor (US), Inc.

     

Term Loan, 3.75%, Maturing June 3, 2020

      924        911,270   

M/A-COM Technology Solutions Holdings, Inc.

     

Term Loan, 4.50%, Maturing May 7, 2021

      100        99,750   

Magic Newco LLC

     

Term Loan, 5.00%, Maturing December 12, 2018

      270        270,143   

MH Sub I, LLC

     

Term Loan, 4.00%, Maturing July 8, 2021(4)

      10        9,742   

Term Loan, 5.00%, Maturing July 8, 2021

      140        139,569   

Microsemi Corporation

     

Term Loan, 3.25%, Maturing February 19, 2020

      239        235,690   

NXP B.V.

     

Term Loan, 3.25%, Maturing January 11, 2020

      347        343,613   

Orbotech, Inc.

     

Term Loan, 5.00%, Maturing August 6, 2020

      75        74,063   

Renaissance Learning, Inc.

     

Term Loan, 4.50%, Maturing April 9, 2021

      124        122,509   

Rocket Software, Inc.

     

Term Loan, 5.75%, Maturing February 8, 2018

      288        287,321   

RP Crown Parent, LLC

     

Term Loan, 6.00%, Maturing December 21, 2018

      896        870,855   
 

 

  8   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Electronics / Electrical (continued)

  

Sensata Technologies B.V.

     

Term Loan, 3.25%, Maturing May 12, 2019

      236      $ 235,488   

SGMS Escrow Corp.

     

Term Loan, 6.00%, Maturing October 1, 2021

      175        171,637   

Shield Finance Co. S.a.r.l.

     

Term Loan, 5.00%, Maturing January 29, 2021

      124        124,375   

Sirius Computer Solutions, Inc.

     

Term Loan, 7.00%, Maturing November 30, 2018

      94        95,048   

SkillSoft Corporation

     

Term Loan, 5.75%, Maturing April 28, 2021

      399        394,303   

Smart Technologies ULC

     

Term Loan, 10.50%, Maturing January 31, 2018

      116        115,047   

Sophia, L.P.

     

Term Loan, 4.00%, Maturing July 19, 2018

      222        220,567   

SunEdison Semiconductor B.V.

     

Term Loan, 6.50%, Maturing May 22, 2019

      150        147,755   

SurveyMonkey.com, LLC

     

Term Loan, 5.50%, Maturing February 5, 2019

      97        96,704   

Sybil Software LLC

     

Term Loan, 4.75%, Maturing March 20, 2020

      561        559,457   

Vantiv, LLC

     

Term Loan, 3.75%, Maturing June 13, 2021

      150        148,652   

VeriFone Inc.

     

Term Loan, 3.50%, Maturing July 8, 2021

      499        494,698   

Wall Street Systems Delaware, Inc.

     

Term Loan, 4.50%, Maturing April 30, 2021

      644        640,818   
                     
  $ 14,527,238   
                     

Equipment Leasing — 0.3%

  

Delos Finance S.a.r.l.

     

Term Loan, 3.50%, Maturing March 6, 2021

      425      $ 423,459   

Flying Fortress Inc.

     

Term Loan, 3.50%, Maturing June 30, 2017

      500        499,063   
                     
  $ 922,522   
                     

Financial Intermediaries — 2.3%

  

American Capital, Ltd.

     

Term Loan, 3.50%, Maturing August 22, 2017

      130      $ 128,963   

Armor Holding II LLC

     

Term Loan, 5.75%, Maturing June 26, 2020

      121        119,791   

Citco Funding LLC

     

Term Loan, 4.25%, Maturing June 29, 2018

      679        674,864   

Clipper Acquisitions Corp.

     

Term Loan, 3.00%, Maturing February 6, 2020

      98        95,860   
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Financial Intermediaries (continued)

  

First Data Corporation

     

Term Loan, 3.65%, Maturing March 23, 2018

      650      $ 644,881   

Term Loan, 3.65%, Maturing September 24, 2018

      375        372,071   

Grosvenor Capital Management Holdings, LLP

     

Term Loan, 3.75%, Maturing January 4, 2021

      1,221        1,196,384   

Guggenheim Partners, LLC

     

Term Loan, 4.25%, Maturing July 22, 2020

      248        247,007   

Harbourvest Partners, LLC

     

Term Loan, 3.25%, Maturing February 4, 2021

      136        133,057   

Home Loan Servicing Solutions, Ltd.

     

Term Loan, 4.50%, Maturing June 19, 2020

      198        186,203   

LPL Holdings, Inc.

     

Term Loan, 3.25%, Maturing March 29, 2019

      1,586        1,567,261   

Medley LLC

     

Term Loan, 6.50%, Maturing June 15, 2019

      86        85,932   

Ocwen Financial Corporation

     

Term Loan, 5.00%, Maturing February 15, 2018

      745        719,841   

Oz Management LP

     

Term Loan, 1.65%, Maturing November 15, 2016

      219        210,410   

Sesac Holdco II, LLC

     

Term Loan, 5.00%, Maturing February 8, 2019

      297        295,855   

Starwood Property Trust, Inc.

     

Term Loan, 3.50%, Maturing April 17, 2020

      124        121,114   

Walker & Dunlop, Inc.

     

Term Loan, 5.25%, Maturing December 11, 2020

      124        123,442   

Walter Investment Management Corp.

     

Term Loan, 4.75%, Maturing December 11, 2020

      208        197,096   
                     
  $ 7,120,032   
                     

Food Products — 2.5%

  

AdvancePierre Foods, Inc.

     

Term Loan, 5.75%, Maturing July 10, 2017

      645      $ 642,192   

Big Heart Pet Brands

     

Term Loan, 3.50%, Maturing March 8, 2020

      780        751,658   

Blue Buffalo Company, Ltd.

     

Term Loan, 3.75%, Maturing August 8, 2019

      245        243,651   

Charger OpCo B.V.

     

Term Loan, 3.50%, Maturing June 30, 2021

  EUR     125        155,580   

Term Loan, 3.50%, Maturing July 23, 2021

      375        370,313   

Clearwater Seafoods Limited Partnership

     

Term Loan, 4.75%, Maturing June 24, 2019

      173        172,956   

CSM Bakery Solutions LLC

     

Term Loan, 5.00%, Maturing July 3, 2020

      173        171,589   

Del Monte Foods, Inc.

     

Term Loan, 4.25%, Maturing February 18, 2021

      124        116,774   
 

 

  9   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Food Products (continued)

  

Dole Food Company Inc.

     

Term Loan, 4.50%, Maturing November 1, 2018

      98      $ 97,713   

H.J. Heinz Company

     

Term Loan, 3.50%, Maturing June 5, 2020

      2,000        1,989,689   

High Liner Foods Incorporated

     

Term Loan, 4.25%, Maturing April 24, 2021

      149        147,571   

JBS USA Holdings Inc.

     

Term Loan, 3.75%, Maturing May 25, 2018

      866        855,532   

Term Loan, 3.75%, Maturing September 18, 2020

      297        294,305   

NBTY, Inc.

     

Term Loan, 3.50%, Maturing October 1, 2017

      888        870,778   

Pinnacle Foods Finance LLC

     

Term Loan, 3.25%, Maturing April 29, 2020

      124        121,584   

Term Loan, 3.25%, Maturing April 29, 2020

      605        594,861   

Post Holdings Inc.

     

Term Loan, 3.75%, Maturing June 2, 2021

      100        99,383   
                     
  $ 7,696,129   
                     

Food Service — 1.3%

  

Aramark Services, Inc.

     

Term Loan, 3.66%, Maturing July 26, 2016

      43      $ 42,353   

Term Loan, 3.66%, Maturing July 26, 2016

      77        76,292   

Buffets, Inc.

     

Term Loan, 0.11%, Maturing April 22, 2015(5)

      26        20,662   

Burger King Corporation

     

Term Loan, 3.75%, Maturing September 28, 2019

      564        563,321   

CEC Entertainment Concepts, L.P.

     

Term Loan, 4.25%, Maturing February 14, 2021

      124        120,540   

Darling International Inc.

     

Term Loan, 3.50%, Maturing January 6, 2021

  EUR     174        217,768   

Dunkin’ Brands, Inc.

     

Term Loan, 3.25%, Maturing February 7, 2021

      526        516,579   

Landry’s, Inc.

     

Term Loan, 4.00%, Maturing April 24, 2018

      450        449,773   

OSI Restaurant Partners, LLC

     

Term Loan, 3.50%, Maturing October 25, 2019

      118        117,210   

US Foods, Inc.

     

Term Loan, 4.50%, Maturing March 31, 2019

      617        616,288   

Weight Watchers International, Inc.

     

Term Loan, 4.00%, Maturing April 2, 2020

      1,182        918,161   

Wendy’s International, Inc.

     

Term Loan, 3.25%, Maturing May 15, 2019

      253        252,280   
                     
  $ 3,911,227   
                     
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Food / Drug Retailers — 1.4%

  

Albertson’s Holdings LLC

     

Term Loan, 4.00%, Maturing August 25, 2019

      425      $ 424,690   

Term Loan, 4.50%, Maturing August 25, 2021

      175        175,231   

Albertson’s, LLC

     

Term Loan, 4.75%, Maturing March 21, 2019

      223        222,850   

General Nutrition Centers, Inc.

     

Term Loan, 3.25%, Maturing March 4, 2019

      852        833,504   

New Albertson’s, Inc.

     

Term Loan, 4.75%, Maturing June 27, 2021

      1,175        1,163,250   

Rite Aid Corporation

     

Term Loan, 3.50%, Maturing February 21, 2020

      444        440,874   

Term Loan - Second Lien, 5.75%, Maturing August 21, 2020

      100        100,708   

Supervalu Inc.

     

Term Loan, 4.50%, Maturing March 21, 2019

      990        978,344   
                     
  $ 4,339,451   
                     

Health Care — 6.0%

  

Akorn, Inc.

     

Term Loan, 4.50%, Maturing April 16, 2021

      200      $ 199,082   

Alere, Inc.

     

Term Loan, 4.25%, Maturing June 30, 2017

      753        751,428   

Alliance Healthcare Services, Inc.

     

Term Loan, 4.25%, Maturing June 3, 2019

      222        219,550   

Amneal Pharmaceuticals LLC

     

Term Loan, 4.75%, Maturing November 1, 2019

      99        98,907   

Amsurg Corp.

     

Term Loan, 3.75%, Maturing July 16, 2021

      100        99,116   

Ardent Medical Services, Inc.

     

Term Loan, 6.75%, Maturing July 2, 2018

      274        275,088   

Biomet Inc.

     

Term Loan, 3.65%, Maturing July 25, 2017

      1,143        1,141,201   

CHG Healthcare Services Inc.

     

Term Loan, 4.25%, Maturing November 19, 2019

      122        121,855   

Community Health Systems, Inc.

     

Term Loan, 3.48%, Maturing January 25, 2017

      371        370,472   

Term Loan, 4.25%, Maturing January 27, 2021

      1,436        1,438,663   

Convatec Inc.

     

Term Loan, 4.00%, Maturing December 22, 2016

      93        92,394   

CPI Buyer, LLC

     

Term Loan, 5.50%, Maturing August 18, 2021

      200        198,000   

DaVita HealthCare Partners, Inc.

     

Term Loan, 3.50%, Maturing June 24, 2021

      549        544,167   

DJO Finance LLC

     

Term Loan, 4.25%, Maturing September 15, 2017

      332        330,874   
 

 

  10   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Health Care (continued)

  

Envision Healthcare Corporation

     

Term Loan, 4.00%, Maturing May 25, 2018

      400      $ 397,460   

Gentiva Health Services, Inc.

     

Term Loan, 6.50%, Maturing October 18, 2019

      647        649,142   

Grifols Worldwide Operations USA, Inc.

     

Term Loan, 3.15%, Maturing February 27, 2021

      821        811,267   

HCA, Inc.

     

Term Loan, 2.98%, Maturing May 1, 2018

      780        776,787   

Hologic Inc.

     

Term Loan, 3.25%, Maturing August 1, 2019

      297        295,372   

Iasis Healthcare LLC

     

Term Loan, 4.50%, Maturing May 3, 2018

      314        314,019   

inVentiv Health, Inc.

     

Term Loan, 7.75%, Maturing May 15, 2018

      533        529,595   

JLL/Delta Dutch Newco B.V.

     

Term Loan, 4.25%, Maturing March 11, 2021

      399        388,740   

Kindred Healthcare, Inc.

     

Term Loan, 4.00%, Maturing April 9, 2021

      249        247,193   

Kinetic Concepts, Inc.

     

Term Loan, 4.00%, Maturing May 4, 2018

      926        920,642   

LHP Hospital Group, Inc.

     

Term Loan, 9.00%, Maturing July 3, 2018

      255        245,128   

Mallinckrodt International Finance S.A.

     

Term Loan, 3.50%, Maturing March 19, 2021

      225        223,232   

Term Loan, 3.50%, Maturing March 19, 2021

      274        271,451   

MedAssets, Inc.

     

Term Loan, 4.00%, Maturing December 13, 2019

      75        74,450   

Millennium Laboratories, Inc.

     

Term Loan, 5.25%, Maturing April 16, 2021

      873        874,449   

MMM Holdings, Inc.

     

Term Loan, 9.75%, Maturing December 12, 2017

      118        116,895   

MSO of Puerto Rico, Inc.

     

Term Loan, 9.75%, Maturing December 12, 2017

      86        84,771   

National Mentor Holdings, Inc.

     

Term Loan, 4.75%, Maturing January 31, 2021

      100        98,878   

Onex Carestream Finance LP

     

Term Loan, 5.00%, Maturing June 7, 2019

      477        478,597   

Opal Acquisition, Inc.

     

Term Loan, 5.00%, Maturing November 27, 2020

      298        297,471   

Ortho-Clinical Diagnostics, Inc.

     

Term Loan, 4.75%, Maturing June 30, 2021

      549        542,968   

Pharmaceutical Product Development LLC

     

Term Loan, 4.00%, Maturing December 5, 2018

      1,341        1,333,456   

PRA Holdings, Inc.

     

Term Loan, 4.50%, Maturing September 23, 2020

      622        615,525   
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Health Care (continued)

  

Radnet Management, Inc.

     

Term Loan, 4.28%, Maturing October 10, 2018

      313      $ 310,088   

RegionalCare Hospital Partners, Inc.

     

Term Loan, 6.00%, Maturing April 19, 2019

      374        374,764   

Salix Pharmaceuticals, Ltd.

     

Term Loan, 4.25%, Maturing January 2, 2020

      120        120,409   

Select Medical Corporation

     

Term Loan, 3.75%, Maturing June 1, 2018

      225        223,312   

Steward Health Care System LLC

     

Term Loan, 6.75%, Maturing April 12, 2020

      399        396,247   

TriZetto Corporation

     

Term Loan, 4.75%, Maturing May 2, 2018

      282        282,204   

Truven Health Analytics Inc.

     

Term Loan, 4.50%, Maturing June 6, 2019

      319        311,752   
                     
  $ 18,487,061   
                     

Home Furnishings — 0.2%

  

Serta Simmons Holdings, LLC

     

Term Loan, 4.25%, Maturing October 1, 2019

      303      $ 300,398   

Tempur-Pedic International Inc.

     

Term Loan, 3.50%, Maturing March 18, 2020

      239        236,113   
                     
  $ 536,511   
                     

Industrial Equipment — 1.6%

  

Apex Tool Group, LLC

     

Term Loan, 4.50%, Maturing January 31, 2020

      546      $ 518,443   

Delachaux S.A.

     

Term Loan, Maturing September 25, 2021(2)

      100        100,375   

Doosan Infracore International, Inc.

     

Term Loan, 4.50%, Maturing May 28, 2021

      200        199,916   

Gardner Denver, Inc.

     

Term Loan, 4.25%, Maturing July 30, 2020

      347        341,832   

Generac Power Systems, Inc.

     

Term Loan, 3.25%, Maturing May 31, 2020

      306        299,464   

Husky Injection Molding Systems Ltd.

     

Term Loan, 4.25%, Maturing June 30, 2021

      473        465,874   

Term Loan - Second Lien, 7.25%, Maturing June 30, 2022

      125        122,500   

Milacron LLC

     

Term Loan, 4.00%, Maturing March 30, 2020

      573        558,310   

NN, Inc.

     

Term Loan, 6.00%, Maturing August 27, 2021

      125        124,610   

Paladin Brands Holding, Inc.

     

Term Loan, 6.75%, Maturing August 16, 2019

      95        95,038   
 

 

  11   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Industrial Equipment (continued)

  

Rexnord LLC

     

Term Loan, 4.00%, Maturing August 21, 2020

      842      $ 830,455   

Signode Industrial Group US Inc.

     

Term Loan, 4.00%, Maturing May 1, 2021

      215        211,324   

Spansion LLC

     

Term Loan, 3.75%, Maturing December 19, 2019

      196        193,366   

STS Operating, Inc.

     

Term Loan, 4.75%, Maturing February 21, 2021

      349        348,616   

Tank Holding Corp.

     

Term Loan, 4.25%, Maturing July 9, 2019

      158        155,700   

Terex Corporation

     

Term Loan, 4.00%, Maturing July 31, 2021

  EUR     300        377,238   

Virtuoso US LLC

     

Term Loan, 4.75%, Maturing February 11, 2021

      75        74,042   
                     
  $ 5,017,103   
                     

Insurance — 1.5%

  

Alliant Holdings I, Inc.

     

Term Loan, 4.25%, Maturing December 20, 2019

      389      $ 383,367   

AmWINS Group, LLC

     

Term Loan, 5.00%, Maturing September 6, 2019

      910        909,751   

Applied Systems, Inc.

     

Term Loan, 4.25%, Maturing January 25, 2021

      149        147,572   

Asurion LLC

     

Term Loan, 5.00%, Maturing May 24, 2019

      1,642        1,644,534   

Term Loan, 4.25%, Maturing July 8, 2020

      173        170,625   

Term Loan - Second Lien, 8.50%, Maturing March 3, 2021

      175        178,227   

CGSC of Delaware Holding Corporation

     

Term Loan, 5.00%, Maturing April 16, 2020

      49        44,684   

Cunningham Lindsey U.S. Inc.

     

Term Loan, 5.00%, Maturing December 10, 2019

      172        168,620   

Hub International Limited

     

Term Loan, 4.25%, Maturing October 2, 2020

      520        513,136   

USI, Inc.

     

Term Loan, 4.25%, Maturing December 27, 2019

      467        462,670   
                     
  $ 4,623,186   
                     

Leisure Goods / Activities / Movies — 2.6%

  

Activision Blizzard, Inc.

     

Term Loan, 3.25%, Maturing October 12, 2020

      530      $ 529,853   

AMC Entertainment, Inc.

     

Term Loan, 3.50%, Maturing April 30, 2020

      443        437,488   

Bally Technologies, Inc.

     

Term Loan, 4.25%, Maturing November 25, 2020

      186        185,979   
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Leisure Goods / Activities / Movies (continued)

  

Bombardier Recreational Products, Inc.

     

Term Loan, 4.00%, Maturing January 30, 2019

      641      $ 631,205   

ClubCorp Club Operations, Inc.

     

Term Loan, 4.50%, Maturing July 24, 2020

      548        544,192   

Emerald Expositions Holding, Inc.

     

Term Loan, 4.75%, Maturing June 17, 2020

      190        189,818   

Equinox Holdings, Inc.

     

Term Loan, 4.25%, Maturing January 31, 2020

      346        342,970   

Fender Musical Instruments Corporation

     

Term Loan, 5.75%, Maturing April 3, 2019

      89        88,084   

Kasima, LLC

     

Term Loan, 3.25%, Maturing May 17, 2021

      170        168,260   

Live Nation Entertainment, Inc.

     

Term Loan, 3.50%, Maturing August 17, 2020

      503        496,896   

Nord Anglia Education Finance LLC

     

Term Loan, 4.50%, Maturing March 31, 2021

      399        395,509   

Regal Cinemas, Inc.

     

Term Loan, 2.68%, Maturing August 23, 2017

      1,179        1,159,377   

Sabre, Inc.

     

Term Loan, 4.00%, Maturing February 19, 2019

      221        218,106   

SeaWorld Parks & Entertainment, Inc.

     

Term Loan, 3.00%, Maturing May 14, 2020

      540        518,415   

Six Flags Theme Parks, Inc.

     

Term Loan, 3.50%, Maturing December 20, 2018

      599        596,858   

SRAM, LLC

     

Term Loan, 4.01%, Maturing April 10, 2020

      331        326,090   

Town Sports International Inc.

     

Term Loan, 4.50%, Maturing November 16, 2020

      223        186,094   

US Finco LLC

     

Term Loan, 4.00%, Maturing May 29, 2020

      74        72,766   

WMG Acquisition Corp.

     

Term Loan, 3.75%, Maturing July 1, 2020

      173        168,088   

Zuffa LLC

     

Term Loan, 3.75%, Maturing February 25, 2020

      565        551,993   
                     
  $ 7,808,041   
                     

Lodging and Casinos — 2.3%

  

Affinity Gaming, LLC

     

Term Loan, 5.25%, Maturing November 9, 2017

      457      $ 457,053   

Amaya Holdings B.V.

     

Term Loan, 5.00%, Maturing August 1, 2021

      525        521,719   

Term Loan - Second Lien, 8.00%, Maturing August 1, 2022

      150        151,625   

Boyd Gaming Corporation

     

Term Loan, 4.00%, Maturing August 14, 2020

      94        93,527   
 

 

  12   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Lodging and Casinos (continued)

  

Caesars Entertainment Operating Company

     

Term Loan, 6.99%, Maturing March 1, 2017

      366      $ 328,706   

CityCenter Holdings, LLC

     

Term Loan, 4.25%, Maturing October 16, 2020

      636        633,526   

Four Seasons Holdings Inc.

     

Term Loan, 3.50%, Maturing June 27, 2020

      99        98,134   

Term Loan - Second Lien, 6.25%, Maturing December 27, 2020

      500        503,750   

Hilton Worldwide Finance, LLC

     

Term Loan, 3.50%, Maturing October 26, 2020

      2,304        2,284,380   

La Quinta Intermediate Holdings LLC

     

Term Loan, 4.00%, Maturing April 14, 2021

      185        183,505   

Las Vegas Sands LLC

     

Term Loan, 3.25%, Maturing December 19, 2020

      347        346,507   

MGM Resorts International

     

Term Loan, 3.50%, Maturing December 20, 2019

      491        486,107   

Pinnacle Entertainment, Inc.

