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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: 811-21832
Eaton Vance Tax-Managed Diversified Equity 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, 2020
Date of Reporting Period
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| Item 1. | Reports to Stockholders |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund (ETY)
Annual Report
October 31, 2020
Important Note. Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (funds.eatonvance.com/closed-end-fund-and-term-trust-documents.php), and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. If you hold shares at the Fund’s transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you may elect to receive shareholder reports and other communications from the Fund electronically by contacting AST. If you own your shares through a financial intermediary (such as a broker-dealer or bank), you must contact your financial intermediary to sign up.
You may elect to receive all future Fund shareholder reports in paper free of charge. If you hold shares at AST, you can inform AST that you wish to continue receiving paper copies of your shareholder reports by calling 1-866-439-6787. If you own these shares through a financial intermediary, you must contact your financial intermediary or follow instructions included with this disclosure, if applicable, to elect to continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with AST or to all funds held through your financial intermediary, as applicable.
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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 investment adviser has claimed an exclusion from the definition of “commodity pool operator” under the Commodity Exchange Act with respect to its management of the Fund. Accordingly, neither the Fund nor the adviser with respect to the operation of the Fund is subject to CFTC regulation. Because of its management of other strategies, the Fund’s adviser is registered with the CFTC as a commodity pool operator. The adviser is also registered as a commodity trading advisor.
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 $0.0843 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.
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Annual Report October 31, 2020
Eaton Vance
Tax-Managed Diversified Equity Income Fund
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Management’s Discussion of Fund Performance1
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated net of management fees and other expenses by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested in accordance with the Fund’s Dividend Reinvestment Plan. Performance at market price will differ from performance at NAV due to variations in the Fund’s market price versus NAV, which may reflect factors such as fluctuations in supply and demand for Fund shares, changes in Fund distributions, shifting market expectations for the Fund’s future returns and distribution rates, and other considerations affecting the trading prices of closed-end funds. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance for periods less than or equal to 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.
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Portfolio Managers Michael A. Allison, CFA and G.R. Nelson
| % Average Annual Total Returns | Inception Date | One Year | Five Years | Ten Years | ||||||||||||
| Fund at NAV |
11/30/2006 | 7.02 | % | 8.57 | % | 9.57 | % | |||||||||
| Fund at Market Price |
— | –5.01 | 7.39 | 8.85 | ||||||||||||
|
| ||||||||||||||||
| S&P 500® Index |
— | 9.71 | % | 11.70 | % | 13.00 | % | |||||||||
| Cboe S&P 500 BuyWrite IndexSM |
— | –10.93 | 2.98 | 5.43 | ||||||||||||
| % Premium/Discount to NAV3 | ||||||||||||||||
| –10.86 | % | |||||||||||||||
| Distributions4 | ||||||||||||||||
| Total Distributions per share for the period |
$ | 1.012 | ||||||||||||||
| Distribution Rate at NAV |
8.72 | % | ||||||||||||||
| Distribution Rate at Market Price |
9.78 | % | ||||||||||||||
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated net of management fees and other expenses by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested in accordance with the Fund’s Dividend Reinvestment Plan. Performance at market price will differ from performance at NAV due to variations in the Fund’s market price versus NAV, which may reflect factors such as fluctuations in supply and demand for Fund shares, changes in Fund distributions, shifting market expectations for the Fund’s future returns and distribution rates, and other considerations affecting the trading prices of closed-end funds. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance for periods less than or equal to 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.
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
See Endnotes and Additional Disclosures in this report.
| 4 |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Endnotes and Additional Disclosures
| 5 |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
| 6 | See Notes to Financial Statements. |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Portfolio of Investments — continued
| 7 | See Notes to Financial Statements. |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Portfolio of Investments — continued
| Written Call Options — (0.2)% | ||||||||||||||||||||
| Exchange-Traded Options — (0.2)% | ||||||||||||||||||||
| Description | Number of Contracts |
Notional Amount |
Exercise Price |
Expiration Date |
Value | |||||||||||||||
| S&P 500 Index | 214 | $ | 69,977,144 | $ | 3,425 | 11/2/20 | $ | (4,815 | ) | |||||||||||
| S&P 500 Index | 214 | 69,977,144 | 3,500 | 11/4/20 | (29,960 | ) | ||||||||||||||
| S&P 500 Index | 212 | 69,323,152 | 3,460 | 11/6/20 | (119,780 | ) | ||||||||||||||
| S&P 500 Index | 213 | 69,650,148 | 3,500 | 11/9/20 | (79,875 | ) | ||||||||||||||
| S&P 500 Index | 212 | 69,323,152 | 3,510 | 11/11/20 | (109,180 | ) | ||||||||||||||
| S&P 500 Index | 212 | 69,323,152 | 3,460 | 11/13/20 | (383,720 | ) | ||||||||||||||
| S&P 500 Index | 210 | 68,669,160 | 3,500 | 11/16/20 | (180,600 | ) | ||||||||||||||
| S&P 500 Index | 212 | 69,323,152 | 3,490 | 11/18/20 | (318,000 | ) | ||||||||||||||
| S&P 500 Index | 212 | 69,323,152 | 3,450 | 11/20/20 | (604,200 | ) | ||||||||||||||
| S&P 500 Index | 211 | 68,996,156 | 3,525 | 11/23/20 | (276,410 | ) | ||||||||||||||
| S&P 500 Index | 219 | 71,612,124 | 3,450 | 11/25/20 | (663,570 | ) | ||||||||||||||
| S&P 500 Index | 217 | 70,958,132 | 3,415 | 11/27/20 | (1,020,985 | ) | ||||||||||||||
| Total |
|
$ | (3,791,095 | ) | ||||||||||||||||
Abbreviations:
| ADR | – | American Depositary Receipt | ||
| 8 | See Notes to Financial Statements. |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Statement of Assets and Liabilities
| Assets | October 31, 2020 | |||
| Unaffiliated investments, at value (identified cost, $1,154,504,705) |
$ | 1,744,550,348 | ||
| Affiliated investment, at value (identified cost, $17,537,671) |
17,537,671 | |||
| Dividends receivable |
2,407,749 | |||
| Dividends receivable from affiliated investment |
2,235 | |||
| Receivable for premiums on written options |
926,402 | |||
| Tax reclaims receivable |
26,078 | |||
| Total assets |
$ | 1,765,450,483 | ||
| Liabilities |
| |||
| Written options outstanding, at value (premiums received, $17,519,311) |
$ | 3,791,095 | ||
| Payable to affiliates: |
||||
| Investment adviser fee |
1,551,431 | |||
| Trustees’ fees |
7,809 | |||
| Accrued expenses |
472,509 | |||
| Total liabilities |
$ | 5,822,844 | ||
| Net Assets |
$ | 1,759,627,639 | ||
| Sources of Net Assets |
| |||
| Common shares, $0.01 par value, unlimited number of shares authorized, 151,717,016 shares issued and outstanding |
$ | 1,517,170 | ||
| Additional paid-in capital |
1,218,187,352 | |||
| Distributable earnings |
539,923,117 | |||
| Net Assets |
$ | 1,759,627,639 | ||
| Net Asset Value |
| |||
| ($1,759,627,639 ÷ 151,717,016 common shares issued and outstanding) |
$ | 11.60 | ||
| 9 | See Notes to Financial Statements. |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Statement of Operations
| Investment Income | Year Ended October 31, 2020 |
|||
| Dividends (net foreign taxes, $162,039) |
$ | 32,968,718 | ||
| Dividends from affiliated investment |
192,300 | |||
| Total investment income |
$ | 33,161,018 | ||
| Expenses | ||||
| Investment adviser fee |
$ | 17,604,925 | ||
| Trustees’ fees and expenses |
93,157 | |||
| Custodian fee |
454,831 | |||
| Transfer and dividend disbursing agent fees |
18,839 | |||
| Legal and accounting services |
144,913 | |||
| Printing and postage |
549,104 | |||
| Miscellaneous |
226,980 | |||
| Total expenses |
$ | 19,092,749 | ||
| Net investment income |
$ | 14,068,269 | ||
| Realized and Unrealized Gain (Loss) | ||||
| Net realized gain (loss) — |
| |||
| Investment transactions |
$ | 41,568,914 | ||
| Investment transactions — affiliated investment |
(11,487 | ) | ||
| Written options |
(106,738,084 | ) | ||
| Foreign currency transactions |
105,027 | |||
| Net realized loss |
$ | (65,075,630 | ) | |
| Change in unrealized appreciation (depreciation) — |
| |||
| Investments |
$ | 143,839,245 | ||
| Investments — affiliated investment |
(621 | ) | ||
| Written options |
18,584,361 | |||
| Foreign currency |
(5,620 | ) | ||
| Net change in unrealized appreciation (depreciation) |
$ | 162,417,365 | ||
| Net realized and unrealized gain |
$ | 97,341,735 | ||
| Net increase in net assets from operations |
$ | 111,410,004 | ||
| 10 | See Notes to Financial Statements. |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Statements of Changes in Net Assets
| Year Ended October 31, | ||||||||
| Increase (Decrease) in Net Assets | 2020 | 2019 | ||||||