     

Term Loan, 3.75%, Maturing August 13, 2020

      131        129,978   

Playa Resorts Holding B.V.

     

Term Loan, 4.00%, Maturing August 6, 2019

      99        97,762   

RHP Hotel Properties, LP

     

Term Loan, 3.75%, Maturing January 15, 2021

      125        123,960   

Scientific Games International, Inc.

     

Term Loan, 4.25%, Maturing October 18, 2020

      645        643,411   
                     
  $ 7,083,650   
                     

Nonferrous Metals / Minerals — 0.8%

  

Alpha Natural Resources, LLC

     

Term Loan, 3.50%, Maturing May 22, 2020

      148      $ 128,789   

Arch Coal Inc.

     

Term Loan, 6.25%, Maturing May 16, 2018

      562        499,463   

Fairmount Minerals Ltd.

     

Term Loan, 4.50%, Maturing September 5, 2019

      371        370,554   

Murray Energy Corporation

     

Term Loan, 5.25%, Maturing December 5, 2019

      249        246,884   

Noranda Aluminum Acquisition Corporation

     

Term Loan, 5.75%, Maturing February 28, 2019

      171        166,466   

Novelis, Inc.

     

Term Loan, 3.75%, Maturing March 10, 2017

      409        405,804   

Oxbow Carbon LLC

     

Term Loan, 4.25%, Maturing July 19, 2019

      94        92,578   

Term Loan - Second Lien, 8.00%, Maturing January 17, 2020

      150        147,000   

Walter Energy, Inc.

     

Term Loan, 7.25%, Maturing April 2, 2018

      431        374,134   
                     
  $ 2,431,672   
                     
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Oil and Gas — 2.0%

  

Ameriforge Group, Inc.

     

Term Loan, 5.00%, Maturing December 19, 2019

      222      $ 221,498   

Bronco Midstream Funding LLC

     

Term Loan, 5.00%, Maturing August 17, 2020

      303        302,601   

Citgo Petroleum Corporation

     

Term Loan, 4.50%, Maturing July 29, 2021

      200        200,292   

Crestwood Holdings LLC

     

Term Loan, 7.00%, Maturing June 19, 2019

      178        178,452   

Drillships Ocean Ventures Inc.

     

Term Loan, 5.50%, Maturing July 25, 2021

      200        192,019   

Energy Transfer Equity, L.P.

     

Term Loan, 3.25%, Maturing December 2, 2019

      325        320,633   

Fieldwood Energy LLC

     

Term Loan, 3.88%, Maturing September 28, 2018

      198        194,204   

Floatel International, Ltd.

     

Term Loan, 6.00%, Maturing June 27, 2020

      174        169,228   

MEG Energy Corp.

     

Term Loan, 3.75%, Maturing March 31, 2020

      1,446        1,423,818   

Obsidian Natural Gas Trust

     

Term Loan, 7.00%, Maturing November 2, 2015

      323        321,398   

Paragon Offshore Finance Company

     

Term Loan, 3.75%, Maturing July 18, 2021

      150        140,250   

Ruby Western Pipeline Holdings, LLC

     

Term Loan, 3.50%, Maturing March 27, 2020

      83        83,255   

Samson Investment Company

     

Term Loan - Second Lien, 5.00%, Maturing September 25, 2018

      175        162,750   

Seadrill Partners Finco LLC

     

Term Loan, 4.00%, Maturing February 21, 2021

      645        612,647   

Seventy Seven Operating LLC

     

Term Loan, 3.75%, Maturing June 25, 2021

      100        97,797   

Sheridan Investment Partners II, L.P.

     

Term Loan, 4.25%, Maturing December 16, 2020

      28        27,152   

Term Loan, 4.25%, Maturing December 16, 2020

      76        72,805   

Term Loan, 4.25%, Maturing December 16, 2020

      544        523,375   

Sheridan Production Partners I, LLC

     

Term Loan, 4.25%, Maturing October 1, 2019

      31        30,021   

Term Loan, 4.25%, Maturing October 1, 2019

      51        49,150   

Term Loan, 4.25%, Maturing October 1, 2019

      383        370,921   

Tallgrass Operations, LLC

     

Term Loan, 4.25%, Maturing November 13, 2018

      249        248,487   

Tervita Corporation

     

Term Loan, 6.25%, Maturing May 15, 2018

      319        310,598   
                     
  $ 6,253,351   
                     
 

 

  13   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Publishing — 1.3%

  

Ascend Learning, LLC

     

Term Loan, 6.00%, Maturing July 31, 2019

      223      $ 224,569   

Getty Images, Inc.

     

Term Loan, 4.75%, Maturing October 18, 2019

      933        881,165   

Interactive Data Corporation

     

Term Loan, 4.75%, Maturing May 2, 2021

      274        274,655   

Laureate Education, Inc.

     

Term Loan, 5.00%, Maturing June 15, 2018

      1,526        1,476,712   

McGraw-Hill Global Education Holdings, LLC

     

Term Loan, 5.75%, Maturing March 22, 2019

      126        126,873   

Media General, Inc.

     

Term Loan, 4.25%, Maturing July 31, 2020

      181        180,602   

Merrill Communications, LLC

     

Term Loan, 5.75%, Maturing March 8, 2018

      135        135,233   

Multi Packaging Solutions, Inc.

     

Term Loan, 4.25%, Maturing September 30, 2020

      75        73,645   

ProQuest LLC

     

Term Loan, Maturing October 24, 2021(2)

      125        125,026   

Rentpath, Inc.

     

Term Loan, 6.25%, Maturing May 29, 2020

      173        173,136   

Springer Science+Business Media Deutschland GmbH

   

Term Loan, 4.75%, Maturing August 16, 2021

      198        196,849   
                     
  $ 3,868,465   
                     

Radio and Television — 1.0%

  

Block Communications, Inc.

     

Term Loan, Maturing October 21, 2021(2)

      50      $ 50,031   

Clear Channel Communications, Inc.

     

Term Loan, 7.65%, Maturing July 30, 2019

      450        436,050   

Cumulus Media Holdings Inc.

     

Term Loan, 4.25%, Maturing December 23, 2020

      748        738,151   

Mission Broadcasting, Inc.

     

Term Loan, 3.75%, Maturing October 1, 2020

      127        125,392   

Nexstar Broadcasting, Inc.

     

Term Loan, 3.75%, Maturing October 1, 2020

      144        142,197   

TWCC Holding Corp.

     

Term Loan, 3.50%, Maturing February 13, 2017

      255        252,494   

Term Loan - Second Lien, 7.00%, Maturing June 26, 2020

      125        123,047   

Univision Communications Inc.

     

Term Loan, 4.00%, Maturing March 1, 2020

      1,147        1,136,674   
                     
  $ 3,004,036   
                     
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Retailers (Except Food and Drug) — 2.9%

  

99 Cents Only Stores

     

Term Loan, 4.50%, Maturing January 11, 2019

      339      $ 336,965   

B.C. Unlimited Liability Company

     

Term Loan, 4.50%, Maturing October 27, 2021

      1,275        1,275,974   

Bass Pro Group, LLC

     

Term Loan, 3.75%, Maturing November 20, 2019

      445        440,676   

Burlington Coat Factory Warehouse Corporation

     

Term Loan, 4.25%, Maturing July 17, 2021

      100        99,189   

CDW LLC

     

Term Loan, 3.25%, Maturing April 29, 2020

      369        361,896   

David’s Bridal, Inc.

     

Term Loan, 5.00%, Maturing October 11, 2019

      119        116,669   

Evergreen Acqco 1 LP

     

Term Loan, 5.00%, Maturing July 9, 2019

      122        121,583   

Harbor Freight Tools USA, Inc.

     

Term Loan, 4.75%, Maturing July 26, 2019

      198        197,747   

Hudson’s Bay Company

     

Term Loan, 4.75%, Maturing November 4, 2020

      671        672,616   

J. Crew Group, Inc.

     

Term Loan, 4.00%, Maturing March 5, 2021

      522        506,573   

Jo-Ann Stores, Inc.

     

Term Loan, 4.00%, Maturing March 16, 2018

      331        318,370   

Men’s Wearhouse, Inc. (The)

     

Term Loan, 4.50%, Maturing June 18, 2021

      250        249,687   

Michaels Stores, Inc.

     

Term Loan, 3.75%, Maturing January 28, 2020

      1,487        1,464,674   

Term Loan, 4.00%, Maturing January 28, 2020

      175        172,599   

Neiman Marcus Group, Inc. (The)

     

Term Loan, 4.25%, Maturing October 25, 2020

      767        756,427   

Party City Holdings Inc.

     

Term Loan, 4.00%, Maturing July 27, 2019

      270        265,310   

Petco Animal Supplies, Inc.

     

Term Loan, 4.00%, Maturing November 24, 2017

      732        726,601   

Pier 1 Imports (U.S.), Inc.

     

Term Loan, 4.50%, Maturing April 30, 2021

      100        99,002   

Pilot Travel Centers LLC

     

Term Loan, 4.25%, Maturing October 1, 2021

      400        401,188   

Spin Holdco Inc.

     

Term Loan, 4.25%, Maturing November 14, 2019

      297        294,777   
                     
  $ 8,878,523   
                     

Steel — 0.6%

  

Essar Steel Algoma, Inc.

     

Term Loan, 10.25%, Maturing November 15, 2014

      197      $ 197,206   

FMG Resources (August 2006) Pty. Ltd.

     

Term Loan, 3.75%, Maturing June 30, 2019

      1,201        1,174,119   
 

 

  14   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Steel (continued)

  

JMC Steel Group, Inc.

     

Term Loan, 4.75%, Maturing April 1, 2017

      145      $ 143,098   

Neenah Foundry Company

     

Term Loan, 6.75%, Maturing April 26, 2017

      88        87,216   

Patriot Coal Corporation

     

Term Loan, 9.00%, Maturing December 15, 2018

      74        72,328   

Waupaca Foundry, Inc.

     

Term Loan, 4.00%, Maturing June 29, 2017

      202        201,842   
                     
  $ 1,875,809   
                     

Surface Transport — 0.3%

  

Hertz Corporation (The)

     

Term Loan, 3.75%, Maturing March 12, 2018

      344      $ 340,974   

Stena International S.a.r.l.

     

Term Loan, 4.00%, Maturing March 3, 2021

      274        269,520   

Swift Transportation Co., LLC

     

Term Loan, 3.75%, Maturing June 9, 2021

      199        198,171   
                     
  $ 808,665   
                     

Telecommunications — 1.7%

  

Arris Group, Inc.

     

Term Loan, 3.25%, Maturing April 17, 2020

      132      $ 131,339   

Cellular South, Inc.

     

Term Loan, 3.25%, Maturing May 22, 2020

      74        72,998   

Intelsat Jackson Holdings S.A.

     

Term Loan, 3.75%, Maturing June 30, 2019

      1,650        1,639,687   

IPC Systems, Inc.

     

Term Loan, 6.00%, Maturing November 8, 2020

      175        174,617   

SBA Senior Finance II LLC

     

Term Loan, 3.25%, Maturing March 24, 2021

      349        343,597   

Syniverse Holdings, Inc.

     

Term Loan, 4.00%, Maturing April 23, 2019

      242        238,745   

Term Loan, 4.00%, Maturing April 23, 2019

      336        332,790   

Telesat Canada

     

Term Loan, 3.50%, Maturing March 28, 2019

      660        651,503   

Windstream Corporation

     

Term Loan, 3.50%, Maturing August 8, 2019

      123        121,464   

Term Loan, 3.50%, Maturing January 23, 2020

      1,361        1,350,089   
                     
  $ 5,056,829   
                     

Utilities — 1.1%

                   

Calpine Construction Finance Company, L.P.

     

Term Loan, 3.00%, Maturing May 3, 2020

      198      $ 192,316   

Term Loan, 3.25%, Maturing January 31, 2022

      74        72,213   
Borrower/Tranche Description        Principal
Amount*
(000’s omitted)
    Value  
     

Utilities (continued)

  

Calpine Corporation

     

Term Loan, 4.00%, Maturing April 1, 2018

      194      $ 192,273   

Term Loan, 4.00%, Maturing April 1, 2018

      531        528,096   

Term Loan, 4.00%, Maturing October 9, 2019

      172        170,013   

Dynegy Holdings Inc.

     

Term Loan, 4.00%, Maturing April 23, 2020

      182        181,510   

EFS Cogen Holdings I LLC

     

Term Loan, 3.75%, Maturing December 17, 2020

      88        87,584   

Energy Future Intermediate Holding Company LLC

     

DIP Loan, 4.25%, Maturing June 19, 2016

      300        299,766   

Equipower Resources Holdings LLC

     

Term Loan, 4.25%, Maturing December 31, 2019

      99        98,421   

Granite Acquisition Inc.

     

Term Loan, Maturing October 15, 2021(2)

      21        21,165   

Term Loan, Maturing October 15, 2021(2)

      479        481,023   

La Frontera Generation, LLC

     

Term Loan, 4.50%, Maturing September 30, 2020

      86        85,332   

TPF II Power, LLC

     

Term Loan, 5.50%, Maturing October 2, 2021

      275        275,859   

WTG Holdings III Corp.

     

Term Loan, 4.75%, Maturing January 15, 2021

      573        569,957   
                     
      $ 3,255,528   
                     

Total Senior Floating-Rate Interests
(identified cost $169,996,032)

   

  $ 167,629,121   
   
Collateralized Mortgage Obligations — 20.8%   
   
Security        Principal
Amount
(000’s omitted)
    Value  

Federal Home Loan Mortgage Corp.:

  

Series 2113, Class QG, 6.00%, 1/15/29

    $ 1,376      $ 1,557,060   

Series 2167, Class BZ, 7.00%, 6/15/29

      1,055        1,215,679   

Series 2182, Class ZB, 8.00%, 9/15/29

      1,731        2,077,422   

Series 2631, (Interest Only), Class DS, 6.947%, 6/15/33(6)(7)

      2,955        516,939   

Series 2770, (Interest Only), Class SH, 6.947%, 3/15/34(6)(7)

      3,337        647,079   

Series 2981, (Interest Only), Class CS, 6.567%, 5/15/35(6)(7)

      1,949        359,668   

Series 3114, (Interest Only), Class TS, 6.497%, 9/15/30(6)(7)

      4,789        801,560   

Series 3339, (Interest Only), Class JI, 6.437%, 7/15/37(6)(7)

      3,912        569,866   

Series 3898, Class TS, 5.00%, 4/15/41(7)

      596        602,889   
 

 

  15   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Security        Principal
Amount
(000’s omitted)
    Value  
     

Federal Home Loan Mortgage Corp.: (continued)

  

Series 4109, (Interest Only), Class ES, 5.997%, 12/15/41(6)(7)

    $ 4,965      $ 273,042   

Series 4163, (Interest Only), Class GS, 6.047%, 11/15/32(6)(7)

      6,842        1,402,498   

Series 4169, (Interest Only), Class AS, 6.097%, 2/15/33(6)(7)

      4,353        834,255   

Series 4180, (Interest Only), Class GI, 3.50%, 8/15/26(6)

      4,730        583,078   

Series 4203, (Interest Only), Class QS, 6.097%, 5/15/43(6)(7)

      4,569        900,529   

Series 4273, Class PU, 4.00%, 11/15/43

      2,574        2,613,151   

Series 4316, (Interest Only), Class JS, 5.947%, 1/15/44(6)(7)

      5,251        934,607   

Series 4332, (Interest Only), Class KI, 4.00%, 9/15/43(6)

      3,904        646,559   

Series 4370, (Interest Only), Class IO, 3.50%, 9/15/41(6)

      3,862        675,044   
                     
  $ 17,210,925   
                     

Federal National Mortgage Association:

     

Series 1989-89, Class H, 9.00%, 11/25/19

    $ 54      $ 60,209   

Series 1991-122, Class N, 7.50%, 9/25/21

      216        239,795   

Series 1993-84, Class M, 7.50%, 6/25/23

      1,750        2,013,657   

Series 1994-42, Class K, 6.50%, 4/25/24

      522        580,106   

Series 1997-28, Class ZA, 7.50%, 4/20/27

      614        723,143   

Series 1997-38, Class N, 8.00%, 5/20/27

      547        642,253   

Series 2004-46, (Interest Only), Class SI, 5.848%, 5/25/34(6)(7)

      3,376        490,782   

Series 2005-17, (Interest Only), Class SA, 6.548%, 3/25/35(6)(7)

      2,307        448,995   

Series 2006-42, (Interest Only), Class PI, 6.438%, 6/25/36(6)(7)

      4,388        725,955   

Series 2006-44, (Interest Only), Class IS, 6.448%, 6/25/36(6)(7)

      3,538        597,316   

Series 2006-72, (Interest Only), Class GI, 6.428%, 8/25/36(6)(7)

      6,505        1,034,390   

Series 2007-50, (Interest Only), Class LS, 6.298%, 6/25/37(6)(7)

      2,835        442,827   

Series 2007-74, Class AC, 5.00%, 8/25/37

      3,396        3,727,389   

Series 2008-26, (Interest Only), Class SA, 6.048%, 4/25/38(6)(7)

      4,415        701,979   

Series 2008-29, (Interest Only), Class CI, 5.00%, 9/25/35(6)

      3,018        188,602   

Series 2008-61, (Interest Only), Class S, 5.948%, 7/25/38(6)(7)

      5,521        937,651   

Series 2010-67, (Interest Only), Class SC, 5.648%, 6/25/40(6)(7)

      1,889        267,043   

Series 2010-99, (Interest Only), Class NS, 6.448%, 3/25/39(6)(7)

      5,707        647,828   
Security        Principal
Amount
(000’s omitted)
    Value  
     

Federal National Mortgage Association: (continued)

  

 

Series 2010-109, (Interest Only), Class PS, 6.448%, 10/25/40(6)(7)

    $ 7,329      $ 1,353,826   

Series 2010-119, (Interest Only), Class SK, 5.848%, 4/25/40(6)(7)

      3,338        228,460   

Series 2010-124, (Interest Only), Class SJ, 5.898%, 11/25/38(6)(7)

      4,429        619,458   

Series 2010-147, (Interest Only), Class KS, 5.798%, 1/25/41(6)(7)

      8,709        1,190,186   

Series 2010-150, (Interest Only), Class GS, 6.598%, 1/25/21(6)(7)

      6,059        743,772   

Series 2010-151, (Interest Only), Class PI, 4.00%, 5/25/28(6)

      11,789        648,789   

Series 2011-22, (Interest Only), Class IC, 3.50%, 12/25/25(6)

      8,270        910,342   

Series 2011-49, Class NT, 6.00%, 6/25/41(7)

      1,370        1,527,694   

Series 2012-52, (Interest Only), Class AI, 3.50%, 8/25/26(6)

      10,240        941,044   

Series 2012-56, (Interest Only), Class SU, 6.598%, 8/25/26(6)(7)

      3,618        387,863   

Series 2012-63, (Interest Only), Class EI, 3.50%, 8/25/40(6)

      8,371        1,145,222   

Series 2012-150, (Interest Only), Class PS, 5.998%, 1/25/43(6)(7)

      8,779        1,722,113   

Series 2012-150, (Interest Only), Class SK, 5.998%, 1/25/43(6)(7)

      4,923        965,052   

Series 2013-6, Class TA, 1.50%, 1/25/43

      4,396        4,149,719   

Series 2013-23, (Interest Only), Class CS, 6.098%, 3/25/33(6)(7)

      4,356        890,782   

Series 2013-54, (Interest Only), Class HS, 6.148%, 10/25/41(6)(7)

      4,358        747,088   

Series 2013-123, Class VS, 11.595%, 9/25/41(7)

      109        110,446   

Series 2014-32, (Interest Only), Class EI, 4.00%, 6/25/44(6)

      3,914        736,041   

Series 2014-36, (Interest Only), Class ID, 4.00%, 6/25/44(6)

      3,507        660,764   

Series 2014-55, (Interest Only), Class IN, 3.50%, 7/25/44(6)

      5,913        1,085,448   

Series 2014-61, Class US, 8.196%, 10/25/44(7)

      2,153        2,190,700   

Series 2014-72, Class CS, 8.969%, 11/25/44(7)

      2,393        2,437,297   

Series G-33, Class PT, 7.00%, 10/25/21

      425        452,206   
                     
      $ 40,314,232   
                     

Government National Mortgage Association:

     

Series 2010-4, (Interest Only), Class SK, 6.043%, 5/20/35(6)(7)

    $ 1,942      $ 322,384   

Series 2012-50, (Principal Only), Class CO, 0.00%, 8/20/40(8)

      154        143,637   

Series 2013-24, Class KS, 5.572%, 2/20/43(7)

      1,121        1,134,374   

Series 2013-124, Class LS, 11.981%, 5/20/41(7)

      451        476,478   
 

 

  16   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Security        Principal
Amount
(000’s omitted)
    Value  
     

Government National Mortgage Association: (continued)

  

 

Series 2014-117, Class HS, 31.544%, 8/20/44(7)

    $ 937      $ 1,308,864   

Series 2014-132, Class SC, 13.418%, 9/20/44(7)

      2,697        2,881,635   
                     
      $ 6,267,372   
                     

Total Collateralized Mortgage Obligations
(identified cost $63,012,257)

   

  $ 63,792,529   
                     
Commercial Mortgage-Backed Securities — 7.1%   
     
Security        Principal
Amount
(000’s omitted)
    Value  

COMM, Series 2014-KYO, Class D, 2.153%, 6/11/27(9)(10)

    $ 1,000      $ 999,393   

COMM, Series 2014-LC17, Class D, 3.687%, 10/10/47(10)(11)

      1,065        912,457   

ESA, Series 2013-ESH7, Class D7, 5.053%, 12/5/31(10)(11)

      1,080        1,121,279   

HILT, Series 2013-HLT, Class DFX, 4.407%, 11/5/30(10)

      850        874,797   

JPMBB, Series 2014-C19, Class D, 4.679%, 4/15/47(10)(11)

      1,425        1,337,063   

JPMBB, Series 2014-C21, Class D, 4.66%, 8/15/47(11)

      650        605,238   

JPMBB, Series 2014-C22, Class D, 4.562%, 9/15/47(10)(11)

      1,850        1,687,134   

JPMBB, Series 2014-C23, Class D, 3.961%, 9/15/47(10)(11)

      850        751,314   

JPMCC, Series 2006-CB14, Class A4, 5.481%, 12/12/44(11)

      433        448,282   

JPMCC, Series 2011-C5, Class D, 5.323%, 8/15/46(10)(11)

      1,850        1,961,796   

JPMCC, Series 2014-DSTY, Class B, 3.771%, 6/10/27(10)

      1,900        1,953,570   

UBSC, Series 2011-C1, Class D, 5.875%, 1/10/45(10)(11)

      2,000        2,242,547   

UBSCM, Series 2012-C1, Class D, 5.535%, 5/10/45(10)(11)

      2,000        2,090,266   

WF-RBS, Series 2012-C9, Class D, 4.803%, 11/15/45(10)(11)

      1,250        1,237,597   

WF-RBS, Series 2014-LC14, Class D, 4.586%, 3/15/47(10)(11)

      1,150        1,076,634   

WFCM, Series 2010-C1, Class C, 5.585%, 11/15/43(10)(11)

      500        559,312   

WFCM, Series 2013-LC12, Class D, 4.302%, 7/15/46(10)(11)

      2,000        1,905,691   
                     

Total Commercial Mortgage-Backed Securities
(identified cost $21,094,881)

   

  $ 21,764,370   
                     
Mortgage Pass-Throughs — 24.6%   
Security        Principal
Amount
(000’s omitted)
    Value  
     

Federal Home Loan Mortgage Corp.:

  

 

2.889%, with maturity at 2035(12)

    $ 3,210      $ 3,431,680   

5.00%, with various maturities to 2023

      2,626        2,808,990   

6.00%, with various maturities to 2029

      2,455        2,774,493   

6.15%, with maturity at 2027

      982        1,119,101   

6.50%, with various maturities to 2032

      7,662        8,646,803   

7.00%, with various maturities to 2035

      4,509        5,267,650   

7.50%, with various maturities to 2035

      2,061        2,379,701   

8.00%, with various maturities to 2032

      2,093        2,518,904   

8.50%, with various maturities to 2031

      2,443        2,901,442   

9.00%, with maturity at 2031

      215        261,983   

9.50%, with various maturities to 2022

      106        117,864   

11.50%, with maturity at 2019

      22        23,472   
                     
  $ 32,252,083   
                     

Federal National Mortgage Association:

     

5.00%, with various maturities to 2040

    $ 4,762      $ 5,287,126   

5.459%, with maturity at 2037(12)

      973        1,018,410   

5.50%, with various maturities to 2033

      3,160        3,535,877   

6.00%, with maturity at 2023

      1,916        2,128,483   

6.321%, with maturity at 2032(12)

      1,347        1,508,182   

6.50%, with various maturities to 2036

      4,449        5,026,857   

7.00%, with various maturities to 2033

      7,006        8,156,184   

7.50%, with various maturities to 2031

      4,769        5,553,066   

8.00%, with various maturities to 2029

      1,302        1,526,322   

8.50%, with various maturities to 2027

      198        227,178   

9.00%, with various maturities to 2029

      551        642,016   

10.00%, with various maturities to 2031

      419        477,652   
                     
  $ 35,087,353   
                     

Government National Mortgage Association:

     

7.50%, with maturity at 2025

    $ 2,253      $ 2,575,624   

8.00%, with various maturities to 2027

      2,840        3,379,601   

9.00%, with various maturities to 2026

      1,429        1,725,787   

9.50%, with maturity at 2025

      167        191,401   

11.00%, with maturity at 2018

      72        78,905   
                     
  $ 7,951,318   
                     

Total Mortgage Pass-Throughs
(identified cost $70,423,872)

   

  $ 75,290,754   
                     
 

 

  17   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Asset-Backed Securities — 3.9%   
     
Security        Principal
Amount
(000’s omitted)
    Value  
     

AH4R, Series 2014-SFR1, Class C, 2.00%, 6/17/31(9)(10)

    $ 200      $ 194,321   

AH4R, Series 2014-SFR1, Class D, 2.35%, 6/17/31(9)(10)

      825        796,839   

ARP, Series 2014-SFR1, Class C, 2.504%, 9/17/31(9)(10)

      2,000        1,993,929   

CAH, Series 2014-1A, Class C, 2.10%, 5/17/31(9)(10)

      760        745,799   

Centurion CDO IX Ltd., Series 2005-9A, Class D1,
4.978%, 7/17/19(9)(10)

      500        496,238   

Invitation Homes Trust, Series 2013-SFR1, Class D,
2.40%, 12/17/30(9)(10)

      550        534,116   

Invitation Homes Trust, Series 2014-SFR1, Class D,
2.754%, 6/17/31(9)(10)

      1,220        1,203,857   

OMFIT, Series 2014-1A, Class A, 2.43%, 6/18/24(10)

      700        703,780   

OMFIT, Series 2014-1A, Class B, 3.24%, 6/18/24(10)

      800        798,368   

SBY, Series 2014-1, Class C, 2.204%, 9/17/31(9)(10)

      2,000        1,966,666   

SCFT, Series 2014-AA, Class B, 4.61%, 10/25/27(10)

      1,980        1,984,340   

SRFC, Series 2014-1A, Class B, 2.42%, 3/20/30(10)

      424        423,398   
                     

Total Asset-Backed Securities
(identified cost $11,939,876)

   

  $ 11,841,651   
                     
Corporate Bonds & Notes — 1.0%   
Security        Principal
Amount
(000’s omitted)
    Value  

Chemicals and Plastics — 0.1%

  

Ineos Finance PLC

     

7.50%, 5/1/20(10)

    $ 150      $ 161,063   
                     
      $ 161,063   
                     

Financial Intermediaries — 0.1%

  

First Data Corp.

     

6.75%, 11/1/20(10)

    $ 163      $ 174,818   
                     
      $ 174,818   
                     

Food Products — 0.4%

                   

Stretford 79 PLC

     

4.81%, 7/15/20(9)(10)

    $ 1,000      $ 1,441,394   
                     
      $ 1,441,394   
                     

Health Care — 0.1%

                   

CHS/Community Health Systems, Inc.

     

5.125%, 8/15/18

    $ 425      $ 443,062   
                     
      $ 443,062   
                     
Security        Principal
Amount
(000’s omitted)
    Value  
     

Lodging and Casinos — 0.1%

                   

Caesars Entertainment Operating Co., Inc.

     

8.50%, 2/15/20

    $ 350      $ 264,250   
                     
      $ 264,250   
                     

Utilities — 0.2%

                   

Calpine Corp.

     

7.875%, 1/15/23(10)

    $ 539      $ 599,637   
                     
      $ 599,637   
                     

Total Corporate Bonds & Notes
(identified cost $3,339,720)

   

  $ 3,084,224   
                     
Foreign Corporate Bonds — 0.2%   
     
Security        Principal
Amount
(000’s omitted)
    Value  

Supranational — 0.2%

                   

International Bank for Reconstruction & Development

     

3.40%, 4/15/17(13)

  UYU     17,219      $ 728,546   
                     
      $ 728,546   
                     

Total Foreign Corporate Bonds
(identified cost $764,754)

   

  $ 728,546   
                     
Foreign Government Bonds — 10.6%   
     
Security        Principal
Amount
(000’s omitted)
    Value  

Bangladesh — 2.0%

                   

Bangladesh Treasury Bond, 8.80%, 6/4/16

  BDT     46,100      $ 599,385   

Bangladesh Treasury Bond, 10.10%, 6/11/19

  BDT     23,600        312,529   

Bangladesh Treasury Bond, 11.30%, 3/7/17

  BDT     50,000        682,590   

Bangladesh Treasury Bond, 11.40%, 5/9/17

  BDT     60,000        822,110   

Bangladesh Treasury Bond, 11.50%, 8/8/17

  BDT     107,500        1,480,211   

Bangladesh Treasury Bond, 11.50%, 11/7/17

  BDT     15,700        216,785   

Bangladesh Treasury Bond, 11.52%, 12/5/17

  BDT     20,000        276,536   

Bangladesh Treasury Bond, 11.55%, 9/5/17

  BDT     30,000        414,226   

Bangladesh Treasury Bond, 11.55%, 10/3/17

  BDT     29,900        412,718   

Bangladesh Treasury Bond, 11.70%, 4/3/18

  BDT     27,400        381,808   

Bangladesh Treasury Bond, 11.72%, 2/6/18

  BDT     8,400        116,871   

Bangladesh Treasury Bond, 11.72%, 7/2/18

  BDT     19,400        270,799   
                     

Total Bangladesh

      $ 5,986,568   
                     
 

 

  18   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Security        Principal
Amount
(000’s omitted)
    Value  
     

Costa Rica — 0.2%

                   

Costa Rica Titulos de Propiedad Bond, 10.58%, 6/22/16

  CRC     255,000      $ 496,784   
                     

Total Costa Rica

  

  $ 496,784   
                     

Dominican Republic — 1.0%

                   

Dominican Republic Central Bank Note, 12.00%, 4/5/19(10)

  DOP     11,940      $ 282,127   

Dominican Republic International Bond, 11.50%, 5/10/24(10)

  DOP     15,000        357,744   

Dominican Republic International Bond, 14.00%, 4/30/21(10)

  DOP     6,700        170,643   

Dominican Republic International Bond, 14.50%, 2/10/23(10)

  DOP     1,800        46,685   

Dominican Republic International Bond, 14.50%, 2/10/23(14)

  DOP     21,000        544,664   

Dominican Republic International Bond, 15.95%, 6/4/21(10)

  DOP     9,000        256,123   

Dominican Republic International Bond, 18.50%, 2/4/28(10)

  DOP     800        24,233   

Dominican Republic International Bond, 18.50%, 2/4/28(14)

  DOP     42,400        1,284,335   
                     

Total Dominican Republic

  

  $ 2,966,554   
                     

Georgia — 0.1%

                   

Georgia Treasury Bond, 6.10%, 3/7/15

  GEL     624      $ 358,919   
                     

Total Georgia

  

  $ 358,919   
                     

Iceland — 1.8%

                   

Republic of Iceland, 6.25%, 2/5/20

  ISK     231,085      $ 1,519,026   

Republic of Iceland, 7.25%, 10/26/22

  ISK     238,567        1,630,260   

Republic of Iceland, 8.75%, 2/26/19

  ISK     329,709        2,374,736   
                     

Total Iceland

  

  $ 5,524,022   
                     

Lebanon — 0.1%

                   

Lebanon Treasury Note, 6.50%, 4/2/15

  LBP     212,010      $ 141,371   

Lebanon Treasury Note, 6.50%, 5/28/15

  LBP     169,890        113,521   
                     

Total Lebanon

  

  $ 254,892   
                     

Philippines — 1.3%

                   

Republic of the Philippines, 4.95%, 1/15/21

  PHP     63,000      $ 1,453,195   

Republic of the Philippines, 6.25%, 1/14/36

  PHP     85,000        2,082,023   

Republic of the Philippines, 9.125%, 9/4/16

  PHP     14,990        375,453   
                     

Total Philippines

  

  $ 3,910,671   
                     
Security        Principal
Amount
(000’s omitted)
    Value  
     

Serbia — 0.8%

                   

Serbia Treasury Bond, 10.00%, 4/4/15

  RSD     8,310      $ 88,456   

Serbia Treasury Bond, 10.00%, 4/27/15

  RSD     60,770        648,749   

Serbia Treasury Bond, 10.00%, 10/17/16

  RSD     21,800        232,694   

Serbia Treasury Bond, 10.00%, 4/1/17

  RSD     46,800        495,809   

Serbia Treasury Bond, 10.00%, 5/8/17

  RSD     18,760        198,316   

Serbia Treasury Bond, 10.00%, 1/24/18

  RSD     22,180        232,193   

Serbia Treasury Bond, 11.50%, 10/26/15

  RSD     61,800        672,350   
                     

Total Serbia

  

  $ 2,568,567   
                     

Sri Lanka — 0.3%

                   

Sri Lanka Government Bond, 8.50%, 11/1/15

  LKR     124,130      $ 968,756   
                     

Total Sri Lanka

  

  $ 968,756   
                     

Turkey — 0.3%

                   

Turkey Government Bond, 6.50%, 1/7/15

  TRY     1,965      $ 883,196   
                     

Total Turkey

  

  $ 883,196   
                     

Uganda — 0.2%

                   

Uganda Government Bond, 14.125%, 12/1/16

  UGX     1,019,100      $ 381,545   

Uganda Government Bond, 14.625%, 11/1/18

  UGX     1,000,900        381,626   
                     

Total Uganda

      $ 763,171   
                     

Uruguay — 1.5%

                   

Monetary Regulation Bill, 0.00%, 8/20/15

  UYU     23,410      $ 872,484   

Monetary Regulation Bill, 0.00%, 10/8/15

  UYU     11,400        417,819   

Monetary Regulation Bill, 0.00%, 1/14/16

  UYU     1,000        35,482   

Monetary Regulation Bill, 0.00%, 4/21/16

  UYU     3,460        118,940   

Uruguay Notas Del Tesoro, 2.75%, 6/16/16(13)

  UYU     54,915        2,214,788   

Uruguay Notas Del Tesoro, 9.50%, 1/27/16

  UYU     8,160        325,305   

Uruguay Notas Del Tesoro, 11.00%, 3/21/17

  UYU     18,380        733,220   
                     

Total Uruguay

      $ 4,718,038   
                     

Vietnam — 1.0%

                   

Vietnam Government Bond, 5.60%, 4/15/16

  VND     36,922,900      $ 1,775,249   

Vietnam Government Bond, 7.60%, 10/31/16

  VND     14,000,000        700,124   

Vietnam Government Bond, 9.10%, 12/15/14

  VND     13,799,200        652,547   
                     

Total Vietnam

      $ 3,127,920   
                     

Total Foreign Government Bonds
(identified cost $33,501,882)

   

  $ 32,528,058   
                     
 

 

  19   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

U.S. Treasury Obligations — 3.2%   
     
Security        Principal
Amount
(000’s omitted)
    Value  
     

U.S. Treasury Note,
1.75%, 5/15/22(15)

    $ 10,000      $ 9,752,340   
                     

Total U.S. Treasury Obligations
(identified cost $9,875,304)

   

  $ 9,752,340   
                     
Common Stocks — 0.4%   
     
Security        Shares     Value  

Affinity Gaming, LLC(5)(16)(17)

      23,498      $ 223,232   

Buffets Restaurants Holdings,
Inc.(5)(16)(17)

      10,672        4,375   

Dayco Products, LLC(17)

      8,898        469,369   

ION Media Networks, Inc.(5)(17)

      1,357        456,156   

MediaNews Group, Inc.(16)(17)

      3,023        100,767   
                     

Total Common Stocks
(identified cost $406,034)

   

  $ 1,253,899   
                     
Short-Term Investments — 13.6%   
Foreign Government Securities — 10.6%   
     
Security        Principal
Amount
(000’s omitted)
    Value  

Georgia — 0.2%

                   

Georgia Treasury Bill, 0.00%, 2/19/15

  GEL     1,110      $ 626,722   
                     

Total Georgia

      $ 626,722   
                     

Kenya — 1.8%

                   

Kenya Treasury Bill, 0.00%, 3/2/15

  KES     168,000      $ 1,826,881   

Kenya Treasury Bill, 0.00%, 4/13/15

  KES     261,000        2,808,287   

Kenya Treasury Bill, 0.00%, 4/27/15

  KES     87,300        935,944   
                     

Total Kenya

      $ 5,571,112   
                     

Lebanon — 2.3%

                   

Lebanon Treasury Bill, 0.00%, 11/6/14

  LBP     729,860      $ 482,340   

Lebanon Treasury Bill, 0.00%, 11/20/14

  LBP     427,700        282,218   

Lebanon Treasury Bill, 0.00%, 12/4/14

  LBP     362,200        238,631   

Lebanon Treasury Bill, 0.00%, 12/18/14

  LBP     1,852,400        1,218,550   

Lebanon Treasury Bill, 0.00%, 1/1/15

  LBP     945,600        621,077   

Lebanon Treasury Bill, 0.00%, 2/26/15

  LBP     888,900        580,021   

Lebanon Treasury Bill, 0.00%, 4/9/15

  LBP     1,598,400        1,036,121   

Lebanon Treasury Bill, 0.00%, 6/11/15

  LBP     3,918,700        2,519,760   
                     

Total Lebanon

      $ 6,978,718   
                     
Security        Principal
Amount
(000’s omitted)
    Value  
     

Malaysia — 1.0%

                   

Bank Negara Monetary Note, 0.00%, 12/11/14

  MYR     10,074      $ 3,052,810   
                     

Total Malaysia

      $ 3,052,810   
                     

Nigeria — 0.6%

                   

Nigeria Treasury Bill, 0.00%, 11/6/14

  NGN     311,100      $ 1,876,959   
                     

Total Nigeria

      $ 1,876,959   
                     

Philippines — 0.7%

                   

Philippine Treasury Bill, 0.00%, 11/5/14

  PHP     26,760      $ 596,275   

Philippine Treasury Bill, 0.00%, 1/7/15

  PHP     70,790        1,573,655   
                     

Total Philippines

      $ 2,169,930   
                     

Serbia — 1.3%

                   

Serbia Treasury Bill, 0.00%, 1/9/15

  RSD     68,210      $ 709,603   

Serbia Treasury Bill, 0.00%, 1/29/15

  RSD     17,000        176,164   

Serbia Treasury Bill, 0.00%, 2/26/15

  RSD     36,670        377,872   

Serbia Treasury Bill, 0.00%, 3/12/15

  RSD     212,260        2,181,028   

Serbia Treasury Bill, 0.00%, 6/4/15

  RSD     30,830        311,204   
                     

Total Serbia

      $ 3,755,871   
                     

Sri Lanka — 2.0%

                   

Sri Lanka Treasury Bill, 0.00%, 11/7/14

  LKR     41,180      $ 314,753   

Sri Lanka Treasury Bill, 0.00%, 12/19/14

  LKR     83,190        631,791   

Sri Lanka Treasury Bill, 0.00%, 1/2/15

  LKR     9,310        70,551   

Sri Lanka Treasury Bill, 0.00%, 2/20/15

  LKR     47,590        357,930   

Sri Lanka Treasury Bill, 0.00%, 2/27/15

  LKR     50,450        378,999   

Sri Lanka Treasury Bill, 0.00%, 3/6/15

  LKR     87,750        658,442   

Sri Lanka Treasury Bill, 0.00%, 3/13/15

  LKR     52,790        395,677   

Sri Lanka Treasury Bill, 0.00%, 3/27/15

  LKR     126,930        949,267   

Sri Lanka Treasury Bill, 0.00%, 4/17/15

  LKR     294,100        2,192,768   

Sri Lanka Treasury Bill, 0.00%, 6/26/15

  LKR     32,360        238,477   
                     

Total Sri Lanka

  

  $ 6,188,655   
                     

Uganda — 0.5%

                   

Uganda Treasury Bill, 0.00%, 2/19/15

  UGX     2,026,900      $ 725,255   

Uganda Treasury Bill, 0.00%, 9/17/15

  UGX     2,103,000        696,322   
                     

Total Uganda

  

  $ 1,421,577   
                     

Uruguay — 0.1%

                   

Monetary Regulation Bill, 0.00%, 12/18/14

  UYU     450      $ 18,366   

Monetary Regulation Bill, 0.00%, 2/20/15

  UYU     3,240        129,133   

Monetary Regulation Bill, 0.00%, 3/26/15

  UYU     470        18,484   

Monetary Regulation Bill, 0.00%, 8/14/15

  UYU     3,922        146,329   
                     

Total Uruguay

  

  $ 312,312   
                     
 

 

  20   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

Security        Principal
Amount
(000’s omitted)
    Value  
     

Zambia — 0.1%

                   

Zambia Treasury Bill, 0.00%, 6/15/15

  ZMW     2,290      $ 330,658   
                     

Total Zambia

  

  $ 330,658   
                     

Total Foreign Government Securities
(identified cost $33,122,223)

   

  $ 32,285,324   
                     
U.S. Treasury Obligations — 1.0%   
     
Security        Principal
Amount
(000’s omitted)
    Value  

U.S. Treasury Bill,
0.00%, 12/4/14(15)

    $ 3,000      $ 3,000,006   
                     

Total U.S. Treasury Obligations
(identified cost $2,999,984)

   

  $ 3,000,006   
                     
Other — 2.0%   
     
Description        Interest
(000’s omitted)
    Value  

Eaton Vance Cash Reserves Fund, LLC, 0.14%(18)

    $ 6,172      $ 6,172,400   
                     

Total Other
(identified cost $6,172,400)

   

  $ 6,172,400   
                     

Total Short-Term Investments
(identified cost $42,294,607)

   

  $ 41,457,730   
                     

Total Investments — 140.2%
(identified cost $426,649,219)

   

  $ 429,123,222   
                     

Less Unfunded Loan Commitments — (0.1)%

  

  $ (246,124
                     

Net Investments — 140.1%
(identified cost $426,403,095)

   

  $ 428,877,098   
                     

Other Assets, Less Liabilities — (40.1)%

  

  $ (122,666,787
                     

Net Assets — 100.0%

  

  $ 306,210,311   
                     

The percentage shown for each investment category in the Consolidated Portfolio of Investments is based on net assets.

AH4R     American Homes 4 Rent
ARP     American Residential Properties Trust
CAH     Colony American Homes
COMM     Commercial Mortgage Trust
DIP     Debtor In Possession
ESA     Extended Stay America Trust
HILT     Hilton USA Trust
JPMBB     JPMBB Commercial Mortgage Securities Trust
JPMCC     JPMorgan Chase Commercial Mortgage Securities Trust
OMFIT     OneMain Financial Issuance Trust
SBY     Silver Bay Realty Trust
SCFT     SpringCastle Funding Trust
SRFC     Sierra Receivables Funding Co., LLC
UBSC     UBS-Citigroup Commercial Mortgage Trust
UBSCM     UBS Commercial Mortgage Trust
WF-RBS     WF-RBS Commercial Mortgage Trust
WFCM     Wells Fargo Commercial Mortgage Trust
   
BDT     Bangladesh Taka
CRC     Costa Rican Colon
DOP     Dominican Peso
EUR     Euro
GBP     British Pound Sterling
GEL     Georgian Lari
ISK     Icelandic Krona
KES     Kenyan Shilling
LBP     Lebanese Pound
LKR     Sri Lankan Rupee
MYR     Malaysian Ringgit
NGN     Nigerian Naira
PHP     Philippine Peso
RSD     Serbian Dinar
TRY     New Turkish Lira
UGX     Ugandan Shilling
UYU     Uruguayan Peso
VND     Vietnamese Dong
ZMW     Zambian Kwacha

 

  * In U.S. dollars unless otherwise indicated.