| From operations — |
||||||||
| Net investment income |
$ | 14,068,269 | $ | 15,065,428 | ||||
| Net realized gain (loss) |
(65,075,630 | ) | 90,237,036 | |||||
| Net change in unrealized appreciation (depreciation) |
162,417,365 | 48,062,137 | ||||||
| Net increase in net assets from operations |
$ | 111,410,004 | $ | 153,364,601 | ||||
| Distributions to shareholders |
$ | (14,097,789 | ) | $ | (97,061,994 | ) | ||
| Tax return of capital to shareholders |
$ | (139,158,730 | ) | $ | (54,494,528 | ) | ||
| Capital share transactions — |
||||||||
| Proceeds from shelf offering, net of offering costs (see Note 5) |
$ | 16,857,924 | $ | 1,882,126 | ||||
| Reinvestment of distributions |
2,252,483 | 3,118,883 | ||||||
| Net increase in net assets from capital share transactions |
$ | 19,110,407 | $ | 5,001,009 | ||||
| Net increase (decrease) in net assets |
$ | (22,736,108 | ) | $ | 6,809,088 | |||
| Net Assets | ||||||||
| At beginning of year |
$ | 1,782,363,747 | $ | 1,775,554,659 | ||||
| At end of year |
$ | 1,759,627,639 | $ | 1,782,363,747 | ||||
| 11 | See Notes to Financial Statements. |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Financial Highlights
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Net asset value — Beginning of year |
$ | 11.870 | $ | 11.860 | $ | 11.960 | $ | 11.140 | $ | 12.010 | ||||||||||
| Income (Loss) From Operations | ||||||||||||||||||||
| Net investment income(1) |
$ | 0.093 | $ | 0.101 | $ | 0.082 | $ | 0.100 | $ | 0.119 | ||||||||||
| Net realized and unrealized gain |
0.648 | 0.921 | 0.830 | 1.732 | 0.023 | |||||||||||||||
| Total income from operations |
$ | 0.741 | $ | 1.022 | $ | 0.912 | $ | 1.832 | $ | 0.142 | ||||||||||
| Less Distributions | ||||||||||||||||||||
| From net investment income |
$ | (0.093 | ) | $ | (0.100 | ) | $ | (0.081 | ) | $ | (0.096 | ) | $ | (0.095 | ) | |||||
| From net realized gain |
— | (0.548 | ) | (0.486 | ) | (0.285 | ) | (0.071 | ) | |||||||||||
| Tax return of capital |
(0.919 | ) | (0.364 | ) | (0.445 | ) | (0.631 | ) | (0.846 | ) | ||||||||||
| Total distributions |
$ | (1.012 | ) | $ | (1.012 | ) | $ | (1.012 | ) | $ | (1.012 | ) | $ | (1.012 | ) | |||||
| Premium from common shares sold through shelf offering (see Note 5)(1) |
$ | 0.001 | $ | 0.000 | (2) | $ | — | $ | — | $ | — | |||||||||
| Net asset value — End of year |
$ | 11.600 | $ | 11.870 | $ | 11.860 | $ | 11.960 | $ | 11.140 | ||||||||||
| Market value — End of year |
$ | 10.340 | $ | 11.920 | $ | 11.460 | $ | 11.640 | $ | 10.290 | ||||||||||
| Total Investment Return on Net Asset Value(3) |
7.02 | % | 9.24 | % | 7.75 | % | 17.51 | % | 1.98 | % | ||||||||||
| Total Investment Return on Market Value(3) |
(5.01 | )% | 13.53 | % | 6.98 | % | 23.81 | % | 0.04 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of year (000’s omitted) |
$ | 1,759,628 | $ | 1,782,364 | $ | 1,775,555 | $ | 1,787,846 | $ | 1,665,148 | ||||||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||||||||||
| Expenses |
1.08 | % | 1.07 | % | 1.07 | % | 1.08 | % | 1.08 | % | ||||||||||
| Net investment income |
0.80 | % | 0.86 | % | 0.66 | % | 0.86 | % | 1.05 | % | ||||||||||
| Portfolio Turnover |
40 | % | 57 | % | 48 | % | 75 | % | 86 | % | ||||||||||
| (1) | Computed using average shares outstanding. |
| (2) | Amount is less than $0.0005. |
| (3) | 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. |
| 12 | See Notes to Financial Statements. |
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Notes to Financial Statements
1 Significant Accounting Policies
Eaton Vance Tax-Managed Diversified Equity 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 current income and gains, with a secondary objective of capital appreciation.
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.
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 ask prices 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 ask prices.
Derivatives. U.S. exchange-traded options are valued at the mean between the bid and ask prices at valuation time as reported by the Options Price Reporting Authority. Non U.S. exchange-traded options and over-the-counter options 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.
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. The daily valuation of exchange-traded foreign securities generally is determined as of the close of trading on the principal exchange on which such securities trade. Events occurring after the close of trading on foreign exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange. When valuing foreign equity securities that meet certain criteria, the Fund’s Trustees have approved the use of a fair value service that values such securities to reflect market trading that occurs after the close of the applicable foreign markets of comparable securities or other instruments that have a strong correlation to the fair-valued securities.