 

  (1) 

Senior floating-rate interests (Senior Loans) often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. However, Senior Loans will have an expected average life of approximately two to four years. The stated interest rate represents the weighted average interest rate of all contracts within the senior loan facility and includes commitment fees on unfunded loan commitments, if any. Senior Loans typically have rates of interest which are redetermined either daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium. These base lending rates are primarily the London Interbank Offered Rate (“LIBOR”) and secondarily, the prime rate offered by one or more major United States banks (the “Prime Rate”) and the certificate of deposit (“CD”) rate or other base lending rates used by commercial lenders.

 

 

  21   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Portfolio of Investments — continued

 

 

 

  (2) 

This Senior Loan will settle after October 31, 2014, at which time the interest rate will be determined.

 

  (3) 

Amount is less than 0.05%.

 

  (4) 

Unfunded or partially unfunded loan commitments. See Note 1G for description.

 

  (5) 

For fair value measurement disclosure purposes, security is categorized as Level 3 (see Note 9).

 

  (6) 

Interest only security that entitles the holder to receive only interest payments on the underlying mortgages. Principal amount shown is the notional amount of the underlying mortgages on which coupon interest is calculated.

 

  (7) 

Inverse floating-rate security whose coupon varies inversely with changes in the interest rate index. The stated interest rate represents the coupon rate in effect at October 31, 2014.

 

  (8) 

Principal only security that entitles the holder to receive only principal payments on the underlying mortgages.

 

  (9) 

Variable rate security. The stated interest rate represents the rate in effect at October 31, 2014.

 

(10) 

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be sold in certain transactions (normally to qualified institutional buyers) and remain exempt from registration. At October 31, 2014, the aggregate value of these securities is $36,066,968 or 11.8% of the Fund’s net assets.

 

(11) 

Weighted average fixed-rate coupon that changes/updates monthly. Rate shown is the rate at October 31, 2014.

 

(12) 

Adjustable rate mortgage security. Rate shown is the rate at October 31, 2014.

 

(13) 

Inflation-linked security whose principal is adjusted for inflation based on changes in a designated inflation index or inflation rate for the applicable country. Interest is calculated based on the inflation-adjusted principal.

 

(14) 

Security exempt from registration under Regulation S of the Securities Act of 1933, which exempts from registration securities offered and sold outside the United States. Security may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. At October 31, 2014, the aggregate value of these securities is $1,828,999 or 0.6% of the Fund’s net assets.

 

(15) 

Security (or a portion thereof) has been pledged to cover collateral requirements on open derivative contracts.

 

(16) 

Non-income producing.

 

(17) 

Security was acquired in connection with a restructuring of a Senior Loan and may be subject to restrictions on resale.

 

(18) 

Affiliated investment company, available to Eaton Vance portfolios and funds, which invests in high quality, U.S. dollar denominated money market instruments. The rate shown is the annualized seven-day yield as of October 31, 2014.

 

(19) 

Represents a payment-in-kind security which may pay interest in additional principal at the issuer’s discretion.

 

 

  22   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Statement of Assets and Liabilities

 

 

Assets   October 31, 2014  

Unaffiliated investments, at value (identified cost, $420,230,695)

  $ 422,704,698   

Affiliated investment, at value (identified cost, $6,172,400)

    6,172,400   

Cash

    2,112,442   

Restricted cash*

    295,284   

Foreign currency, at value (identified cost, $1,055,092)

    1,040,371   

Interest receivable

    2,475,574   

Interest receivable from affiliated investment

    1,690   

Receivable for investments sold

    581,104   

Receivable for open forward foreign currency exchange contracts

    2,810,986   

Receivable for open swap contracts

    559,300   

Premium paid on open swap contracts

    503,211   

Tax reclaims receivable

    21,418   

Other assets

    5,253   

Total assets

  $ 439,283,731   
Liabilities   

Notes payable

  $ 128,000,000   

Cash collateral due to brokers

    295,074   

Payable for investments purchased

    1,541,639   

Payable for Fund shares repurchased

    8,755   

Payable for variation margin on open centrally cleared swap contracts

    350   

Payable for open forward foreign currency exchange contracts

    1,781,385   

Payable for open swap contracts

    734,751   

Payable to affiliates:

 

Investment adviser fee

    326,152   

Trustees’ fees

    2,000   

Accrued expenses

    383,314   

Total liabilities

  $ 133,073,420   

Net Assets

  $ 306,210,311   
Sources of Net Assets   

Common shares, $0.01 par value, unlimited number of shares authorized, 18,602,496 shares issued and outstanding

  $ 186,025   

Additional paid-in capital

    325,980,905   

Accumulated net realized loss

    (22,764,862

Accumulated distributions in excess of net investment income

    (501,328

Net unrealized appreciation

    3,309,571   

Net Assets

  $ 306,210,311   
Net Asset Value   

($306,210,311 ÷ 18,602,496 common shares issued and outstanding)

  $ 16.46   

 

* Represents restricted cash on deposit at the custodian and the broker for open derivative contracts.

 

  23   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Statement of Operations

 

 

Investment Income  

Year Ended

October 31, 2014

 

Interest (net of foreign taxes, $124,950)

  $ 20,884,665   

Dividends

    197,917   

Interest allocated from affiliated investment

    11,350   

Expenses allocated from affiliated investment

    (1,408

Total investment income

  $ 21,092,524   
Expenses        

Investment adviser fee

  $ 3,941,332   

Trustees’ fees and expenses

    23,209   

Custodian fee

    457,223   

Transfer and dividend disbursing agent fees

    18,536   

Legal and accounting services

    187,882   

Printing and postage

    103,434   

Interest expense and fees

    1,146,943   

Interest expense on securities sold short

    799   

Miscellaneous

    88,779   

Total expenses

  $ 5,968,137   

Deduct —

 

Reduction of custodian fee

  $ 1,499   

Total expense reductions

  $ 1,499   

Net expenses

  $ 5,966,638   

Net investment income

  $ 15,125,886   
Realized and Unrealized Gain (Loss)        

Net realized gain (loss) —

 

Investment transactions (including a loss of $631,772 from precious metals)

  $ (443,629

Investment transactions allocated from affiliated investment

    116   

Written options

    161,343   

Securities sold short

    7,386   

Futures contracts

    (215,638

Swap contracts

    (512,354

Foreign currency and forward foreign currency exchange contract transactions

    (592,543

Net realized loss

  $ (1,595,319

Change in unrealized appreciation (depreciation) —

 

Investments (including net increase of $454,469 from precious metals)

  $ (4,012,287

Written options

    (96,845

Securities sold short

    (4,042

Futures contracts

    12,901   

Swap contracts

    (377,840

Foreign currency and forward foreign currency exchange contracts

    1,172,606   

Net change in unrealized appreciation (depreciation)

  $ (3,305,507

Net realized and unrealized loss

  $ (4,900,826

Net increase in net assets from operations

  $ 10,225,060   

 

  24   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Statements of Changes in Net Assets

 

 

    Year Ended October 31,  
Increase (Decrease) in Net Assets   2014     2013  

From operations —

   

Net investment income

  $ 15,125,886      $ 15,562,697   

Net realized loss from investment transactions, written options, securities sold short, futures contracts, swap contracts, forward commodity contracts, and foreign currency and forward foreign currency exchange contract transactions

    (1,595,319     (2,850,387

Net change in unrealized appreciation (depreciation) from investments, written options, securities sold short, futures contracts, swap contracts, forward commodity contracts, foreign currency and forward foreign currency exchange contracts

    (3,305,507     (9,201,618

Net increase in net assets from operations

  $ 10,225,060      $ 3,510,692   

Distributions to shareholders —

   

From net investment income

  $ (14,281,714   $ (13,169,455

Tax return of capital

    (6,033,550     (7,228,069

Total distributions

  $ (20,315,264   $ (20,397,524

Capital share transactions —

   

Cost of shares repurchased (see Note 5)

  $ (4,213,097   $   

Net decrease in net assets from capital share transactions

  $ (4,213,097   $   

Net decrease in net assets

  $ (14,303,301   $ (16,886,832
Net Assets   

At beginning of year

  $ 320,513,612      $ 337,400,444   

At end of year

  $ 306,210,311      $ 320,513,612   

Accumulated distributions in excess of net investment income

included in net assets

  

  

At end of year

  $ (501,328   $ (321,218

 

  25   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Statement of Cash Flows

 

 

Cash Flows From Operating Activities   Year Ended
October 31, 2014
 

Net increase in net assets from operations

  $ 10,225,060   

Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:

 

Investments purchased, including repurchases of securities sold short

    (223,174,672

Investments sold and principal repayments

    185,353,431   

Increase in short-term investments, net, excluding foreign government securities

    (1,421,670

Net amortization/accretion of premium (discount)

    8,397,067   

Decrease in restricted cash

    104,716   

Decrease in interest receivable

    101,288   

Increase in interest receivable from affiliated investment

    (969

Increase in receivable for open forward foreign currency exchange contracts

    (1,881,611

Decrease in receivable for open swap contracts

    719,594   

Decrease in premium paid on open swap contracts

    268,883   

Increase in tax reclaims receivable

    (2,117

Increase in other assets

    (209

Decrease in cash collateral due to brokers

    (104,926

Decrease in written options outstanding, at value

    (49,859

Decrease in payable for variation margin on open futures contracts

    (82,898

Increase in payable for variation margin on open centrally cleared swap contracts

    350   

Increase in payable for open forward foreign currency exchange contracts

    717,132   

Decrease in payable for open swap contracts

    (366,112

Decrease in payable to affiliate for investment adviser fee

    (13,966

Decrease in payable to affiliate for Trustees’ fees

    (178

Decrease in interest payable for securities sold short

    (1,417

Decrease in accrued expenses

    (127,539

Increase in unfunded loan commitments

    46,124   

Net change in unrealized (appreciation) depreciation from:

 

Investments

    4,012,287   

Securities sold short

    4,042   

Net realized (gain) loss from:

 

Investments

    443,629   

Securities sold short

    (7,386

Net cash used in operating activities

  $ (16,841,926
Cash Flows From Financing Activities        

Distributions paid, net of reinvestments

  $ (20,315,264

Repurchase of common shares

    (4,204,342

Proceeds from notes payable

    69,000,000   

Repayment of notes payable

    (36,000,000

Net cash provided by financing activities

  $ 8,480,394   

Net decrease in cash*

  $ (8,361,532

Cash at beginning of year(1)

  $ 11,514,345   

Cash at end of year(1)

  $ 3,152,813   
Supplemental disclosure of cash flow information        

Cash paid for interest and fees

  $ 1,203,729   

 

(1) 

Balance includes foreign currency, at value.

 

* Includes net change in unrealized appreciation (depreciation) on foreign currency of $(11,062).

 

  26   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Consolidated Financial Highlights

 

 

    Year Ended October 31,  
    2014     2013     2012     2011     2010  

Net asset value — Beginning of year

  $ 16.970      $ 17.860      $ 17.800      $ 18.270      $ 17.660   
Income (Loss) From Operations                                        

Net investment income(1)

  $ 0.804      $ 0.824      $ 0.867      $ 0.822      $ 1.051   

Net realized and unrealized gain (loss)

    (0.261     (0.634     0.273        (0.132     0.639   

Total income from operations

  $ 0.543      $ 0.190      $ 1.140      $ 0.690      $ 1.690   
Less Distributions                                        

From net investment income

  $ (0.759   $ (0.697   $ (0.732   $ (1.160   $ (1.080

Tax return of capital

    (0.321     (0.383     (0.348              

Total distributions

  $ (1.080   $ (1.080   $ (1.080   $ (1.160   $ (1.080

Anti-dilutive effect of share repurchase program (see Note 5)(1)

  $ 0.027      $      $      $      $   

Net asset value — End of year

  $ 16.460      $ 16.970      $ 17.860      $ 17.800      $ 18.270   

Market value — End of year

  $ 14.530      $ 15.290      $ 17.320      $ 16.350      $ 17.600   

Total Investment Return on Net Asset Value(2)

    4.10     1.47     6.92     4.35     10.26

Total Investment Return on Market Value(2)

    2.05     (5.72 )%      12.87     (0.51 )%      20.48
Ratios/Supplemental Data   

Net assets, end of year (000’s omitted)

  $ 306,210      $ 320,514      $ 337,400      $ 336,165      $ 345,073   

Ratios (as a percentage of average daily net assets):

         

Expenses excluding interest and fees(3)

    1.53     1.55     1.47     1.38     1.27

Interest and fee expense(4)

    0.36     0.47     0.55     0.51     0.46

Total expenses(3)

    1.89     2.02     2.02     1.89     1.73

Net investment income

    4.80     4.72     4.87     4.52     5.81

Portfolio Turnover

    41     48     42     35     21

Senior Securities:

         

Total notes payable outstanding (in 000’s)

  $ 128,000      $ 95,000      $ 115,000      $ 98,000      $ 98,000   

Asset coverage per $1,000 of notes payable(5)

  $ 3,392      $ 4,374      $ 3,934      $ 4,430      $ 4,521   

 

(1) 

Computed using average common shares outstanding.

 

(2) 

Returns are historical and are calculated by determining the percentage change in net asset value or market value with all distributions reinvested. Distributions are assumed to be reinvested at prices obtained under the Fund’s dividend reinvestment plan.

 

(3) 

Excludes the effect of custody fee credits, if any, of less than 0.005%.

 

(4) 

Interest and fee expense relates to borrowings for the purpose of financial leverage (see Note 7) and securities sold short.

 

(5) 

Calculated by subtracting the Fund’s total liabilities (not including the notes payable) from the Fund’s total assets, and dividing the result by the notes payable balance in thousands.

 

  27   See Notes to Consolidated Financial Statements.


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements

 

 

1  Significant Accounting Policies

Eaton Vance Short Duration Diversified Income Fund (the Fund) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company. The Fund’s primary investment objective is to provide a high level of current income, with a secondary objective of seeking capital appreciation to the extent consistent with its primary goal.

The Fund seeks to gain exposure to the commodity markets, in whole or in part, through investments in Eaton Vance EVG Commodity Subsidiary, Ltd. (the Subsidiary), a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands with the same objective and investment policies and restrictions as the Fund. The Fund may invest up to 25% of its total assets in the Subsidiary. The net assets of the Subsidiary at October 31, 2014 were $1,425,341 or 0.5% of the Fund’s consolidated net assets. The accompanying consolidated financial statements include the accounts of the Subsidiary. Intercompany balances and transactions have been eliminated in consolidation.

The following is a summary of significant accounting policies of the Fund. The policies are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946.

A  Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.

Senior Floating-Rate Loans. Interests in senior floating-rate loans (Senior Loans) for which reliable market quotations are readily available are valued generally at the average mean of bid and ask quotations obtained from a third party pricing service. Other Senior Loans are valued at fair value by the investment adviser under procedures approved by the Trustees. In fair valuing a Senior Loan, the investment adviser utilizes one or more of the valuation techniques described in (i) through (iii) below to assess the likelihood that the borrower will make a full repayment of the loan underlying such Senior Loan relative to yields on other Senior Loans issued by companies of comparable credit quality. If the investment adviser believes that there is a reasonable likelihood of full repayment, the investment adviser will determine fair value using a matrix pricing approach that considers the yield on the Senior Loan. If the investment adviser believes there is not a reasonable likelihood of full repayment, the investment adviser will determine fair value using analyses that include, but are not limited to: (i) a comparison of the value of the borrower’s outstanding equity and debt to that of comparable public companies; (ii) a discounted cash flow analysis; or (iii) when the investment adviser believes it is likely that a borrower will be liquidated or sold, an analysis of the terms of such liquidation or sale. In certain cases, the investment adviser will use a combination of analytical methods to determine fair value, such as when only a portion of a borrower’s assets are likely to be sold. In conducting its assessment and analyses for purposes of determining fair value of a Senior Loan, the investment adviser will use its discretion and judgment in considering and appraising relevant factors. Fair value determinations are made by the portfolio managers of the Fund based on information available to such managers. The portfolio managers of other funds managed by the investment adviser that invest in Senior Loans may not possess the same information about a Senior Loan borrower as the portfolio managers of the Fund. At times, the fair value of a Senior Loan determined by the portfolio managers of other funds managed by the investment adviser that invest in Senior Loans may vary from the fair value of the same Senior Loan determined by the portfolio managers of the Fund. The fair value of each Senior Loan is periodically reviewed and approved by the investment adviser’s Valuation Committee and by the Trustees based upon procedures approved by the Trustees. Junior Loans (i.e., subordinated loans and second lien loans) are valued in the same manner as Senior Loans.

Debt Obligations. Debt obligations (including short-term obligations with a remaining maturity of more than sixty days) are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics, interest rates, anticipated prepayments, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term obligations purchased with a remaining maturity of sixty days or less (excluding those that are non-U.S. dollar denominated, which typically are valued by a pricing service or dealer quotes) are generally valued at amortized cost, which approximates market value.

Equity Securities. Equity securities listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and asked prices therefore on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and asked prices.

Commodities. Precious metals are valued at the New York composite mean quotation reported by Bloomberg at the valuation time.

Derivatives. Exchange-traded options are valued at the mean between the bid and asked prices at valuation time as reported by the Options Price Reporting Authority for U.S. listed options or by the relevant exchange or board of trade for non-U.S. listed options. Over-the-counter options (including options on securities, indices and foreign currencies) are valued by a third party pricing service using techniques that consider factors including the value of the underlying instrument, the volatility of the underlying instrument and the period of time until option expiration. Financial and commodities futures contracts are valued at the closing settlement price established by the board of trade or exchange on which they are traded. Forward foreign currency exchange contracts are generally valued at the mean of the average bid and average asked prices that are reported by currency dealers to a third party pricing service at the valuation time. Such third party pricing service valuations are supplied for specific settlement periods and the Fund’s forward foreign currency exchange contracts are valued at an interpolated rate between the closest preceding and subsequent settlement period reported by the third party pricing service. Forward commodity contracts are generally valued based on the price of the underlying futures or forward contract provided by the exchange on which the underlying instruments are traded or if unavailable, based on forward rates provided by broker/dealers. Swaps (other than centrally cleared) are normally valued using valuations provided by a third party pricing service. Such pricing service valuations are based on the present value of

 

  28  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

fixed and projected floating rate cash flows over the term of the swap contract, and in the case of credit default swaps, based on credit spread quotations obtained from broker/dealers and expected default recovery rates determined by the pricing service using proprietary models. In the case of total return swaps, the pricing service valuations are based on the value of the underlying index or instrument and reference interest rate. Future cash flows on swaps are discounted to their present value using swap rates provided by electronic data services or by broker/dealers. Centrally cleared swaps are valued at the daily settlement price provided by the central clearing counterparty.

Foreign Securities and Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate. Inputs to the model include reported trades and implied bid/ask spreads.

Affiliated Fund. The Fund may invest in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). The value of the Fund’s investment in Cash Reserves Fund reflects the Fund’s proportionate interest in its net assets. Cash Reserves Fund generally values its investment securities utilizing the amortized cost valuation technique in accordance with Rule 2a-7 under the 1940 Act. This technique involves initially valuing a portfolio security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. If amortized cost is determined not to approximate fair value, Cash Reserves Fund may value its investment securities in the same manner as debt obligations described above.

Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that fairly reflects the security’s value, or the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.

B  Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.

C  Income — Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Fees associated with loan amendments are recognized immediately. Inflation adjustments to the principal amount of inflation-adjusted bonds and notes are reflected as interest income. Withholding taxes on foreign interest have been provided for in accordance with the Fund’s understanding of the applicable countries’ tax rules and rates.

D  Federal Taxes — The Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary.

The Subsidiary is treated as a controlled foreign corporation under the Internal Revenue Code and is not expected to be subject to U.S. federal income tax. The Fund is treated as a U.S. shareholder of the Subsidiary. As a result, the Fund is required to include in gross income for U.S. federal tax purposes all of the Subsidiary’s income, whether or not such income is distributed by the Subsidiary. If a net loss is realized by the Subsidiary, such loss is not generally available to offset the income earned by the Fund.

As of October 31, 2014, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.

E  Expense Reduction — State Street Bank and Trust Company (SSBT) serves as custodian of the Fund. Pursuant to the custodian agreement, SSBT receives a fee reduced by credits, which are determined based on the average daily cash balance the Fund maintains with SSBT. All credit balances, if any, used to reduce the Fund’s custodian fees are reported as a reduction of expenses in the Consolidated Statement of Operations.

F  Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.

G  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 commitments at the borrower’s discretion. These commitments are disclosed in the accompanying Consolidated Portfolio of Investments.

 

  29  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

H  Use of Estimates — The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.

I  Indemnifications — Under the Fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Fund) could be deemed to have personal liability for the obligations of the Fund. However, the Fund’s Declaration of Trust contains an express disclaimer of liability on the part of Fund shareholders and the By-laws provide that the Fund shall assume the defense on behalf of any Fund shareholders. Moreover, the By-laws also provide for indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain 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.

J  Financial and Commodities Futures Contracts — Upon entering into a financial or commodities futures contract, the Fund is required to deposit with the broker, either in cash or securities, an amount equal to a certain percentage of the contract amount (initial margin). Subsequent payments, known as variation margin, are made or received by the Fund each business day, depending on the daily fluctuations in the value of the underlying security, commodity or currency, and are recorded as unrealized gains or losses by the Fund. Gains (losses) are realized upon the expiration or closing of the financial or commodities futures contracts. Should market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the financial or commodities futures contracts and may realize a loss. Futures contracts have minimal counterparty risk as they are exchange traded and the clearinghouse for the exchange is substituted as the counterparty, guaranteeing counterparty performance.

K  Forward Foreign Currency Exchange and Forward Commodity Contracts — The Fund may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded as unrealized until such time as the contracts have been closed. Unrealized and realized gains and losses on forward commodity contracts, which are entered into for the purchase or sale of a specific commodity at a fixed price on a future date, are accounted for as described above. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and, in the case of forward foreign currency exchange contracts, from movements in the value of a foreign currency relative to the U.S. dollar.

L  Written Options — Upon the writing of a call or a put option, the premium received by the Fund is included in the Consolidated Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written, in accordance with the Fund’s policies on investment valuations discussed above. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. When an index option is exercised, the Fund is required to deliver an amount of cash determined by the excess of the strike price of the option over the value of the index (in the case of a put) or the excess of the value of the index over the strike price of the option (in the case of a call) at contract termination. If a put option on a security is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as a writer of an option, may have no control over whether the underlying securities or other assets may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities or other assets underlying the written option. The Fund may also bear the risk of not being able to enter into a closing transaction if a liquid secondary market does not exist.

M  Purchased Options — Upon the purchase of a call or put option, the premium paid by the Fund is included in the Consolidated Statement of Assets and Liabilities as an investment. The amount of the investment is subsequently marked-to-market to reflect the current market value of the option purchased, in accordance with the Fund’s policies on investment valuations discussed above. As the purchaser of an index option, the Fund has the right to receive a cash payment equal to any depreciation in the value of the index below the strike price of the option (in the case of a put) or equal to any appreciation in the value of the index over the strike price of the option (in the case of a call) as of the valuation date of the option. If an option which the Fund had purchased expires on the stipulated expiration date, the Fund will realize a loss in the amount of the cost of the option. If the Fund enters into a closing sale transaction, the Fund will realize a gain or loss, depending on whether the sales proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option on a security, it will realize a gain or loss from the sale of the underlying security, and the proceeds from such sale will be decreased by the premium originally paid. If the Fund exercises a call option on a security, the cost of the security which the Fund purchases upon exercise will be increased by the premium originally paid. The risk associated with purchasing options is limited to the premium originally paid.

N  Interest Rate Swaps — Swap contracts are privately negotiated agreements between the Fund and a counterparty. Certain swap contracts may be centrally cleared (“centrally cleared swaps”), whereby all payments made or received by the Fund pursuant to the contract are with a central clearing party (CCP) rather than the original counterparty. The CCP guarantees the performance of the original parties to the contract. Upon entering into centrally cleared swaps, the Fund is required to deposit with the CCP, either in cash or securities, an amount of initial margin determined by the CCP, which is subject to adjustment.

Pursuant to interest rate swap agreements, the Fund either makes floating-rate payments to the counterparty (or CCP in the case of centrally cleared swaps) based on a benchmark interest rate in exchange for fixed-rate payments or the Fund makes fixed-rate payments to the counterparty (or CCP in the case of a centrally cleared swap) in exchange for payments on a floating benchmark interest rate. Payments received or made are recorded as realized

 

  30  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

gains or losses. During the term of the outstanding swap agreement, changes in the underlying value of the swap are recorded as unrealized gains or losses. For centrally cleared swaps, the daily change in valuation is recorded as a receivable or payable for variation margin and settled in cash with the CCP daily. The value of the swap is determined by changes in the relationship between two rates of interest. The Fund is exposed to credit loss in the event of non-performance by the swap counterparty. In the case of centrally cleared swaps, counterparty risk is minimal due to protections provided by the CCP. Risk may also arise from movements in interest rates.

O  Cross-Currency Swaps — Cross-currency swaps are interest rate swaps in which interest cash flows are exchanged between two parties based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the inception of the trade. Cross-currency swaps also involve the exchange of the notional amounts at the start of the contract at the current spot rate with an agreement to re-exchange such amounts at a later date at either the same exchange rate, a specified rate or the then current spot rate. The entire principal value of a cross-currency swap is subject to the risk that the counterparty to the swap will default on its contractual delivery obligations.

P  Credit Default Swaps — When the Fund is the buyer of a credit default swap contract, the Fund is entitled to receive the par (or other agreed-upon) value of a referenced debt obligation (or basket of debt obligations) from the counterparty to the contract if a credit event by a third party, such as a U.S. or foreign corporate issuer or sovereign issuer, on the debt obligation occurs. In return, the Fund pays the counterparty a periodic stream of payments over the term of the contract provided that no credit event has occurred. If no credit event occurs, the Fund would have spent the stream of payments and received no proceeds from the contract. When the Fund is the seller of a credit default swap contract, it receives the stream of payments, but is obligated to pay to the buyer of the protection an amount up to the notional amount of the swap and in certain instances take delivery of securities of the reference entity upon the occurrence of a credit event, as defined under the terms of that particular swap agreement. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring, obligation acceleration and repudiation/moratorium. If the Fund is a seller of protection and a credit event occurs, the maximum potential amount of future payments that the Fund could be required to make would be an amount equal to the notional amount of the agreement. This potential amount would be partially offset by any recovery value of the respective referenced obligation, or net amount received from the settlement of a buy protection credit default swap agreement entered into by the Fund for the same referenced obligation. As the seller, the Fund may create economic leverage to its portfolio because, in addition to its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. The interest fee paid or received on the swap contract, which is based on a specified interest rate on a fixed notional amount, is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as realized gain upon receipt or realized loss upon payment. The Fund also records an increase or decrease to unrealized appreciation (depreciation) in an amount equal to the daily valuation. Upfront payments or receipts, if any, are recorded as other assets or other liabilities, respectively, and amortized over the life of the swap contract as realized gains or losses. For financial reporting purposes, unamortized upfront payments, if any, are netted with unrealized appreciation or depreciation on swap contracts to determine the market value of swaps as presented in Notes 6 and 9. The Fund segregates assets in the form of cash or liquid securities in an amount equal to the notional amount of the credit default swaps of which it is the seller. The Fund segregates assets in the form of cash or liquid securities in an amount equal to any unrealized depreciation of the credit default swaps of which it is the buyer, marked to market on a daily basis. These transactions involve certain risks, including the risk that the seller may be unable to fulfill the transaction.

Q  Total Return Swaps — In a total return swap, the buyer receives a periodic return equal to the total return of a specified security, securities or index for a specified period of time. In return, the buyer pays the counterparty a variable stream of payments, typically based upon short-term interest rates, possibly plus or minus an agreed upon spread. During the term of the outstanding swap agreement, changes in the underlying value of the swap are recorded as unrealized gains and losses. Periodic payments received or made are recorded as realized gains or losses. The Fund is exposed to credit loss in the event of nonperformance by the swap counterparty. Risk may also arise from the unanticipated movements in value of exchange rates, interest rates, securities, or the index.

R  Repurchase Agreements — A repurchase agreement is the purchase by the Fund of securities from a counterparty in exchange for cash that is coupled with an agreement to resell those securities to the counterparty at a specified date and price. When a repurchase agreement is entered, the Fund typically receives securities with a value that equals or exceeds the repurchase price, including any accrued interest earned on the agreement. The value of such securities will be marked to market daily, and cash or additional securities will be exchanged between the parties as needed. Except in the case of a repurchase agreement entered to settle a short sale, the value of the securities delivered to the Fund will be at least equal to 90% of the repurchase price during the term of the repurchase agreement. The terms of a repurchase agreement entered to settle a short sale may provide that the cash purchase price paid by the Fund is more than the value of purchased securities that effectively collateralize the repurchase price payable by the counterparty. Since in such a transaction, the Fund normally will have used the purchased securities to settle the short sale, the Fund will segregate liquid assets equal to the marked to market value of the purchased securities that it is obligated to return to the counterparty under the repurchase agreement. In the event of insolvency of the counterparty to a repurchase agreement, recovery of the repurchase price owed to the Fund may be delayed. Such an insolvency also may result in a loss to the extent that the value of the purchased securities decreases during the delay or that value has otherwise not been maintained at an amount at least equal to the repurchase price.

S  Securities Sold Short — A short sale is a transaction in which the Fund sells a security it does not own in anticipation of a decline in the market value of that security. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer with an obligation to replace such borrowed security at a later date. Until the security is replaced, the Fund is required to repay the lender any interest, which accrues during the period of the loan. The proceeds received from a short sale are recorded as a liability and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of the open short position on the day of determination. A gain, limited to the price at which the Fund sold the security short, or a loss, potentially unlimited as there is no upward limit on the price of a security, is recorded when the short position is terminated. Interest payable on securities sold short is recorded as an expense.

 

  31  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

T  Stripped Mortgage-Backed Securities — The Fund may invest in Interest Only (IO) and Principal Only (PO) securities, a form of stripped mortgage-backed securities, whereby the IO security receives all the interest and the PO security receives all the principal on a pool of mortgage assets. The yield to maturity on an IO security is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the yield to maturity from these securities. If the underlying mortgages experience greater than anticipated prepayments of principal, the Fund may fail to recoup its initial investment in an IO security. The market value of IO and PO securities can be unusually volatile due to changes in interest rates.

U  Consolidated Statement of Cash Flows — The cash amount shown in the Consolidated Statement of Cash Flows of the Fund is the amount included in the Fund’s Consolidated Statement of Assets and Liabilities and represents the unrestricted cash on hand at its custodian and does not include any short-term investments.

2  Distributions to Shareholders and Income Tax Information

Subject to its Managed Distribution Plan, the Fund intends to make monthly distributions to shareholders and to distribute all or substantially all of its net realized capital gains (reduced by available capital loss carryforwards from prior years). In its distributions, the Fund intends to include amounts attributable to the imputed interest on foreign currency exposures through long and short positions in forward currency exchange contracts (represented by the difference between the foreign currency spot rate and the foreign currency forward rate) and the imputed interest derived from certain other derivative positions. Distributions are recorded on the ex-dividend date. Distributions to shareholders are determined in accordance with income tax regulations, which may differ from U.S. GAAP. As required by U.S. GAAP, only distributions in excess of tax basis earnings and profits are reported in the consolidated financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income. In certain circumstances, a portion of distributions to shareholders may include a return of capital component.

The tax character of distributions declared for the years ended October 31, 2014 and October 31, 2013 was as follows:

 

    Year Ended October 31,  
     2014      2013  

Distributions declared from:

    

Ordinary income

  $ 14,281,714       $ 13,169,455   

Tax return of capital

  $ 6,033,550       $ 7,228,069   

During the year ended October 31, 2014, accumulated net realized loss was decreased by $2,278,572, accumulated undistributed net investment income was decreased by $1,024,282 and paid-in capital was decreased by $1,254,290 due to differences between book and tax accounting, primarily for foreign currency gain (loss), paydown gain (loss), premium amortization, swap contracts, mixed straddles, investments in partnerships and investment in the Subsidiary. These reclassifications had no effect on the net assets or net asset value per share of the Fund.

As of October 31, 2014, the components of distributable earnings (accumulated losses) and unrealized appreciation (depreciation) on a tax basis were as follows:

 

Capital loss carryforward

  $ (21,088,086

Net unrealized appreciation

  $ 1,131,467   

The differences between components of distributable earnings (accumulated losses) on a tax basis and the amounts reflected in the Consolidated Statement of Assets and Liabilities are primarily due to wash sales, foreign currency transactions, premium amortization, swap contracts, straddle adjustments and investments in partnerships.

At October 31, 2014, the Fund, for federal income tax purposes, had a capital loss carryforward of $21,088,086 which will reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus will reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. The capital loss carryforward will expire on October 31, 2016 ($13,612,131), October 31, 2017 ($738,126), October 31, 2018 ($5,165,932) and October 31, 2019 ($1,571,897) and its character is short-term. Under tax regulations, capital losses incurred in taxable years beginning after December 2010 are considered deferred capital losses and are treated as arising on the first day of the Fund’s next taxable year, retaining the same short-term or long-term character as when originally deferred. Deferred capital losses are required to be used prior to capital loss carryforwards, which carry an expiration date. As a result of this ordering rule, capital loss carryforwards may be more likely to expire unused.

During the year ended October 31, 2014, a capital loss carryforward of $489,102 was utilized to offset net realized gains by the Fund.

 

  32  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

The cost and unrealized appreciation (depreciation) of investments of the Fund, including the Fund’s investment in the Subsidiary, at October 31, 2014, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

  $ 431,851,835   

Gross unrealized appreciation

  $ 5,574,388   

Gross unrealized depreciation

    (8,123,786

Net unrealized depreciation

  $ (2,549,398

3  Investment Adviser Fee and Other Transactions with Affiliates

The investment adviser fee is earned by EVM as compensation for investment advisory services rendered to the Fund and the Subsidiary. Pursuant to the investment advisory agreement and subsequent fee reduction agreement between the Fund and EVM and the investment advisory agreement between the Subsidiary and EVM, the Fund and Subsidiary each pay EVM a fee at an annual rate of 0.75% of its respective average daily total leveraged assets (excluding its interest in the Subsidiary in the case of the Fund), subject to the limitation described below, and is payable monthly. Total leveraged assets as referred to herein represent net assets plus liabilities or obligations attributable to investment leverage and the notional value of long and short forward currency contracts, futures contracts and swaps held by the Fund. The notional value of a contract for purposes of calculating total leveraged assets is the stated dollar value of the underlying reference instrument at the time the derivative position is entered into and remains constant throughout the life of the derivative contract. However, the derivative contracts are marked to market daily and any unrealized appreciation or depreciation is reflected in the Fund’s net assets. When the Fund holds both long and short forward currency contracts in the same foreign currency, the offsetting positions are netted for purposes of determining total leveraged assets. When the Fund holds other long and short positions in foreign obligations denominated in the same currency, total leveraged assets are calculated by excluding the smaller of the long or short position.

The advisory agreements provide that if investment leverage exceeds 40% of the Fund’s total leveraged assets, EVM will not receive a management fee on total leveraged assets in excess of this amount. As of October 31, 2014, the Fund’s investment leverage was 47% of its total leveraged assets. For the year ended October 31, 2014, the Fund’s investment adviser fee amounted to $3,941,332 or 0.71% of the Fund’s average daily total leveraged assets and 1.25% of the Fund’s average daily net assets. The Fund invests its cash in Cash Reserves Fund. EVM does not currently receive a fee for advisory services provided to Cash Reserves Fund. EVM also serves as administrator of the Fund, but receives no compensation.

Trustees and officers of the Fund who are members of EVM’s organization receive remuneration for their services to the Fund out of the investment adviser fee. Trustees of the Fund who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the year ended October 31, 2014, no significant amounts have been deferred. Certain officers and Trustees of the Fund are officers of EVM.

4  Purchases and Sales of Investments

Purchases and sales of investments, other than short-term obligations and including maturities, paydowns, principal repayments on Senior Loans and securities sold short, for the year ended October 31, 2014 were as follows:

 

     Purchases      Sales  

Investments (non-U.S. Government)

  $ 145,270,552       $ 118,587,009   

U.S. Government and Agency Securities

    39,931,966         34,087,825   
    $ 185,202,518       $ 152,674,834   

5  Common Shares of Beneficial Interest

The Fund may issue common shares pursuant to its dividend reinvestment plan. There were no common shares issued by the Fund for the years ended October 31, 2014 and October 31, 2013.

On November 11, 2013, the Board of Trustees of the Fund authorized the repurchase by the Fund of up to 10% of its then currently outstanding common shares in open-market transactions at a discount to net asset value (NAV). The repurchase program does not obligate the Fund to purchase a specific amount of shares. During the year ended October 31, 2014, the Fund repurchased 284,100 of its common shares under the share repurchase program at a cost, including brokerage commissions, of $4,213,097 and an average price per share of $14.83. The weighted average discount per share to NAV on these repurchases amounted to 10.75% for the year ended October 31, 2014.

 

  33  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

6  Financial Instruments

The Fund may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities. These financial instruments may include forward foreign currency exchange contracts, futures contracts, swap contracts and written options and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. The notional or contractual amounts of these instruments represent the investment the Fund has in particular classes of financial instruments and do not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered.

A summary of obligations under these financial instruments at October 31, 2014 is as follows:

 

Forward Foreign Currency Exchange Contracts  
Settlement
Date
  Deliver   In Exchange For   Counterparty   Unrealized
Appreciation
    Unrealized
(Depreciation)
    Net Unrealized
Appreciation
(Depreciation)
 
11/3/14   Chilean Peso
799,383,290
  United States Dollar 1,377,829   BNP Paribas   $      $ (11,388   $ (11,388
11/3/14   Chilean Peso
799,383,290
  United States Dollar 1,386,254   Citibank, N.A.            (2,963     (2,963
11/3/14   United States Dollar
1,386,254
  Chilean Peso 799,383,290   BNP Paribas     2,963               2,963   
11/3/14   United States Dollar
1,390,232
  Chilean Peso 799,383,290   Citibank, N.A.            (1,015     (1,015
11/4/14   Brazilian Real
3,796,000
  United States Dollar 1,519,616   Morgan Stanley & Co. International PLC            (12,327     (12,327
11/4/14   Brazilian Real
3,796,000
  United States Dollar 1,553,064   Standard Chartered Bank     21,122               21,122   
11/4/14   United States Dollar
1,553,064
  Brazilian Real 3,796,000   Morgan Stanley & Co. International PLC            (21,122     (21,122
11/4/14   United States Dollar
1,639,458
  Brazilian Real 3,796,000   Standard Chartered Bank            (107,515     (107,515
11/5/14   Euro
4,654,197
  Romanian Leu 20,739,100   BNP Paribas     60,223               60,223   
11/5/14   Romanian Leu
10,421,141
  Euro
2,360,662
  Bank of America, N.A.            (2,710     (2,710
11/5/14   Romanian Leu
5,274,000
  Euro
1,193,369
  BNP Paribas            (3,038     (3,038
11/5/14   Romanian Leu
5,043,959
  Euro
1,132,002
  BNP Paribas            (14,579     (14,579
11/12/14   Euro
871,603
  United States Dollar 1,170,268   Citibank, N.A.     77,963               77,963   
11/12/14   United States Dollar
1,417,754
  Mexican Peso 18,902,060   BNP Paribas            (14,787     (14,787
11/12/14   United States Dollar
1,587,709
  Mexican Peso 20,952,000   Deutsche Bank AG            (32,589     (32,589
11/14/14   United States Dollar
1,037,007
  Indian Rupee 64,227,000   Barclays Bank PLC     7,731               7,731   
11/14/14   United States Dollar
542,432
  Indian Rupee 33,350,000   Citibank, N.A.     51               51   
11/14/14   United States Dollar
476,120
  Indian Rupee 29,273,000   Deutsche Bank AG     44               44   
11/14/14   United States Dollar
1,128,740
  Indian Rupee 69,948,000   Standard Chartered Bank     9,058               9,058   
11/14/14   United States Dollar
2,347,263
  Indonesian Rupiah 27,831,494,048   Australia and New Zealand Banking Group Limited            (46,822     (46,822

 

  34  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

Forward Foreign Currency Exchange Contracts (continued)  
Settlement
Date
  Deliver   In Exchange For   Counterparty   Unrealized
Appreciation
    Unrealized
(Depreciation)
    Net Unrealized
Appreciation
(Depreciation)
 
11/17/14   United States Dollar
731,875
  Singapore Dollar 935,000   Australia and New Zealand Banking Group Limited   $      $ (4,131   $ (4,131
11/17/14   United States Dollar
3,076,737
  South Korean Won 3,202,729,000   BNP Paribas            (88,426     (88,426
11/20/14   Indonesian Rupiah
2,592,239,000
  United States Dollar 218,736   BNP Paribas     4,613               4,613   
11/20/14   Indonesian Rupiah
2,370,157,000
  United States Dollar 200,030   Standard Chartered Bank     4,252               4,252   
11/21/14   Euro
894,321
  United States Dollar 1,186,745   Bank of America, N.A.     65,904               65,904   
11/21/14   Euro
2,005,050
  United States Dollar 2,575,116   Bank of America, N.A.     62,214               62,214   
11/21/14   Euro
1,276,518
  United States Dollar 1,627,465   Bank of America, N.A.     27,622               27,622   
11/21/14   Euro
85,074
  United States Dollar 113,440   Bank of America, N.A.     6,818               6,818   
11/21/14   Euro
160,100
  United States Dollar 201,887   Bank of America, N.A.     1,236               1,236   
11/21/14   Euro
113,122
  United States Dollar 150,167   Goldman Sachs International     8,393               8,393   
11/21/14   United States Dollar
409,477
  Chilean Peso 240,875,000   BNP Paribas     8,447               8,447   
11/21/14   United States Dollar
618,396
  Chilean Peso 364,249,000   Citibank, N.A.     13,585               13,585   
11/21/14   United States Dollar
981,874
  Indian Rupee 60,724,000   Citibank, N.A.     5,021               5,021   
11/21/14   United States Dollar
1,030,545
  Indian Rupee 63,765,000   JPMorgan Chase Bank, N.A.     5,773               5,773   
11/21/14   United States Dollar
970,074
  Indian Rupee 60,033,000   Standard Chartered Bank     5,592               5,592   
11/21/14   United States Dollar
1,748,157
  Indonesian Rupiah 21,542,540,000   Deutsche Bank AG     31,091               31,091   
11/21/14   United States Dollar
2,469,476
  Indonesian Rupiah 30,419,007,000   Goldman Sachs International     42,900               42,900   
11/24/14   United States Dollar
2,380,155
  Singapore Dollar 3,020,000   Standard Chartered Bank            (29,668     (29,668
11/26/14   Euro
6,716,354
  United States Dollar 9,010,511   Morgan Stanley & Co. International PLC     592,730               592,730   
11/26/14   United States Dollar
562,327
  Euro
419,003
  Standard Chartered Bank            (37,180     (37,180
11/28/14   Euro
3,448,673
  United States Dollar 4,551,576   Goldman Sachs International     229,209               229,209   
11/28/14   United States Dollar
562,642
  Euro
445,072
  Goldman Sachs International            (4,814     (4,814
11/28/14   United States Dollar
2,253,834
  Israeli Shekel 8,227,282   BNP Paribas            (88,788     (88,788
12/2/14   United States Dollar
1,507,905
  Brazilian Real 3,796,000   Morgan Stanley & Co. International PLC     10,908               10,908   

 

  35  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

Forward Foreign Currency Exchange Contracts (continued)  
Settlement
Date
  Deliver   In Exchange For   Counterparty   Unrealized
Appreciation
    Unrealized
(Depreciation)
    Net Unrealized
Appreciation
(Depreciation)
 