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). While Cash Reserves Fund is not a registered money market mutual fund, it conducts all of its investment activities in accordance with the requirements of Rule 2a-7 under the 1940 Act. Investments in Cash Reserves Fund are valued at the closing net asset value per unit on the valuation day. Cash Reserves Fund generally values its investment securities based on available market quotations provided by a third party pricing service.
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 most fairly reflects the security’s “fair value”, which is 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 statements, 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 — Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. However, if the ex-dividend date has passed, certain dividends from foreign securities are recorded as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends and capital gains have been provided for in accordance with the Fund’s understanding of the applicable countries’ tax rules and rates. In consideration of recent decisions rendered by European courts, the Fund has filed additional tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Due to the uncertainty as to the ultimate resolution of these proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment, no amounts are reflected in the Fund’s financial statements for such outstanding reclaims.
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.
As of October 31, 2020, 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.
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Notes to Financial Statements — continued
E 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.
F Use of Estimates — The preparation of the 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 financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
G 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, upon request by the shareholder, 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.
H Written Options — Upon the writing of a call or a put option, the premium received by the Fund is included in the 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 exercise 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 exercise 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.
2 Distributions to Shareholders and Income Tax Information
Subject to its Managed Distribution Plan, the Fund makes monthly distributions from its cash available for distribution, which consists of the Fund’s dividends and interest income after payment of Fund expenses, net option premiums and net realized and unrealized gains on stock investments. The Fund intends to distribute all or substantially all of its net realized capital gains. 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 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. Distributions in any year may include a substantial return of capital component.
The tax character of distributions declared for the years ended October 31, 2020 and October 31, 2019 was as follows:
| Year Ended October 31, | ||||||||
| 2020 | 2019 | |||||||
| Ordinary income |
$ | 14,097,789 | $ | 14,918,353 | ||||
| Long-term capital gains |
$ | — | $ | 82,143,641 | ||||
| Tax return of capital |
$ | 139,158,730 | $ | 54,494,528 | ||||
During the year ended October 31, 2020, distributable earnings was increased by $1,358 and paid-in capital was decreased by $1,358 due to differences between book and tax accounting. These reclassifications had no effect on the net assets or net asset value per share of the Fund.
As of October 31, 2020, the components of distributable earnings (accumulated loss) on a tax basis were as follows:
| Deferred capital losses |
$ | (47,844,352 | ) | |
| Net unrealized appreciation |
$ | 587,767,469 | ||
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Notes to Financial Statements — continued
At October 31, 2020, the Fund, for federal income tax purposes, had deferred capital losses of $47,844,352 which would 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 would 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 deferred capital losses are treated as arising on the first day of the Fund’s next taxable year and retain the same short-term or long-term character as when originally deferred. Of the deferred capital losses at October 31, 2020, $47,844,352 are short-term.
The cost and unrealized appreciation (depreciation) of investments, including open derivative contracts, of the Fund at October 31, 2020, as determined on a federal income tax basis, were as follows:
| Aggregate cost |
$ | 1,174,315,581 | ||
| Gross unrealized appreciation |
$ | 631,989,608 | ||
| Gross unrealized depreciation |
(44,217,170 | ) | ||
| Net unrealized appreciation |
$ | 587,772,438 | ||
3 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by EVM, a wholly-owned subsidiary of Eaton Vance Corp., as compensation for management and investment advisory services rendered to the Fund. Pursuant to the investment advisory agreement and subsequent fee reduction agreement, the fee is computed at an annual rate of 1.00% of the Fund’s average daily gross assets up to and including $1.5 billion, 0.98% over $1.5 billion up to and including $3 billion and at reduced rates on daily gross assets over $3 billion, and is payable monthly. Gross assets as referred to herein represent net assets plus obligations attributable to investment leverage, if any. The fee reduction cannot be terminated without the consent of a majority of Trustees and a majority of shareholders. For the year ended October 31, 2020, the Fund’s investment adviser fee amounted to $17,604,925 or 1.00% of the Fund’s average daily gross 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, 2020, 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, aggregated $699,982,456 and $917,261,610, respectively, for the year ended October 31, 2020.
5 Common Shares of Beneficial Interest and Shelf Offering
Common shares issued by the Fund pursuant to its dividend reinvestment plan for the years ended October 31, 2020 and October 31, 2019 were 186,395 and 262,676, respectively.
In August 2012, the Board of Trustees initially approved a share repurchase program for the Fund. Pursuant to the reauthorization of the share repurchase program by the Board of Trustees in March 2019, the Fund is authorized to repurchase up to 10% of its common shares outstanding as of the last day of the prior calendar year at market prices when shares are trading at a discount to net asset value. The share repurchase program does not obligate the Fund to purchase a specific amount of shares. There were no repurchases of common shares by the Fund for the years ended October 31, 2020 and October 31, 2019.
Pursuant to a registration statement filed with and declared effective on May 9, 2019 by the SEC, the Fund is authorized to issue up to an additional 22,462,218 common shares through an equity shelf offering program (the “shelf offering”). Under the shelf offering, the Fund, subject to market conditions, may raise additional capital from time to time and in varying amounts and offering methods at a net price at or above the Fund’s net asset value per common share.
During the years ended October 31, 2020 and October 31, 2019, the Fund sold 1,361,759 and 158,062 common shares, respectively, and received proceeds (net of offering costs) of $16,857,924 and $1,882,126, respectively, through its shelf offering. The net proceeds in excess of the net asset value of the shares sold were $139,775 for the year ended October 31, 2020 and $15,939 for the year ended October 31, 2019. Offering costs (other than the applicable sales commissions) incurred in connection with the shelf offering were borne directly by EVM. Eaton Vance Distributors, Inc. (EVD), an affiliate of EVM, is the distributor of the Fund’s shares and is entitled to receive a sales commission from the Fund of 1.00% of the gross sales price per share, a
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Notes to Financial Statements — continued
portion of which is re-allowed to sales agents. The Fund was informed that the sales commissions retained by EVD during the years ended October 31, 2020 and October 31, 2019 were $34,057 and $3,802, respectively.
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 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, 2020 is included in the Portfolio of Investments. At October 31, 2020, the Fund had sufficient cash and/or securities to cover commitments under these contracts.
The Fund is subject to equity price risk in the normal course of pursuing its investment objectives. The Fund writes index call options above the current value of the index to generate premium income. In writing index call options, the Fund in effect, sells potential appreciation in the value of the applicable index above the exercise price in exchange for the option premium received. The Fund retains the risk of loss, minus the premium received, should the value of the underlying index decline.
The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) and whose primary underlying risk exposure is equity price risk at October 31, 2020 was as follows:
| Fair Value | ||||||||
| Derivative | Asset Derivative | Liability Derivative(1) | ||||||
| Written options |
$ | — | $ | (3,791,095 | ) | |||
| (1) | Statement of Assets and Liabilities location: Written options outstanding, at value. |
The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Statement of Operations and whose primary underlying risk exposure is equity price risk for the year ended October 31, 2020 was as follows:
| Derivative | Realized Gain (Loss) on Derivatives Recognized in Income(1) |
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income(2) |
||||||
| Written options |
$ | (106,738,084 | ) | $ | 18,584,361 | |||
| (1) | Statement of Operations location: Net realized gain (loss) – Written options. |
| (2) | Statement of Operations location: Change in unrealized appreciation (depreciation) – Written options. |
The average number of written options contracts outstanding during the year ended October 31, 2020, which is indicative of the volume of this derivative type, was 2,694 contracts.
7 Investments in Affiliated Funds
At October 31, 2020, the value of the Fund’s investment in affiliated funds was $17,537,671, which represents 1.0% of the Fund’s net assets. Transactions in affiliated funds by the Fund for the year ended October 31, 2020 were as follows:
| Name of affiliated fund | Value, beginning of period |
Purchases | Sales proceeds | Net realized gain (loss) |
Change in unrealized appreciation (depreciation) |
Value, end of period |
Dividend income |
Units, end of period |
||||||||||||||||||||||||
| Short-Term Investments |
| |||||||||||||||||||||||||||||||
| Eaton Vance Cash Reserves Fund, LLC |
$ | 15,233,398 | $ | 484,257,143 | $ | (481,940,762 | ) | $ | (11,487 | ) | $ | (621 | ) | $ | 17,537,671 | $ | 192,300 | 17,537,671 | ||||||||||||||
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Notes to Financial Statements — continued
8 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.
| • | Level 1 – quoted prices in active markets for identical investments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | 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, 2020, 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 | ||||||||||||
| Common Stocks |
||||||||||||||||
| Communication Services |
$ | 192,733,594 | $ | — | $ | — | $ | 192,733,594 | ||||||||
| Consumer Discretionary |
233,941,030 | — | — | 233,941,030 | ||||||||||||
| Consumer Staples |
146,461,944 | — | — | 146,461,944 | ||||||||||||
| Energy |
33,594,664 | — | — | 33,594,664 | ||||||||||||
| Financials |
173,910,042 | — | — | 173,910,042 | ||||||||||||
| Health Care |
234,246,881 | 23,414,598 | — | 257,661,479 | ||||||||||||
| Industrials |
118,781,587 | — | — | 118,781,587 | ||||||||||||
| Information Technology |
439,753,408 | — | — | 439,753,408 | ||||||||||||
| Materials |
41,491,157 | — | — | 41,491,157 | ||||||||||||
| Real Estate |
42,756,856 | — | — | 42,756,856 | ||||||||||||
| Utilities |
63,464,587 | — | — | 63,464,587 | ||||||||||||
| Total Common Stocks |
$ | 1,721,135,750 | $ | 23,414,598 | * | $ | — | $ | 1,744,550,348 | |||||||
| Short-Term Investments |
$ | — | $ | 17,537,671 | $ | — | $ | 17,537,671 | ||||||||
| Total Investments |
$ | 1,721,135,750 | $ | 40,952,269 | $ | — | $ | 1,762,088,019 | ||||||||
| Liability Description |
||||||||||||||||
| Written Call Options |
$ | (3,791,095 | ) | $ | — | $ | — | $ | (3,791,095 | ) | ||||||
| Total |
$ | (3,791,095 | ) | $ | — | $ | — | $ | (3,791,095 | ) | ||||||
| * | Includes foreign equity securities whose values were adjusted to reflect market trading of comparable securities or other correlated instruments that occurred after the close of trading in their applicable foreign markets. |
9 Risks and Uncertainties
Pandemic Risk
An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December 2019 and subsequently spread internationally. This coronavirus has resulted in closing borders, enhanced health screenings, changes to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general concern and uncertainty. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political, social and economic risks and disrupt normal market conditions and operations. The impact of this outbreak has negatively affected the worldwide economy, the economies of individual countries, individual companies, and the market in general, and may continue to do so in significant and unforeseen ways, as may other epidemics and pandemics that may arise in the future. Any such impact could adversely affect the Fund’s performance, or the performance of the securities in which the Fund invests.