12/4/14   British Pound Sterling
1,778,000
  Euro
2,212,433
  Standard Chartered Bank   $      $ (70,532   $ (70,532
12/4/14   Euro
4,673,285
  British Pound Sterling 3,719,000   Deutsche Bank AG     90,387               90,387   
12/9/14   Ghanaian Cedi
1,184,000
  United States Dollar 431,330   Citibank, N.A.     73,444               73,444   
12/9/14   Ghanaian Cedi
1,175,000
  United States Dollar 431,193   Standard Bank PLC     76,028               76,028   
12/9/14   Ghanaian Cedi
1,183,000
  United States Dollar 431,358   Standard Bank PLC     73,775               73,775   
12/9/14   United States Dollar
395,550
  Ghanaian Cedi 1,184,000   Citibank, N.A.            (37,665     (37,665
12/9/14   United States Dollar
787,759
  Ghanaian Cedi 2,358,000   Standard Bank PLC            (75,012     (75,012
12/9/14   United States Dollar
1,213,794
  Indian Rupee 74,357,000   Citibank, N.A.            (8,174     (8,174
12/11/14   Euro
2,409,215
  Norwegian Krone 19,841,000   Standard Chartered Bank            (81,940     (81,940
12/11/14   Euro
2,414,081
  Swedish Krona 22,193,000   Deutsche Bank AG            (20,198     (20,198
12/11/14   New Zealand Dollar
3,153,000
  United States Dollar 2,582,228   Standard Chartered Bank     133,264               133,264   
12/11/14   United States Dollar
2,587,699
  New Zealand Dollar 3,153,000   Morgan Stanley & Co. International PLC            (138,735     (138,735
12/12/14   Euro
1,266,709
  United States Dollar 1,639,741   BNP Paribas     51,978               51,978   
12/12/14   Ghanaian Cedi
1,196,000
  United States Dollar 431,146   Standard Bank PLC     70,310               70,310   
12/12/14   United States Dollar
398,999
  Ghanaian Cedi 1,196,000   Standard Bank PLC            (38,162     (38,162
12/15/14   United States Dollar
2,402,847
  Yuan Renminbi Offshore 14,821,000   Citibank, N.A.     7,319               7,319   
12/15/14   United States Dollar
1,541,929
  Yuan Renminbi Offshore 9,510,000   Deutsche Bank AG     4,571               4,571   
12/16/14   United States Dollar
310,345
  Zambian Kwacha 1,980,000   Barclays Bank PLC     349               349   
12/19/14   Ghanaian Cedi
1,203,000
  United States Dollar 431,183   Standard Bank PLC     69,810               69,810   
12/19/14   United States Dollar
400,000
  Ghanaian Cedi 1,203,000   Standard Bank PLC            (38,627     (38,627
12/19/14   United States Dollar
1,669,332
  Mauritian Rupee 52,200,000   Citibank, N.A.            (7,711     (7,711
12/22/14   United States Dollar
697,632
  Chilean Peso 411,408,000   JPMorgan Chase Bank, N.A.     14,275               14,275   
12/26/14   United States Dollar
3,334,821
  Peruvian New Sol 9,716,000   BNP Paribas            (30,445     (30,445
12/26/14   United States Dollar
2,833,934
  Peruvian New Sol 8,251,000   Citibank, N.A.            (27,800     (27,800

 

  36  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

Forward Foreign Currency Exchange Contracts (continued)  
Settlement
Date
  Deliver   In Exchange For   Counterparty   Unrealized
Appreciation
    Unrealized
(Depreciation)
    Net Unrealized
Appreciation
(Depreciation)
 
12/31/14   British Pound Sterling
1,121,762
  United States Dollar
1,826,526
  Goldman Sachs International   $ 32,849      $      $ 32,849   
12/31/14   Euro
84,712
  United States Dollar
107,555
  HSBC Bank USA, N.A.     1,359               1,359   
1/12/15   United States Dollar
117,024
  Ugandan Shilling
320,060,000
  Citibank, N.A.            (1,020     (1,020
1/12/15   United States Dollar
683,978
  Ugandan Shilling
1,867,261,000
  Standard Chartered Bank            (7,201     (7,201
1/13/15   United States Dollar
2,900,084
  Colombian Peso
5,955,323,000
  Citibank, N.A.            (25,961     (25,961
1/14/15   United States Dollar
601,782
  Egyptian Pound
4,390,000
  Citibank, N.A.     2,024               2,024   
1/20/15   Euro
1,638,792
  Polish Zloty
6,962,164
  BNP Paribas     4,995               4,995   
1/20/15   Euro
3,446,078
  Polish Zloty
14,636,784
  Nomura International PLC     9,510               9,510   
1/28/15   United States Dollar
3,134,293
  Mexican Peso
42,664,000
  HSBC Bank USA, N.A.     18,123               18,123   
1/30/15   British Pound Sterling
84,097
  United States Dollar
135,613
  HSBC Bank USA, N.A.     1,178               1,178   
1/30/15   United States Dollar
1,366,818
  Chilean Peso
799,383,290
  BNP Paribas     11,606               11,606   
2/4/15   Euro
2,351,924
  Romanian Leu
10,421,141
  Bank of America, N.A.     1,822               1,822   
2/5/15   Kazakhstani Tenge
259,474,000
  United States Dollar
1,384,969
  Deutsche Bank AG     54,586               54,586   
2/5/15   United States Dollar
1,563,096
  Kazakhstani Tenge 259,474,000   Deutsche Bank AG            (232,713     (232,713
2/6/15   United States Dollar
483,871
  Uruguayan Peso 12,000,000   Citibank, N.A.            (1,494     (1,494
2/13/15   United States Dollar
513,078
  Uruguayan Peso 12,750,000   Citibank, N.A.            (1,695     (1,695
2/23/15   Argentine Peso
1,000,000
  United States Dollar 96,432   Citibank, N.A.            (8,728     (8,728
2/23/15   Argentine Peso
1,000,000
  United States Dollar 96,395   Citibank, N.A.            (8,766     (8,766
2/23/15   Argentine Peso
1,000,000
  United States Dollar 95,831   Citibank, N.A.            (9,329     (9,329
2/23/15   United States Dollar
258,621
  Argentine Peso 3,000,000   Citibank, N.A.     56,860               56,860   
2/24/15   Argentine Peso
770,000
  United States Dollar 73,734   Citibank, N.A.            (7,132     (7,132
2/24/15   Argentine Peso
1,230,000
  United States Dollar 117,613   Citibank, N.A.            (11,561     (11,561
2/24/15   United States Dollar
172,414
  Argentine Peso 2,000,000   Citibank, N.A.     37,626               37,626   
2/25/15   Argentine Peso
1,000,000
  United States Dollar 95,547   Citibank, N.A.            (9,333     (9,333

 

  37  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

Forward Foreign Currency Exchange Contracts (continued)  
Settlement
Date
  Deliver   In Exchange For   Counterparty   Unrealized
Appreciation
    Unrealized
(Depreciation)
    Net Unrealized
Appreciation
(Depreciation)
 
2/25/15   Argentine Peso
2,000,000
  United States Dollar 192,604   Citibank, N.A.   $      $ (17,156   $ (17,156
2/25/15   Argentine Peso
2,000,000
  United States Dollar 191,681   Citibank, N.A.            (18,079     (18,079
2/25/15   United States Dollar
432,900
  Argentine Peso 5,000,000   Citibank, N.A.     91,501               91,501   
3/5/15   Kenyan Shilling
62,297,000
  United States Dollar 674,940   JPMorgan Chase Bank, N.A.            (3,470     (3,470
3/12/15   Russian Ruble
30,380,000
  United States Dollar 777,181   Bank of America, N.A.     94,534               94,534   
3/12/15   United States Dollar
772,144
  Russian Ruble 30,380,000   Credit Suisse International            (89,497     (89,497
3/13/15   Euro
256,884
  Serbian Dinar 32,560,000   Citibank, N.A.     13,672               13,672   
3/23/15   United States Dollar
1,076,807
  Zambian Kwacha 7,150,000   Standard Chartered Bank     3,196               3,196   
4/30/15   United States Dollar
710,900
  Uruguayan Peso 18,000,000   Citibank, N.A.            (6,015     (6,015
5/21/15   New Turkish Lira
8,058,000
  United States Dollar 3,360,599   BNP Paribas            (113,531     (113,531
5/21/15   United States Dollar
5,534,049
  New Turkish Lira 13,409,000   Standard Chartered Bank     247,113               247,113   
6/11/15   United States Dollar
309,444
  Zambian Kwacha 2,310,000   Standard Chartered Bank     29,012               29,012   
6/12/15   United States Dollar
191,934
  Zambian Kwacha 1,404,000   Citibank, N.A.     13,702               13,702   
6/12/15   United States Dollar
310,948
  Zambian Kwacha 2,186,900   Citibank, N.A.     9,355               9,355   
6/12/15   United States Dollar
127,284
  Zambian Kwacha 906,900   Citibank, N.A.     5,544               5,544   
6/15/15   United States Dollar
2,369,549
  Ugandan Shilling 6,570,760,006   Citibank, N.A.            (109,841     (109,841
6/17/15   United States Dollar
307,517
  Zambian Kwacha 2,265,000   Standard Chartered Bank     23,619               23,619   
6/18/15   United States Dollar
421,527
  Zambian Kwacha 3,084,300   Standard Chartered Bank     29,224               29,224   
6/18/15   United States Dollar
179,806
  Zambian Kwacha 1,311,000   Standard Chartered Bank     11,788               11,788   
6/25/15   United States Dollar
598,298
  Zambian Kwacha 4,253,900   Barclays Bank PLC     21,797               21,797   
7/24/15   United States Dollar
624,387
  Azerbaijani Manat 509,000   Standard Bank PLC     9,644               9,644   
10/8/15   United States Dollar
899,484
  Azerbaijani Manat 732,000   Standard Bank PLC     3,774               3,774   
                $ 2,810,986      $ (1,781,385   $ 1,029,601   

 

  38  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

 

Centrally Cleared Interest Rate Swaps                    
Counterparty   Notional
Amount
(000’s omitted)
    Fund
Pays/Receives
Floating Rate
  Floating
Rate Index
  Annual
Fixed Rate
    Termination
Date
  Net Unrealized
Appreciation
(Depreciation)
 
LCH.Clearnet     HUF 80,000      Pays   6-month HUF BUBOR     5.12   1/16/17   $ 31,953   
LCH.Clearnet     HUF 80,000      Receives   6-month HUF BUBOR     7.63      1/16/17     (56,311
                                $ (24,358

 

HUF     Hungarian Forint

 

Interest Rate Swaps                      
Counterparty   Notional
Amount
(000’s omitted)
    Fund
Pays/Receives
Floating Rate
  Floating Rate Index   Annual
Fixed Rate
    Termination
Date
    Net Unrealized
Appreciation
(Depreciation)
 
Bank of America, N.A.   HUF  139,000      Pays   6-month HUF BUBOR     5.13     12/21/16      $ 55,557   
Bank of America, N.A.   PLN  838      Pays   6-month PLN WIBOR     4.34        7/30/17        17,908   
Bank of America, N.A.   PLN  838      Receives   6-month PLN WIBOR     3.35        7/30/17        (10,726
Bank of America, N.A.   PLN  2,560      Pays   6-month PLN WIBOR     3.83        11/14/17        66,440   
Bank of America, N.A.   PLN  2,560      Receives   6-month PLN WIBOR     3.61        11/14/17        (59,544
Bank of America, N.A.   PLN  2,900      Receives   6-month PLN WIBOR     3.52        11/16/17        (64,310
Barclays Bank PLC   PLN  2,900      Pays   6-month PLN WIBOR     3.81        11/16/17        74,556   
Barclays Bank PLC   PLN  4,890      Pays   6-month PLN WIBOR     3.82        11/19/17        126,600   
Barclays Bank PLC   PLN  4,890      Receives   6-month PLN WIBOR     3.53        11/19/17        (109,163
BNP Paribas   PLN  2,147      Pays   6-month PLN WIBOR     4.25        8/7/17        44,153   
BNP Paribas   PLN  2,147      Receives   6-month PLN WIBOR     3.60        8/7/17        (32,105
BNP Paribas   PLN  400      Pays   6-month PLN WIBOR     3.85        11/13/17        10,476   
BNP Paribas   PLN  400      Receives   6-month PLN WIBOR     3.38        11/13/17        (8,258
Citibank, N.A.   PLN  2,130      Pays   6-month PLN WIBOR     3.82        11/19/17        54,918   
Citibank, N.A.   PLN  2,130      Receives   6-month PLN WIBOR     3.60        11/19/17        (49,362
Deutsche Bank AG   PLN  550      Pays   6-month PLN WIBOR     3.79        11/16/17        14,010   
Deutsche Bank AG   PLN  550      Receives   6-month PLN WIBOR     3.60        11/16/17        (12,746
JPMorgan Chase Bank, N.A.   HUF  139,000      Receives   6-month HUF BUBOR     7.36        12/21/16        (93,394
JPMorgan Chase Bank, N.A.   HUF  82,000      Pays   6-month HUF BUBOR     5.09        1/20/17        32,195   
JPMorgan Chase Bank, N.A.   HUF  82,000      Receives   6-month HUF BUBOR     7.75        1/20/17        (58,689
                                    $ (1,484

 

HUF     Hungarian Forint
PLN     Polish Zloty

 

Credit Default Swaps — Buy Protection  
Reference Entity   Counterparty    Notional
Amount
(000’s omitted)
     Contract
Annual
Fixed Rate*
    Termination
Date
     Market
Value
     Unamortized
Upfront
Payments
Received (Paid)
     Net Unrealized
Appreciation
(Depreciation)
 
China   Bank of America, N.A.    $ 500         1.00 %(1)      3/20/17       $ (8,598    $ (7,116    $ (15,714
China   Barclays Bank PLC      863         1.00 (1)      3/20/17         (14,840      (11,178      (26,018
China   Deutsche Bank AG      316         1.00 (1)      3/20/17         (5,434      (3,890      (9,324
China   Deutsche Bank AG      369         1.00 (1)      3/20/17         (6,345      (4,543      (10,888
Croatia   BNP Paribas      870         1.00 (1)      12/20/17         25,921         (36,749      (10,828

 

  39  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

Credit Default Swaps — Buy Protection (continued)  
Reference Entity   Counterparty    Notional
Amount
(000’s omitted)
     Contract
Annual
Fixed Rate*
    Termination
Date
     Market
Value
     Unamortized
Upfront
Payments
Received (Paid)
     Net Unrealized
Appreciation
(Depreciation)
 
Croatia   Citibank, N.A.    $ 1,500         1.00 %(1)      12/20/17       $ 44,691       $ (62,603    $ (17,912
Egypt   Bank of America, N.A.      1,400         1.00 (1)      9/20/15         8,348         (11,862      (3,514
Egypt   Citibank, N.A.      300         1.00 (1)      6/20/20         25,586         (18,744      6,842   
Egypt   Deutsche Bank AG      300         1.00 (1)      6/20/20         25,587         (16,667      8,920   
Egypt   Deutsche Bank AG      350         1.00 (1)      6/20/20         29,851         (21,972      7,879   
Egypt   Deutsche Bank AG      300         1.00 (1)      6/20/20         25,587         (18,859      6,728   
Guatemala   Citibank, N.A.      1,286         1.00 (1)      9/20/20         90,255         (58,137      32,118   
Lebanon   Barclays Bank PLC      500         1.00 (1)      12/20/14         (289      (1,033      (1,322
Lebanon   Barclays Bank PLC      100         1.00 (1)      3/20/15         40         (548      (508
Lebanon   Barclays Bank PLC      100         1.00 (1)      3/20/15         39         (626      (587
Lebanon   Barclays Bank PLC      300         1.00 (1)      3/20/15         119         (1,614      (1,495
Lebanon   Citibank, N.A.      350         1.00 (1)      12/20/14         (202      (709      (911
Lebanon   Citibank, N.A.      500         1.00 (1)      12/20/14         (289      (1,033      (1,322
Lebanon   Citibank, N.A.      1,000         1.00 (1)      12/20/14         (578      (2,098      (2,676
Lebanon   Citibank, N.A.      300         1.00 (1)      3/20/15         120         (1,438      (1,318
Lebanon   Credit Suisse International      200         1.00 (1)      3/20/15         80         (1,082      (1,002
Lebanon   Credit Suisse International      800         1.00 (1)      3/20/15         318         (4,301      (3,983
Lebanon   Credit Suisse International      100         1.00 (1)      6/20/15         138         (836      (698
Lebanon   Deutsche Bank AG      200         1.00 (1)      3/20/15         79         (998      (919
Lebanon   Deutsche Bank AG      100         1.00 (1)      6/20/15         138         (836      (698
Lebanon   HSBC Bank USA, N.A.      1,250         1.00 (1)      12/20/17         72,772         (111,676      (38,904
Philippines   Barclays Bank PLC      1,100         1.85        12/20/14         (4,829              (4,829
Philippines   Barclays Bank PLC      655         1.00 (1)      3/20/15         (2,914      (1,450      (4,364
Philippines   Citibank, N.A.      800         1.84        12/20/14         (3,492              (3,492
Philippines   JPMorgan Chase Bank, N.A.      656         1.00 (1)      3/20/15         (2,919      (1,452      (4,371
Thailand   Barclays Bank PLC      1,900         0.97        9/20/19         (18,827              (18,827
Thailand   Citibank, N.A.      1,600         0.86        12/20/14         (3,191              (3,191
Thailand   Citibank, N.A.      900         0.95        9/20/19         (8,049              (8,049
Thailand   JPMorgan Chase Bank, N.A.      800         0.87        12/20/14         (1,616              (1,616
Tunisia   Barclays Bank PLC      350         1.00 (1)      9/20/17         11,449         (18,567      (7,118
Tunisia   Citibank, N.A.      360         1.00 (1)      9/20/17         11,776         (20,014      (8,238
Tunisia   Deutsche Bank AG      500         1.00 (1)      6/20/17         14,098         (20,860      (6,762
Tunisia   Goldman Sachs International      300         1.00 (1)      9/20/17         9,813         (14,048      (4,235
Tunisia   Nomura International PLC      400         1.00 (1)      12/20/17         14,851         (25,672      (10,821
               $ 329,244       $ (503,211    $ (173,967

 

* The contract annual fixed rate represents the fixed rate of interest received by the Fund (as a seller of protection) or paid by the Fund (as a buyer of protection) annually on the notional amount of the credit default swap contract.

 

(1) 

Upfront payment is exchanged with the counterparty as a result of the standardized trading coupon.

 

  40  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

Written options activity for the year ended October 31, 2014 was as follows:

 

     Principal
Amount of
Contracts
(000’s omitted)
     Principal
Amount of
Contracts
(000’s omitted)
     Principal
Amount of
Contracts
(000’s omitted)
     Premiums
Received
 

Outstanding, beginning of year

    INR  225,360         COP                 —       GBP  10,151       $ 146,704   

Options written

    184,670         1,558,590                 14,639   

Options expired

    (410,030      (1,558,590      (10,151      (161,343

Outstanding, end of year

    INR             —         COP                 —       GBP             —       $   

 

COP     Colombian Peso
GBP     British Pound Sterling
INR     Indian Rupee

At October 31, 2014, the Fund had sufficient cash and/or securities to cover commitments under these contracts.

In the normal course of pursuing its investment objectives, the Fund is subject to the following risks:

Commodity Risk:  During the year ended October 31, 2014, the Fund invested in commodities-linked derivative investments, including commodity futures contracts, that provided exposure to the investment returns of certain commodities. Commodities-linked derivative investments were used to enhance total return and/or as a substitute for the purchase or sale of commodities.

Credit Risk:  The Fund enters into credit default swap contracts to manage certain investment risks and/or to enhance total return.

Foreign Exchange Risk: The Fund engages in forward foreign currency exchange contracts, currency options and total return swaps to enhance total return, to seek to hedge against fluctuations in currency exchange rates and/or as a substitute for the purchase or sale of securities or currencies.

Interest Rate Risk:  The Fund utilizes various interest rate derivatives including interest rate futures contracts and interest rate swaps to enhance total return, to seek to hedge against fluctuations in interest rates, and/or to change the effective duration of its portfolio.

The Fund enters into swap contracts (other than centrally cleared swaps), over-the-counter written options and forward foreign currency exchange contracts that may contain provisions whereby the counterparty may terminate the contract under certain conditions, including but not limited to a decline in the Fund’s net assets below a certain level over a certain period of time, which would trigger a payment by the Fund for those derivatives in a liability position. At October 31, 2014, the fair value of derivatives with credit-related contingent features in a net liability position was $2,362,094. The aggregate fair value of assets pledged as collateral by the Fund for such liability was $918,170 at October 31, 2014.

The over-the-counter (OTC) derivatives in which the Fund invests are subject to the risk that the counterparty to the contract fails to perform its obligations under the contract. The Fund is not subject to counterparty credit risk with respect to its written options as the Fund, not the counterparty, is obligated to perform under such derivatives. To mitigate this risk, the Fund (and Subsidiary) has entered into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with substantially all its derivative counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, set-off provisions in the event of a default and/or termination event as defined under the relevant ISDA Master Agreement. Under an ISDA Master Agreement, the Fund (and Subsidiary) may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy or insolvency. Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA Master Agreements, which would cause the counterparty to accelerate payment by the Fund of any net liability owed to it.

The collateral requirements for derivatives traded under an ISDA Master Agreement are governed by a Credit Support Annex to the ISDA Master Agreement. Collateral requirements are determined at the close of business each day and are typically based on changes in market values for each transaction under an ISDA Master Agreement and netted into one amount for such agreement. Generally, the amount of collateral due from or to a counterparty is subject to a minimum transfer threshold amount before a transfer is required, which may vary by counterparty. Collateral pledged for the benefit of the Fund (and Subsidiary) and/or counterparty is held in segregated accounts by the Fund’s custodian and cannot be sold, re-pledged, assigned or otherwise used while pledged. The portion of such collateral representing cash, if any, is reflected as restricted cash and, in the case of cash pledged by a counterparty for the benefit of the Fund, a corresponding liability on the Consolidated Statement of Assets and Liabilities. Securities pledged by the Fund as collateral, if any,

 

  41  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

are identified as such in the Consolidated Portfolio of Investments. The carrying amount of the liability for cash collateral due to brokers at October 31, 2014 approximated its fair value. If measured at fair value, such liability would have been considered as Level 2 in the fair value hierarchy (see Note 9) at October 31, 2014. Because the Subsidiary is not registered under the 1940 Act, it may not be able to negotiate terms with its counterparties that are equivalent to those a registered fund may negotiate. As a result, the Subsidiary may have greater exposure to those counterparties than a registered fund.