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Notes to Financial Statements — continued
10 Additional Information
On October 8, 2020, Morgan Stanley and Eaton Vance Corp. (“Eaton Vance”) announced that they had entered into a definitive agreement under which Morgan Stanley would acquire Eaton Vance. Under the Investment Company Act of 1940, as amended, consummation of this transaction may be deemed to result in the automatic termination of an Eaton Vance Fund’s investment advisory agreement, and, where applicable, any related sub-advisory agreement. On November 10, 2020, the Fund’s Board approved a new investment advisory agreement. The new investment advisory agreement will be presented to Fund shareholders for approval, and, if approved, would take effect upon consummation of the transaction. Shareholders of record of the Fund at the close of business on October 29, 2020 who have voting power with respect to such shares are entitled to be present and vote at a joint special meeting of shareholders to be held on January 7, 2021 and at any adjournments or postponements thereof.
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders of Eaton Vance Tax-Managed Diversified Equity Income Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of Eaton Vance Tax-Managed Diversified Equity Income Fund (the “Fund”), including the portfolio of investments, as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
December 17, 2020
We have served as the auditor of one or more Eaton Vance investment companies since 1959.
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Federal Tax Information (Unaudited)
The Form 1099-DIV you receive in February 2021 will show the tax status of all distributions paid to your account in calendar year 2020. 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 and the dividends received deduction for corporations.
Qualified Dividend Income. For the fiscal year ended October 31, 2020, the Fund designates approximately $31,980,536, 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%.
Dividends Received Deduction. Corporate shareholders are generally entitled to take the dividends received deduction on the portion of the Fund’s dividend distribution that qualifies under tax law. For the Fund’s fiscal 2020 ordinary income dividends, 100% qualifies for the corporate dividends received deduction.
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Annual Meeting of Shareholders (Unaudited)
The Fund held its Annual Meeting of Shareholders on August 13, 2020. The following action was taken by the shareholders:
Proposal 1: The election of George J. Gorman, William H. Park, Keith Quinton and Susan J. Sutherland as Class II Trustees of the Fund for a three-year term expiring in 2023.
| Nominee for Trustee |
Number of Shares | |||||||
| For | Withheld | |||||||
| George J. Gorman |
130,130,671 | 5,250,069 | ||||||
| William H. Park |
130,062,077 | 5,318,663 | ||||||
| Keith Quinton |
130,282,988 | 5,097,752 | ||||||
| Susan J. Sutherland |
130,400,986 | 4,979,754 | ||||||
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
The Fund offers a dividend reinvestment plan (Plan) pursuant to which shareholders automatically have distributions reinvested in common shares (Shares) of the Fund unless they elect otherwise through their investment dealer. 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 American Stock Transfer & Trust Company, LLC, 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.
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
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 Tax-Managed Diversified Equity Income Fund
c/o American Stock Transfer & Trust Company, LLC
P.O. Box 922
Wall Street Station
New York, NY 10269-0560
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Fund Management. The Trustees of Eaton Vance Tax-Managed Diversified Equity 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. 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 143 portfolios (with the exception of Messrs. Faust and Wennerholm and Ms. Frost who oversee 142 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.