The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) by risk exposure at October 31, 2014 was as follows:

 

    Fair Value  
Consolidated Statement of Assets and Liabilities Caption   Credit     Foreign
Exchange
    Interest
Rate
    Total  

Net unrealized appreciation*

  $      $      $ 31,953      $ 31,953   

Receivable for open forward foreign currency exchange contracts

           2,810,986               2,810,986   

Receivable for open swap contracts; Premium paid on open swap contracts

    411,656               496,813        908,469   

Total Asset Derivatives

  $ 411,656      $ 2,810,986      $ 528,766      $ 3,751,408   

Derivatives not subject to master netting or similar agreements

  $      $      $ 31,953      $ 31,953   

Total Asset Derivatives subject to master netting or similar agreements

  $ 411,656      $ 2,810,986      $ 496,813      $ 3,719,455   
       
     Credit     Foreign
Exchange
    Interest
Rate
    Total  

Net unrealized appreciation*

  $      $      $ (56,311   $ (56,311

Payable for open forward foreign currency exchange contracts

           (1,781,385            (1,781,385

Payable for open swap contracts; Premium paid on open swap contracts

    (82,412            (498,297     (580,709

Total Liability Derivatives

  $ (82,412   $ (1,781,385   $ (554,608   $ (2,418,405

Derivatives not subject to master netting or similar agreements

  $      $      $ (56,311   $ (56,311

Total Liability Derivatives subject to master netting or similar agreements

  $ (82,412   $ (1,781,385   $ (498,297   $ (2,362,094

 

* Amount represents cumulative unrealized appreciation or (depreciation) on centrally cleared swap contracts in the Centrally Cleared Swaps Contracts table above. Only the current day’s variation margin on open centrally cleared swap contracts is reported within the Consolidated Statement of Assets and Liabilities as Receivable or Payable for variation margin, as applicable.

During the current reporting period, the Fund adopted the new disclosure requirements for offsetting assets and liabilities, pursuant to which an entity is required to disclose both gross and net information for assets and liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions that are eligible for offset or subject to an enforceable master netting or similar agreement. The Fund’s derivative assets and liabilities at fair value by risk, which are reported gross in the Consolidated Statement of Assets and Liabilities, are presented in the table above. The following tables present the Fund’s derivative assets and liabilities by counterparty, net of amounts available for offset under a

 

  42  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

master netting agreement and net of the related collateral received by the Fund (and Subsidiary) for assets and pledged by the Fund (and Subsidiary) for liabilities as of October 31, 2014.

 

Counterparty   Derivative
Assets Subject to
Master Netting
Agreement
     Derivatives
Available
for Offset
     Non-cash
Collateral
Received
(a)
     Cash
Collateral
Received
(a)
     Net Amount
of Derivative
Assets
(b)
 

Bank of America, N.A.

  $ 408,403       $ (145,888    $       $       $ 262,515   

Barclays Bank PLC

    242,680         (150,862                      91,818   

BNP Paribas

    225,375         (225,375                        

Citibank, N.A.

    635,013         (386,601              (248,412        

Credit Suisse International

    536         (536                        

Deutsche Bank AG

    290,029         (290,029                        

Goldman Sachs International

    323,164         (4,814                      318,350   

HSBC Bank USA, N.A.

    93,432                 (93,432                

JPMorgan Chase Bank, N.A.

    52,243         (52,243                        

Morgan Stanley & Co. International PLC

    603,638         (172,184      (319,224              112,230   

Nomura International PLC

    24,361                                 24,361   

Standard Bank PLC

    303,341         (151,801                      151,540   

Standard Chartered Bank

    517,240         (334,036                      183,204   
    $ 3,719,455       $ (1,914,369    $ (412,656    $ (248,412    $ 1,144,018   
             
Counterparty   Derivative
Liabilities Subject to
Master Netting
Agreement
     Derivatives
Available
for Offset
     Non-cash
Collateral
Pledged
(a)
     Cash
Collateral
Pledged
(a)
     Net Amount
of Derivative
Liabilities
(c)
 

Australia and New Zealand Banking Group Limited

  $ (50,953    $       $       $       $ (50,953

Bank of America, N.A.

    (145,888      145,888                           

Barclays Bank PLC

    (150,862      150,862                           

BNP Paribas

    (405,345      225,375         179,970                   

Citibank, N.A.

    (386,601      386,601                           

Credit Suisse International

    (89,497      536                         (88,961

Deutsche Bank AG

    (310,025      290,029         19,996                   

Goldman Sachs International

    (4,814      4,814                           

JPMorgan Chase Bank, N.A.

    (160,088      52,243         107,845                   

Morgan Stanley & Co. International PLC

    (172,184      172,184                           

Standard Bank PLC

    (151,801      151,801                           

Standard Chartered Bank

    (334,036      334,036                           
    $ (2,362,094    $ 1,914,369       $ 307,811       $       $ (139,914

 

(a) 

In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization.

 

(b) 

Net amount represents the net amount due from the counterparty in the event of default.

 

(c) 

Net amount represents the net amount payable to the counterparty in the event of default.

 

  43  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Consolidated Statement of Operations by risk exposure for the year ended October 31, 2014 was as follows:

 

Consolidated Statement of Operations Caption   Commodity      Credit      Foreign
Exchange
     Interest
Rate
 

Net realized gain (loss) —

          

Investment transactions

  $       $       $ (299,921    $   

Futures contracts

    (196,603                      (19,035

Written options

                    161,343           

Swap contracts

            (532,609      109,006         (88,751

Foreign currency and forward foreign currency exchange contract transactions

                    (139,933        

Total

  $ (196,603    $ (532,609    $ (169,505    $ (107,786

Change in unrealized appreciation (depreciation) —

          

Investments

  $       $       $ 281,529       $   

Futures contracts

    (3,454                      16,355   

Written options

                    (96,845        

Swap contracts

            (458,641      (16,138      96,939   

Foreign currency and forward foreign currency exchange contracts

                    1,164,479           

Total

  $ (3,454    $ (458,641    $ 1,333,025       $ 113,294   

The average notional amounts of derivative contracts outstanding during the year ended October 31, 2014, which are indicative of the volume of these derivative types, were as follows:

 

Futures
Contracts – Long
    Futures
Contracts – Short
    Forward
Foreign Currency
Exchange Contracts
    Swap
Contracts
 
  $544,000      $ 58,000      $ 139,232,000      $ 43,549,000   

The average principal amount of purchased currency options contracts outstanding during the year ended October 31, 2014, which is indicative of the volume of this derivative type, was approximately $8,453,000.

7  Credit Agreement

The Fund has entered into a Credit Agreement (the Agreement) with a bank to borrow up to a limit of $150 million pursuant to a 364-day revolving line of credit. Borrowings under the Agreement are secured by the assets of the Fund. Interest is charged at a rate above the London Interbank Offered Rate (LIBOR) and is payable monthly. Under the terms of the Agreement, the Fund pays a commitment fee of 0.15% on the borrowing limit. The Fund is required to maintain certain net asset levels during the term of the Agreement. At October 31, 2014, the Fund had borrowings outstanding under the Agreement of $128,000,000 at an interest rate of 0.92%. Based on the short-term nature of the borrowings under the Agreement and the variable interest rate, the carrying amount of the borrowings at October 31, 2014 approximated its fair value. If measured at fair value, borrowings under the Agreement would have been considered as Level 2 in the fair value hierarchy (see Note 9) at October 31, 2014. For the year ended October 31, 2014, the average borrowings under the Agreement and the average interest rate (excluding fees) were $98,276,712 and 0.93%, respectively.

8  Risks Associated with Foreign Investments

The Fund’s investments in foreign instruments can be adversely affected by changes in currency exchange rates and political, economic and market developments abroad. In emerging or less developed countries, these risks can be more significant. Investment markets in emerging market countries are typically substantially smaller, less liquid and more volatile than the major markets in developed countries. Emerging market countries may have relatively unstable governments and economies. Emerging market investments often are subject to speculative trading, which typically contributes to volatility.

 

  44  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Notes to Consolidated Financial Statements — continued

 

 

The Fund may have difficulties enforcing its legal or contractual rights in a foreign country. Economic data as reported by foreign governments and other issuers may be delayed, inaccurate or fraudulent. In the event of a default by a sovereign entity, there are typically no assets to be seized or cash flows to be attached. Furthermore, the willingness or ability of a foreign government to renegotiate defaulted debt may be limited.

9  Fair Value Measurements

Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

 

Ÿ  

Level 1 – quoted prices in active markets for identical investments

 

Ÿ  

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

Ÿ  

Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments)

In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

At October 31, 2014, the hierarchy of inputs used in valuing the Fund’s investments and open derivative instruments, which are carried at value, were as follows:

 

Asset Description   Level 1      Level 2      Level 3*      Total  

Senior Floating-Rate Interests (Less Unfunded Loan Commitments)

  $         —       $ 167,362,335       $ 20,662       $ 167,382,997   

Collateralized Mortgage Obligations

            63,792,529                 63,792,529   

Commercial Mortgage-Backed Securities

            21,764,370                 21,764,370   

Mortgage Pass-Throughs

            75,290,754                 75,290,754   

Asset-Backed Securities

            11,841,651                 11,841,651   

Corporate Bonds & Notes

            3,084,224                 3,084,224   

Foreign Corporate Bonds

            728,546                 728,546   

Foreign Government Bonds

            32,528,058                 32,528,058   

U.S. Treasury Obligations

            9,752,340                 9,752,340   

Common Stocks

            570,136         683,763         1,253,899   

Short-Term Investments —

          

Foreign Government Securities

            32,285,324                 32,285,324   

U.S. Treasury Obligations

            3,000,006                 3,000,006   

Other

            6,172,400                 6,172,400   

Total Investments

  $       $ 428,172,673       $ 704,425       $ 428,877,098   

Forward Foreign Currency Exchange Contracts

  $       $ 2,810,986       $       $ 2,810,986   

Swap Contracts

            940,422                 940,422   

Total

  $       $ 431,924,081       $ 704,425       $ 432,628,506   

Liability Description

                                  

Forward Foreign Currency Exchange Contracts

  $       $ (1,781,385    $       $ (1,781,385

Swap Contracts

            (637,020              (637,020

Total

  $       $ (2,418,405    $       $ (2,418,405

 

* None of the unobservable inputs for Level 3 assets, individually or collectively, had a material impact on the Fund.

Level 3 investments at the beginning and/or end of the period in relation to net assets were not significant and accordingly, a reconciliation of Level 3 assets for the year ended October 31, 2014 is not presented.

At October 31, 2014, there were no investments transferred between Level 1 and Level 2 during the year then ended.

 

  45  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Report of Independent Registered Public Accounting Firm

 

 

To the Trustees and Shareholders of Eaton Vance Short Duration Diversified Income Fund:

We have audited the accompanying consolidated statement of assets and liabilities of Eaton Vance Short Duration Diversified Income Fund and subsidiary (the “Fund”), including the consolidated portfolio of investments, as of October 31, 2014, and the related consolidated statements of operations and cash flows for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits 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 and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities and senior loans owned as of October 31, 2014, by correspondence with the custodian, brokers and selling or agent banks; where replies were not received from brokers and selling or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements and consolidated financial highlights referred to above present fairly, in all material respects, the financial position of Eaton Vance Short Duration Diversified Income Fund and subsidiary as of October 31, 2014, the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts

December 17, 2014

 

  46  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Federal Tax Information (Unaudited)

 

 

The Form 1099-DIV you receive in February 2015 will show the tax status of all distributions paid to your account in calendar year 2014. Shareholders are advised to consult their own tax adviser with respect to the tax consequences of their investment in the Fund. As required by the Internal Revenue Code and/or regulations, shareholders must be notified regarding the status of qualified dividend income for individuals.

Qualified Dividend Income.  For the fiscal year ended October 31, 2014, the Fund designates approximately $156,293, or up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code, as qualified dividend income eligible for the reduced tax rate of 15%.

 

  47  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Dividend Reinvestment Plan

 

 

The Fund offers a dividend reinvestment plan (Plan) pursuant to which shareholders may elect to have distributions automatically reinvested in common shares (Shares) of the Fund. You may elect to participate in the Plan by completing the Dividend Reinvestment Plan Application Form. If you do not participate, you will receive all distributions in cash paid by check mailed directly to you by American Stock Transfer & Trust Company, LLC (AST) as dividend paying agent. On the distribution payment date, if the NAV per Share is equal to or less than the market price per Share plus estimated brokerage commissions, then new Shares will be issued. The number of Shares shall be determined by the greater of the NAV per Share or 95% of the market price. Otherwise, Shares generally will be purchased on the open market by AST, the Plan agent (Agent). Distributions subject to income tax (if any) are taxable whether or not Shares are reinvested.

If your Shares are in the name of a brokerage firm, bank, or other nominee, you can ask the firm or nominee to participate in the Plan on your behalf. If the nominee does not offer the Plan, you will need to request that the Fund’s transfer agent re-register your Shares in your name or you will not be able to participate.

The Agent’s service fee for handling distributions will be paid by the Fund. Plan participants will be charged their pro rata share of brokerage commissions on all open-market purchases.

Plan participants may withdraw from the Plan at any time by writing to the Agent at the address noted on the following page. If you withdraw, you will receive Shares in your name for all Shares credited to your account under the Plan. If a participant elects by written notice to the Agent to sell part or all of his or her Shares and remit the proceeds, the Agent is authorized to deduct a $5.00 fee plus brokerage commissions from the proceeds.

If you wish to participate in the Plan and your Shares are held in your own name, you may complete the form on the following page and deliver it to the Agent. Any inquiries regarding the Plan can be directed to the Agent at 1-866-439-6787.

 

  48  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Application for Participation in Dividend Reinvestment Plan

 

 

 

This form is for shareholders who hold their common shares in their own names. If your common shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it will participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank, or nominee is unable to participate on your behalf, you should request that your common shares be re-registered in your own name which will enable your participation in the Plan.

The following authorization and appointment is given with the understanding that I may terminate it at any time by terminating my participation in the Plan as provided in the terms and conditions of the Plan.

 

 

Please print exact name on account:

 

Shareholder signature                                                           Date

 

Shareholder signature                                                           Date

Please sign exactly as your common shares are registered. All persons whose names appear on the share certificate must sign.

YOU SHOULD NOT RETURN THIS FORM IF YOU WISH TO RECEIVE YOUR DISTRIBUTIONS IN CASH. THIS IS NOT A PROXY.

This authorization form, when signed, should be mailed to the following address:

Eaton Vance Short Duration Diversified Income Fund

c/o American Stock Transfer & Trust Company, LLC

P.O. Box 922

Wall Street Station

New York, NY 10269-0560

 

 

Number of Employees

The Fund is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a closed-end management investment company and has no employees.

Number of Shareholders

As of October 31, 2014, Fund records indicate that there are 9 registered shareholders and approximately 10,683 shareholders owning the Fund shares in street name, such as through brokers, banks, and financial intermediaries.

If you are a street name shareholder and wish to receive Fund reports directly, which contain important information about the Fund, please write or call:

Eaton Vance Distributors, Inc.

Two International Place

Boston, MA 02110

1-800-262-1122

New York Stock Exchange symbol

The New York Stock Exchange symbol is EVG.

 

  49  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Management and Organization

 

 

Fund Management.  The Trustees of Eaton Vance Short Duration Diversified Income Fund (the Fund) are responsible for the overall management and supervision of the Fund’s affairs. The Trustees and officers of the Fund are listed below. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. The “Noninterested Trustees” consist of those Trustees who are not “interested persons” of the Fund, as that term is defined under the 1940 Act. The business address of each Trustee and officer is Two International Place, Boston, Massachusetts 02110. As used below, “EVC” refers to Eaton Vance Corp., “EV” refers to Eaton Vance, Inc., “EVM” refers to Eaton Vance Management, “BMR” refers to Boston Management and Research and “EVD” refers to Eaton Vance Distributors, Inc. EVC and EV are the corporate parent and trustee, respectively, of EVM and BMR. EVD is a wholly-owned subsidiary of EVC. Each officer affiliated with Eaton Vance may hold a position with other Eaton Vance affiliates that is comparable to his or her position with EVM listed below. Each Trustee oversees 180 portfolios in the Eaton Vance Complex (including all master and feeder funds in a master feeder structure). Each officer serves as an officer of certain other Eaton Vance funds. Each Trustee serves for a three year term. Each officer serves until his or her successor is elected.

 

Name and Year of Birth   

Position(s)

with the

Fund

    

Term Expiring;

Trustee Since(1)

    

Principal Occupation(s) and Directorships

During Past Five Years and Other Relevant Experience

Interested Trustee

Thomas E. Faust Jr.

1958

  

Class I

Trustee

    

Until 2015.

Trustee since 2007.

    

Chairman, Chief Executive Officer and President of EVC, Director and President of EV, Chief Executive Officer and President of EVM and BMR, and Director of EVD. Trustee and/or officer of 180 registered investment companies. Mr. Faust is an interested person because of his positions with EVM, BMR, EVD, EVC and EV, which are affiliates of the Fund.

Directorships in the Last Five Years.(2) Director of EVC and Hexavest Inc.

            

Noninterested Trustees

Scott E. Eston

1956

  

Class I

Trustee

    

Until 2015.

Trustee since 2011.

    

Private investor. Formerly held various positions at Grantham, Mayo, Van Otterloo and Co., L.L.C. (investment management firm) (1997-2009), including Chief Operating Officer (2002-2009), Chief Financial Officer (1997-2009) and Chairman of the Executive Committee (2002-2008); President and Principal Executive Officer, GMO Trust (open-end registered investment company) (2006-2009). Former Partner, Coopers and Lybrand L.L.P. (now PricewaterhouseCoopers) (public accounting firm) (1987-1997).

Directorships in the Last Five Years.(2) None.

Cynthia E. Frost(3)

1961

  

Class I

Trustee

    

Until 2015.

Trustee since 2014.

    

Private investor. Formerly, Chief Investment Officer of Brown University (university endowment) (2000-2012); Portfolio Strategist for Duke Management Company (university endowment manager) (1995-2000); Managing Director, Cambridge Associates (1989-1995); Consultant, Bain and Company (1987-1989); Senior Equity Analyst, BA Investment Management Company (1983-1985).

Directorships in the Last Five Years. None.

George J. Gorman(3)

1952

  

Class II

Trustee

    

Until 2016.

Trustee since 2014.

    

Principal at George J. Gorman LLC (consulting firm). Formerly, Senior Partner at Ernst & Young LLP (public accounting firm) (1974-2009).

Directorships in the Last Five Years. Formerly, Trustee of the Bank of America Money Market Funds Series Trust (2011-2014) and of the Ashmore Funds (2010-2014).

Valerie A. Mosley(4)

1960

  

Class III

Trustee

    

Until 2017.

Trustee since 2014.

    

Chairwoman and Chief Executive Officer of Valmo Ventures (a consulting and investment firm). Former Partner and Senior Vice President, Portfolio Manager and Investment Strategist at Wellington Management Company, LLP (investment management firm) (1992-2012). Former Chief Investment Officer, PG Corbin Asset Management (1990-1992). Formerly worked in institutional corporate bond sales at Kidder Peabody (1986-1990).

Directorships in the Last Five Years.(2) Director of Dynex Capital, Inc. (mortgage REIT) (since 2013).

William H. Park

1947

  

Class II

Trustee

    

Until 2016.

Trustee since 2003.

    

Consultant and private investor. Formerly, Chief Financial Officer, Aveon Group L.P. (investment management firm) (2010-2011). Formerly, Vice Chairman, Commercial Industrial Finance Corp. (specialty finance company) (2006-2010). Formerly, President and Chief Executive Officer, Prizm Capital Management, LLC (investment management firm) (2002-2005). Formerly, Executive Vice President and Chief Financial Officer, United Asset Management Corporation (investment management firm) (1982-2001). Formerly, Senior Manager, Price Waterhouse (now PricewaterhouseCoopers) (an independent registered public accounting firm) (1972-1981).

Directorships in the Last Five Years.(2) None.

 

  50  


Eaton Vance

Short Duration Diversified Income Fund

October 31, 2014

 

Management and Organization — continued

 

 

Name and Year of Birth   

Position(s)

with the

Fund

    

Term Expiring;

Trustee Since(1)

    

Principal Occupation(s) and Directorships

During Past Five Years and Other Relevant Experience

Noninterested Trustees (continued)

Ronald A. Pearlman

1940

  

Class II

Trustee

    

Until 2016.

Trustee since 2003.

    

Lawyer and consultant. Formerly, Professor of Law, Georgetown University Law Center (1999-2014). Formerly, Partner, Covington & Burling LLP (law firm) (1991-2000). Formerly, Chief of Staff, Joint Committee on Taxation, U.S. Congress (1988-1990). Formerly, Deputy Assistant Secretary (Tax Policy) and Assistant Secretary (Tax Policy), U.S. Department of the Treasury (1983-1985).

Directorships in the Last Five Years.(2) None.

Helen Frame Peters

1948

  

Class III

Trustee

    

Until 2017.

Trustee since 2008.

    

Professor of Finance, Carroll School of Management, Boston College. Formerly, Dean, Carroll School of Management, Boston College (2000-2002). Formerly, Chief Investment Officer, Fixed Income, Scudder Kemper Investments (investment management firm) (1998-1999). Formerly, Chief Investment Officer, Equity and Fixed Income, Colonial Management Associates (investment management firm) (1991-1998).

Directorships in the Last Five Years.(2) Formerly, Director of BJ’s Wholesale Club, Inc. (wholesale club retailer) (2004-2011). Formerly, Trustee of SPDR Index Shares Funds and SPDR Series Trust (exchange traded funds) (2000-2009). Formerly, Director of Federal Home Loan Bank of Boston (a bank for banks) (2007-2009).

Harriett Tee Taggart

1948

  

Class II

Trustee

    

Until 2016.

Trustee since 2011.