| Name and Year of Birth | Fund Position(s) |
Term Expiring. Trustee Since(1) |
Principal Occupation(s) and Other Directorships During Past Five Years and Other Relevant Experience | |||
| Interested Trustee | ||||||
| Thomas E. Faust Jr. 1958 |
Class I Trustee |
Until 2022. 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 142 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. Other Directorships in the Last Five Years. Director of EVC and Hexavest Inc. (investment management firm). | |||
| Noninterested Trustees | ||||||
| Mark R. Fetting 1954 |
Class III Trustee |
Until 2021. Trustee since 2016. |
Private investor. Formerly held various positions at Legg Mason, Inc. (investment management firm) (2000-2012), including President, Chief Executive Officer, Director and Chairman (2008-2012), Senior Executive Vice President (2004-2008) and Executive Vice President (2001-2004). Formerly, President of Legg Mason family of funds (2001-2008). Formerly, Division President and Senior Officer of Prudential Financial Group, Inc. and related companies (investment management firm) (1991-2000). Other Directorships in the Last Five Years. None. | |||
| Cynthia E. Frost 1961 |
Class I Trustee |
Until 2022. Trustee since 2014. |
Private investor. Formerly, Chief Investment Officer of Brown University (university endowment) (2000-2012). Formerly, Portfolio Strategist for Duke Management Company (university endowment manager) (1995-2000). Formerly, Managing Director, Cambridge Associates (investment consulting company) (1989-1995). Formerly, Consultant, Bain and Company (management consulting firm) (1987-1989). Formerly, Senior Equity Analyst, BA Investment Management Company (1983-1985). Other Directorships in the Last Five Years. None. | |||
| George J. Gorman 1952 |
Class II Trustee |
Until 2023. Trustee since 2014. |
Principal at George J. Gorman LLC (consulting firm). Formerly, Senior Partner at Ernst & Young LLP (a registered public accounting firm) (1974-2009). Other Directorships in the Last Five Years. Formerly, Trustee of the BofA Funds Series Trust (11 funds) (2011-2014) and of the Ashmore Funds (9 funds) (2010-2014). | |||
| Valerie A. Mosley 1960 |
Class III Trustee |
Until 2021. 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). Other Directorships in the Last Five Years. Director of DraftKings, Inc. (digital sports entertainment and gaming company) (since September 2020). Director of Groupon, Inc. (e-commerce provider) (since April 2020). Director of Envestnet, Inc. (provider of intelligent systems for wealth management and financial wellness) (since 2018). Formerly, Director of Dynex Capital, Inc. (mortgage REIT) (2013-2020). | |||
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Management and Organization — continued
| Name and Year of Birth | Fund Position(s) |
Term Expiring. Trustee Since(1) |
Principal Occupation(s) and Other Directorships During Past Five Years and Other Relevant Experience | |||
| Noninterested Trustees (continued) | ||||||
| William H. Park 1947 |
Chairperson of the Board and Class II Trustee |
Until 2023. Chairperson of the Board since 2016 and Trustee since 2003. |
Private investor. Formerly, Consultant (management and transactional) (2012-2014). 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) (a registered public accounting firm) (1972-1981). Other Directorships in the Last Five Years. None. | |||
| Helen Frame Peters 1948 |
Class III Trustee |
Until 2021. 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). Other Directorships in the Last Five Years. None. | |||
| Keith Quinton 1958 |
Class II Trustee |
Until 2023. Trustee since 2018. |
Private investor, researcher and lecturer. Independent Investment Committee Member at New Hampshire Retirement System (since 2017). Formerly, Portfolio Manager and Senior Quantitative Analyst at Fidelity Investments (investment management firm) (2001-2014). Other Directorships in the Last Five Years. Director (since 2016) and Chairman (since 2019) of New Hampshire Municipal Bond Bank. | |||
| Marcus L. Smith 1966 |
Class III Trustee |
Until 2021. Trustee since 2018. |
Private investor. Member of Posse Boston Advisory Board (foundation) (since 2015). Formerly, Portfolio Manager at MFS Investment Management (investment management firm) (1994-2017). Other Directorships in the Last Five Years. Director of MSCI Inc. (global provider of investment decision support tools) (since 2017). Formerly, Director of DCT Industrial Trust Inc. (logistics real estate company) (2017-2018). | |||
| Susan J. Sutherland 1957 |
Class II Trustee |
Until 2023. Trustee since 2015. |
Private investor. Director of Ascot Group Limited and certain of its subsidiaries (insurance and reinsurance) (since 2018). Formerly, Director of Hagerty Holding Corp. (insurance and reinsurance) (2015-2018). Formerly, Associate, Counsel and Partner at Skadden, Arps, Slate, Meagher & Flom LLP (law firm) (1982-2013). Other Directorships in the Last Five Years. Formerly, Director of Montpelier Re Holdings Ltd. (global provider of customized insurance and reinsurance products) (2013-2015). | |||
| Scott E. Wennerholm 1959 |
Class I Trustee |
Until 2022. Trustee since 2016. |
Private Investor. Formerly, Trustee at Wheelock College (postsecondary institution) (2012-2018). Formerly, Consultant at GF Parish Group (executive recruiting firm) (2016-2017). Formerly, Chief Operating Officer and Executive Vice President at BNY Mellon Asset Management (investment management firm) (2005-2011). Formerly, Chief Operating Officer and Chief Financial Officer at Natixis Global Asset Management (investment management firm) (1997-2004). Formerly, Vice President at Fidelity Investments Institutional Services (investment management firm) (1994-1997). Other Directorships in the Last Five Years. None. | |||
| Name and Year of Birth | Fund Position(s) |
Officer Since(2) |
Principal Occupation(s) During Past Five Years | |||
| Principal Officers who are not Trustees | ||||||
| Edward J. Perkin 1972 |