    

Managing Director, Taggart Associates (a professional practice firm). Formerly, Partner and Senior Vice President, Wellington Management Company, LLP (investment management firm) (1983-2006).

Directorships in the Last Five Years.(2) Director of Albemarle Corporation (chemicals manufacturer) (since 2007) and The Hanover Group (specialty property and casualty insurance company) (since 2009). Formerly, Director of Lubrizol Corporation (specialty chemicals) (2007-2011).

Ralph F. Verni

1943

  

Chairman of the Board and

Class III

Trustee

    

Until 2017.

Trustee since 2005 and Chairman since 2007.

    

Consultant and private investor. Formerly, Chief Investment Officer (1982-1992), Chief Financial Officer (1988-1990) and Director (1982-1992), New England Life. Formerly, Chairperson, New England Mutual Funds (1982-1992). Formerly, President and Chief Executive Officer, State Street Management & Research (1992-2000). Formerly, Chairperson, State Street Research Mutual Funds (1992-2000). Formerly, Director, W.P. Carey, LLC (1998-2004) and First Pioneer Farm Credit Corp. (2002-2006).

Directorships in the Last Five Years.(2) None.

            

Principal Officers who are not Trustees

Name and Year of Birth   

Position(s)
with the

Fund

     Officer
Since
(5)
    

Principal Occupation(s)

During Past Five Years

Payson F. Swaffield

1956

   President      2003      Vice President and Chief Income Investment Officer of EVM and BMR.

Maureen A. Gemma

1960

   Vice President, Secretary and Chief Legal Officer      2005      Vice President of EVM and BMR.

James F. Kirchner

1967

   Treasurer      2007      Vice President of EVM and BMR.

Paul M. O’Neil

1953

   Chief Compliance Officer      2004      Vice President of EVM and BMR.

 

(1) 

Year first appointed to serve as Trustee for a fund in the Eaton Vance family of funds. Each Trustee has served continuously since appointment unless indicated otherwise. Each Trustee holds office until the annual meeting for the year in which his or her term expires and until his or her successor is elected and qualified, subject to a prior death, resignation, retirement, disqualification or removal.

(2) 

During their respective tenures, the Trustees (except for Ms. Frost and Mr. Gorman) also served as Board members of one or more of the following funds (which operated in the years noted): eUnitsTM 2 Year U.S. Market Participation Trust: Upside to Cap / Buffered Downside (launched in 2012 and terminated in 2014); eUnitsTM 2 Year U.S. Market Participation Trust II: Upside to Cap / Buffered Downside (launched in 2012 and terminated in 2014); Eaton Vance Credit Opportunities Fund (launched in 2005 and terminated in 2010); Eaton Vance Insured Florida Plus Municipal Bond Fund (launched in 2002 and terminated in 2009); and Eaton Vance National Municipal Income Trust (launched in 1998 and terminated in 2009). However, Ms. Mosley did not serve as a Board member of eUnitsTM 2 Year U.S. Market Participation Trust: Upside to Cap / Buffered Downside (launched in 2012 and terminated in 2014).

(3) 

Ms. Frost and Mr. Gorman began serving as Trustees effective May 29, 2014.

(4) 

Ms. Mosley began serving as a Trustee effective January 1, 2014.

(5) 

Year first elected to serve as officer of a fund in the Eaton Vance family of funds when the officer has served continuously. Otherwise, year of most recent election as an officer of a fund in the Eaton Vance family of funds. Titles may have changed since initial election.

 

  51  


Eaton Vance Funds

 

IMPORTANT NOTICES

 

 

Privacy.  The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy Policy”) with respect to nonpublic personal information about its customers:

 

Ÿ  

Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions.

 

Ÿ  

None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker-dealers.

 

Ÿ  

Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information.

 

Ÿ  

We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com.

Our pledge of privacy applies to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.

Delivery of Shareholder Documents.  The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called “householding” and it helps eliminate duplicate mailings to shareholders. Eaton Vance, or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-262-1122, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will be effective within 30 days of receipt by Eaton Vance or your financial advisor.

Portfolio Holdings.  Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-262-1122 or in the EDGAR database on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC’s public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).

Proxy Voting.  From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-262-1122 and by accessing the SEC’s website at www.sec.gov.

Share Repurchase Program.  The Fund’s Board of Trustees has approved a share repurchase program authorizing the Fund to repurchase up to 10% of its outstanding common shares as of the approved date in open-market transactions at a discount to net asset value. The repurchase program does not obligate the Fund to purchase a specific amount of shares. The Fund’s repurchase activity, including the number of shares purchased, average price and average discount to net asset value, is disclosed in the Fund’s annual and semi-annual reports to shareholders.

Additional Notice to Shareholders.  If applicable, a Fund may also redeem or purchase its outstanding preferred shares in order to maintain compliance with regulatory requirements, borrowing or rating agency requirements or for other purposes as it deems appropriate or necessary.

Closed-End Fund Information.  Eaton Vance closed-end funds make fund performance data and certain information about portfolio characteristics available on the Eaton Vance website shortly after the end of each month. Other information about the funds is available on the website. The funds’ net asset value per share is readily accessible on the Eaton Vance website. Portfolio holdings for the most recent month-end are also posted to the website approximately 30 days following the end of the month. This information is available at www.eatonvance.com on the fund information pages under “Individual Investors — Closed-End Funds”.

 

  52  


Investment Adviser and Administrator

Eaton Vance Management

Two International Place

Boston, MA 02110

Custodian

State Street Bank and Trust Company

State Street Financial Center, One Lincoln Street

Boston, MA 02111

Transfer Agent

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

200 Berkeley Street

Boston, MA 02116-5022

Fund Offices

Two International Place

Boston, MA 02110

 


LOGO

 

2319    10.31.14    


Item 2. Code of Ethics

The registrant has adopted a code of ethics applicable to its Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-262-1122.

Item 3. Audit Committee Financial Expert

The registrant’s Board has designated William H. Park, an independent trustee, as its audit committee financial expert. Mr. Park is a certified public accountant who is a consultant and private investor. Previously, he served as the Chief Financial Officer of Aveon Group, L.P. (an investment management firm), as the Vice Chairman of Commercial Industrial Finance Corp. (specialty finance company), as President and Chief Executive Officer of Prizm Capital Management, LLC (investment management firm), as Executive Vice President and Chief Financial Officer of United Asset Management Corporation (an institutional investment management firm) and as a Senior Manager at Price Waterhouse (now PricewaterhouseCoopers) (an independent registered public accounting firm).

Item 4. Principal Accountant Fees and Services

(a) –(d)

The following table presents the aggregate fees billed to the registrant for the registrant’s fiscal years ended October 31, 2013 and October 31, 2014 by the registrant’s principal accountant, Deloitte & Touche LLP (“D&T”), for professional services rendered for the audit of the registrant’s annual financial statements and fees billed for other services rendered by D&T during such periods.

 

Fiscal Years Ended

   10/31/13      10/31/14  

Audit Fees

   $ 95,110       $ 115,442   

Audit-Related Fees(1)

   $ 0       $ 0   

Tax Fees(2)

   $ 40,050       $ 41,340   

All Other Fees(3)

   $ 0       $ 0   
  

 

 

    

 

 

 

Total

   $ 135,160         156,782   
  

 

 

    

 

 

 

 

(1)  Audit-related fees consist of the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under the category of audit fees.
(2)  Tax fees consist of the aggregate fees billed for professional services rendered by the principal accountant relating to tax compliance, tax advice, and tax planning and specifically include fees for tax return preparation and other related tax compliance/planning matters.
(3)  All other fees consist of the aggregate fees billed for products and services provided by the principal accountant other than audit, audit-related, and tax services.

(e)(1) The registrant’s audit committee has adopted policies and procedures relating to the pre-approval of services provided by the registrant’s principal accountant (the “Pre-Approval Policies”). The Pre-Approval Policies establish a framework intended to assist the audit committee in the proper discharge of its pre-approval responsibilities. As a general matter, the Pre-Approval Policies (i) specify certain types of audit, audit-related, tax, and other services determined to be pre-approved by the audit committee; and (ii) delineate specific procedures governing the mechanics of the pre-approval process, including the approval and monitoring of audit and non-audit service fees. Unless a service is specifically pre-approved under the Pre-Approval Policies, it must be separately pre-approved by the audit committee.

The Pre-Approval Policies and the types of audit and non-audit services pre-approved therein must be reviewed and ratified by the registrant’s audit committee at least annually. The registrant’s audit committee maintains full responsibility for the appointment, compensation, and oversight of the work of the registrant’s principal accountant.

(e)(2) No services described in paragraphs (b)-(d) above were approved by the registrant’s audit committee pursuant to the “de minimis exception” set forth in Rule 2-01 (c)(7)(i)(C) of Regulation S-X.


(f) Not applicable.

(g) The following table presents (i) the aggregate non-audit fees (i.e., fees for audit-related, tax, and other services) billed to the registrant by D&T for the registrant’s fiscal years ended October 31, 2013 and October 31, 2014; and (ii) the aggregate non-audit fees (i.e., fees for audit-related, tax, and other services) billed to the Eaton Vance organization by D&T for the same time periods.

 

Fiscal Years Ended

   10/31/13      10/31/14  

Registrant

   $ 40,050       $ 41,340   

Eaton Vance(1)

   $ 526,385       $ 99,750   

 

(1)  The investment adviser to the registrant, as well as any of its affiliates that provide ongoing services to the registrant, are subsidiaries of Eaton Vance Corp.

(h) The registrant’s audit committee has considered whether the provision by the registrant’s principal accountant of non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants

The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities and Exchange Act of 1934, as amended. William H. Park (Chair), Scott E. Eston, Ronald A. Pearlman, Helen Frame Peters and Ralph F. Verni are the members of the registrant’s audit committee.

Item 6. Schedule of Investments

Please see schedule of investments contained in the Report to Stockholders included under Item 1 of this Form N-CSR.

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

The Board of Trustees of the Trust has adopted a proxy voting policy and procedure (the “Fund Policy”), pursuant to which the Trustees have delegated proxy voting responsibility to the Fund’s investment adviser and adopted the investment adviser’s proxy voting policies and procedures (the “Policies”) which are described below. The Trustees will review the Fund’s proxy voting records from time to time and will annually consider approving the Policies for the upcoming year. In the event that a conflict of interest arises between the Fund’s shareholders and the investment adviser, the administrator, or any of their affiliates or any affiliate of the Fund, the investment adviser will generally refrain from voting the proxies related to the companies giving rise to such conflict until it consults with the Board’s Special Committee except as contemplated under the Fund Policy. The Board’s Special Committee will instruct the investment adviser on the appropriate course of action.


The Policies are designed to promote accountability of a company’s management to its shareholders and to align the interests of management with those shareholders. An independent proxy voting service (“Agent”), currently Institutional Shareholder Services, Inc., has been retained to assist in the voting of proxies through the provision of vote analysis, implementation and recordkeeping and disclosure services. The investment adviser will generally vote proxies through the Agent. The Agent is required to vote all proxies and/or refer them back to the investment adviser pursuant to the Policies. It is generally the policy of the investment adviser to vote in accordance with the recommendation of the Agent. The Agent shall refer to the investment adviser proxies relating to mergers and restructurings, and the disposition of assets, termination, liquidation and mergers contained in mutual fund proxies. The investment adviser will normally vote against anti-takeover measures and other proposals designed to limit the ability of shareholders to act on possible transactions, except in the case of closed-end management investment companies. The investment adviser generally supports management on social and environmental proposals. The investment adviser may abstain from voting from time to time where it determines that the costs associated with voting a proxy outweighs the benefits derived from exercising the right to vote or the economic effect on shareholders interests or the value of the portfolio holding is indeterminable or insignificant.

In addition, the investment adviser will monitor situations that may result in a conflict of interest between the Fund’s shareholders and the investment adviser, the administrator, or any of their affiliates or any affiliate of the Fund by maintaining a list of significant existing and prospective corporate clients. The investment adviser’s personnel responsible for reviewing and voting proxies on behalf of the Fund will report any proxy received or expected to be received from a company included on that list to the personnel of the investment adviser identified in the Policies. If such personnel expects to instruct the Agent to vote such proxies in a manner inconsistent with the guidelines of the Policies or the recommendation of the Agent, the personnel will consult with members of senior management of the investment adviser to determine if a material conflict of interests exists. If it is determined that a material conflict does exist, the investment adviser will seek instruction on how to vote from the Special Committee.

Information on how the Fund voted proxies relating to portfolio securities during the most recent 12 month period ended June 30 is available (1) without charge, upon request, by calling 1-800-262-1122, and (2) on the Securities and Exchange Commission’s website at http://www.sec.gov.

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

Catherine M. McDermott, Scott H. Page, Eric A. Stein, Payson F. Swaffield and Andrew Szczurowski and other Eaton Vance Management (“EVM” of “Eaton Vance”) investment professionals comprise the investment team responsible for the overall and day-to-day management of the Fund’s investments as well as allocations among the Fund’s three principal investment categories.

Ms. McDermott has been an EVM portfolio manager since 2008. Mr. Page has been an EVM portfolio manager since 1996 and is Co-Director of EVM’s Bank Loan Investment Group. Mr. Stein has been an EVM portfolio manager since 2009 and is Co-Director of EVM’s Global Income Group. Mr. Swaffield has been an EVM portfolio manager since 1996 and is Chief Income Investment Officer. Mr. Szczurowski has been an analyst since 2008 and an EVM portfolio manager since 2011. Ms. McDermott and Messrs. Page, Stein, Swaffield and Szczurowski are Vice Presidents of EVM. This information is provided as of the date of filing of this report.


The following table shows, as of the Fund’s most recent fiscal year end, the number of accounts each portfolio manager managed in each of the listed categories and the total assets (in millions of dollars), in the accounts managed within each category. The table also shows the number of accounts with respect to which the advisory fee is based on the performance of the account, if any, and the total assets (in millions of dollars) in those accounts.

 

     Number of
All Accounts
    Total Assets of All
Accounts
   

Number of
Accounts

Paying a
Performance
Fee

     Total Assets of
Accounts Paying
a Performance
Fee
 

Catherine C. McDermott

         

Registered Investment Companies

     2      $ 3,551.4        0       $ 0   

Other Pooled Investment Vehicles

     0      $ 0        0       $ 0   

Other Accounts

     0      $ 0        0       $ 0   

Scott H. Page

         

Registered Investment Companies

     18      $ 32,381.3        0       $ 0   

Other Pooled Investment Vehicles

     8      $ 11,005.4 (1)      1       $ 143.9   

Other Accounts

     3      $ 1,901.6        0       $ 0   

Eric A. Stein(2)

         

Registered Investment Companies

     14 (3)    $ 19,256.7        0       $ 0   

Other Pooled Investment Vehicles

     3      $ 435.9        1       $ 21.1   

Other Accounts

     0      $ 0        0       $ 0   

Payson F. Swaffield

         

Registered Investment Companies

     2      $ 3,551.4        0       $ 0   

Other Pooled Investment Vehicles

     0      $ 0        0       $ 0   

Other Accounts

     0      $ 0        0       $ 0   

Andrew Szczurowski(2)

         

Registered Investment Companies

     6      $ 6,623.5        0       $ 0   

Other Pooled Investment Vehicles

     1      $ 378.6        0       $ 0   

Other Accounts

     0      $ 0        0       $ 0   

 

(1) Certain of these “Other Pooled Investment Vehicles” invest a substantial portion of their assets either in a registered investment company or in a separate pooled investment vehicle managed by this portfolio manager or another Eaton Vance portfolio manager.
(2) This portfolio manager serves as portfolio manager of one or more registered investment companies and pooled investment vehicles that invest or may invest in one or more underlying registered investment companies in the Eaton Vance family of funds. The underlying investment companies may be managed by this portfolio manager or another portfolio manager.
(3) This portfolio manager provides investment advice with respect to only a portion of the total assets of certain of these accounts. Only the assets allocated to this portfolio manager as of the Fund’s most recent fiscal year end are reflected in the table.


The following table shows the dollar range of Fund shares beneficially owned by each portfolio manager as of the Fund’s most recent fiscal year end.

 

Portfolio Manager   

Dollar Range of
Equity Securities

Owned in the Fund

Catherine C. McDermott

   None

Scott H. Page

   None

Eric A. Stein

   $1 - $10,000

Payson F. Swaffield

   None

Andrew Szczurowski

   None

Potential for Conflicts of Interest. It is possible that conflicts of interest may arise in connection with a portfolio manager’s management of the Fund’s investments on the one hand and investments of other accounts for which a portfolio manager is responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among the Fund and other accounts he or she advises. In addition, due to differences in the investment strategies or restrictions between the Fund and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to the Fund. In some cases, another account managed by a portfolio manager may compensate the investment adviser based on the performance of the securities held by that account. The existence of such a performance based fee may create additional conflicts of interest for a portfolio manager in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, a portfolio manager will endeavor to exercise his or her discretion in a manner that he or she believes is equitable to all interested persons. EVM has adopted several policies and procedures designed to address these potential conflicts including a code of ethics and policies which govern the investment adviser’s trading practices, including among other things the aggregation and allocation of trades among clients, brokerage allocation, cross trades and best execution.

Compensation Structure for EVM

Compensation of EVM’s portfolio managers and other investment professionals has three primary components: (1) a base salary, (2) an annual cash bonus, and (3) annual stock-based compensation consisting of options to purchase shares of EVC’s nonvoting common stock and/or restricted shares of EVC’s nonvoting common stock. EVM’s investment professionals also receive certain retirement, insurance and other benefits that are broadly available to EVM’s employees. Compensation of EVM’s investment professionals is reviewed primarily on an annual basis. Cash bonuses, stock-based compensation awards, and adjustments in base salary are typically paid or put into effect at or shortly after the October 31st fiscal year end of EVC.

Method to Determine Compensation. EVM compensates its portfolio managers based primarily on the scale and complexity of their portfolio responsibilities and the total return performance of managed funds and accounts versus the benchmark(s) stated in the prospectus, as well as an appropriate peer group (as described below). In addition to rankings within peer groups of funds on the basis of absolute performance, consideration may also be given to relative risk-adjusted performance. Risk-adjusted performance measures include, but are not limited to, the Sharpe Ratio. Performance is


normally based on periods ending on the September 30th preceding fiscal year end. Fund performance is normally evaluated primarily versus peer groups of funds as determined by Lipper Inc. and/or Morningstar, Inc. When a fund’s peer group as determined by Lipper or Morningstar is deemed by EVM’s management not to provide a fair comparison, performance may instead be evaluated primarily against a custom peer group or market index. In evaluating the performance of a fund and its manager, primary emphasis is normally placed on three-year performance, with secondary consideration of performance over longer and shorter periods. For funds that are tax-managed or otherwise have an objective of after-tax returns, performance is measured net of taxes. For other funds, performance is evaluated on a pre-tax basis. For funds with an investment objective other than total return (such as current income), consideration will also be given to the fund’s success in achieving its objective. For managers responsible for multiple funds and accounts, investment performance is evaluated on an aggregate basis, based on averages or weighted averages among managed funds and accounts. Funds and accounts that have performance-based advisory fees are not accorded disproportionate weightings in measuring aggregate portfolio manager performance.

The compensation of portfolio managers with other job responsibilities (such as heading an investment group or providing analytical support to other portfolios) will include consideration of the scope of such responsibilities and the managers’ performance in meeting them.

EVM seeks to compensate portfolio managers commensurate with their responsibilities and performance, and competitive with other firms within the investment management industry. EVM participates in investment-industry compensation surveys and utilizes survey data as a factor in determining salary, bonus and stock-based compensation levels for portfolio managers and other investment professionals. Salaries, bonuses and stock-based compensation are also influenced by the operating performance of EVM and its parent company. The overall annual cash bonus pool is based on a substantially fixed percentage of pre-bonus operating income. While the salaries of EVM’s portfolio managers are comparatively fixed, cash bonuses and stock-based compensation may fluctuate significantly from year to year, based on changes in manager performance and other factors as described herein. For a high performing portfolio manager, cash bonuses and stock-based compensation may represent a substantial portion of total compensation.

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

REGISTRANT PURCHASES OF EQUITY SECURITIES

 

Period*

   Total Number of
Shares Purchased
     Average Price
Paid per Share
     Total Number of
Shares Purchased
as Part of Publicly
Announced
Programs
     Maximum
Number of
Shares that May
Yet Be
Purchased Under
the Programs
 

November 2013

     —           —           —           1,888,660   

December 2013

     56,000       $ 15.18         56,000         1,832,660   

January 2014

     —           —           —           1,832,660   

February 2014

     —           —           —           1,832,660   

March 2014

     —           —           —           1,832,660   

April 2014

     —           —           —           1,832,660   

May 2014

     —           —           —           1,832,660   

June 2014

     —           —           —           1,832,660   

July 2014

     —           —           —           1,832,660   

August 2014

     —           —           —           1,832,660   

September 2014

     149,000       $ 14.80         149,000         1,683,660   

October 2014

     79,100       $ 14.63         79,100         1,604,560   

Total

     284,100       $ 14.83         284,100      

 

* On November 11, 2013, the Fund’s Board of Trustees approved a share repurchase program authorizing the Fund to repurchase up to 10% of its then currently outstanding common shares in open-market transactions at a discount to net asset value. The repurchase program was announced on November 15, 2013.


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

No Material Changes.

Item 11. Controls and Procedures

(a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.

(b) There have been no changes in the registrant’s internal controls over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits

(a)(1)   Registrant’s Code of Ethics – Not applicable (please see Item 2).
(a)(2)(i)   Treasurer’s Section 302 certification.
(a)(2)(ii)   President’s Section 302 certification.
(b)   Combined Section 906 certification.
(c)   Registrant’s notices to shareholders pursuant to Registrant’s exemptive order granting an exemption from Section 19(b) of the 1940 Act and Rule 19b-1 thereunder regarding distributions paid pursuant to the Registrant’s Managed Distribution Plan.


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.

Eaton Vance Short Duration Diversified Income Fund

 

 
By:  

/s/ Payson F. Swaffield

  Payson F. Swaffield
  President
Date: December 11, 2014

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/ James F. Kirchner

  James F. Kirchner
  Treasurer
Date: December 11, 2014
By:  

/s/ Payson F. Swaffield

  Payson F. Swaffield
  President
Date: December 11, 2014