President | 2014 | Vice President and Chief Equity Investment Officer of EVM and BMR. Also Vice President of Calvert Research and Management (“CRM”). | |||
| Maureen A. Gemma 1960 |
Vice President, Secretary and Chief Legal Officer | 2005 | Vice President of EVM and BMR. Also Vice President of CRM. | |||
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Eaton Vance
Tax-Managed Diversified Equity Income Fund
October 31, 2020
Management and Organization — continued
| Name and Year of Birth | Fund Position(s) |
Officer Since(2) |
Principal Occupation(s) During Past Five Years | |||
| Principal Officers who are not Trustees (continued) | ||||||
| James F. Kirchner 1967 |
Treasurer | 2007 | Vice President of EVM and BMR. Also Vice President of CRM. | |||
| Richard F. Froio 1968 |
Chief Compliance Officer | 2017 | Vice President of EVM and BMR since 2017. Formerly Deputy Chief Compliance Officer (Adviser/Funds) and Chief Compliance Officer (Distribution) at PIMCO (2012-2017) and Managing Director at BlackRock/Barclays Global Investors (2009-2012). | |||
| (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. |
| (2) | 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. Each officer serves until his or her successor is elected. |
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Eaton Vance Funds
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each entity listed below has adopted a privacy policy and procedures (“Privacy Program”) Eaton Vance believes is reasonably designed to protect your personal information and to govern when and with whom Eaton Vance may share your personal information.
| • | At the time of opening an account, Eaton Vance generally requires you to provide us with certain information such as name, address, social security number, tax status, account numbers, and account balances. This information is necessary for us to both open an account for you and to allow us to satisfy legal requirements such as applicable anti-money laundering reviews and know-your-customer requirements. |
| • | On an ongoing basis, in the normal course of servicing your account, Eaton Vance may share your information with unaffiliated third parties that perform various services for Eaton Vance and/or your account. These third parties include transfer agents, custodians, broker/dealers and our professional advisers, including auditors, accountants, and legal counsel. Eaton Vance may additionally share your personal information with our affiliates. |
| • | We believe our Privacy Program is reasonably designed to protect the confidentiality of your personal information and to prevent unauthorized access to that information. |
| • | We reserve the right to change our Privacy Program at any time upon proper notification to you. You may want to review our Privacy Program periodically for changes by accessing the link on our homepage: www.eatonvance.com. |
Our pledge of protecting your personal information 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 (International) Limited, Eaton Vance Advisers International Ltd., Eaton Vance Global Advisors Limited, Eaton Vance Management’s Real Estate Investment Group, Boston Management and Research, Calvert Research and Management, and Calvert Funds. This Privacy Notice supersedes all previously issued privacy disclosures. For more information about our Privacy Program or about how your personal information may be used, 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. American Stock Transfer & Trust Company, LLC (“AST”), the closed-end funds transfer agent, or your financial intermediary, may household the mailing of your documents indefinitely unless you instruct AST, or your financial intermediary, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact AST or your financial intermediary. Your instructions that householding not apply to delivery of your Eaton Vance documents will typically be effective within 30 days of receipt by AST or your financial intermediary.
Portfolio Holdings. Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) files a schedule of portfolio holdings on Part F to Form N-PORT with the SEC. Certain information filed on Form N-PORT may be viewed 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.
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 common shares outstanding as of the last day of the prior calendar year 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”.
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2897 10.31.20
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| Item 2. | Code of Ethics |
The registrant (sometimes referred to as the “Fund”) 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. The registrant has not amended the code of ethics as described in Form N-CSR during the period covered by this report. The registrant has not granted any waiver, including an implicit waiver, from a provision of the code of ethics as described in Form N-CSR during the period covered by this report.
| Item 3. | Audit Committee Financial Expert |
The registrant’s Board of Trustees (the “Board”) has designated George J. Gorman and William H. Park, each an independent trustee, as audit committee financial experts. Mr. Gorman is a certified public accountant who is the Principal at George J. Gorman LLC (a consulting firm). Previously, Mr. Gorman served in various capacities at Ernst & Young LLP (a registered public accounting firm), including as Senior Partner. Mr. Gorman also has experience serving as an independent trustee and audit committee financial expert of other
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mutual fund complexes. Mr. Park is a certified public accountant who is a private investor. Previously, he served as a consultant, 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) (a 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, 2019 and October 31, 2020 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 |
10/31/19 | 10/31/20 | ||||||
| Audit Fees |
$ | 52,250 | $ | 50,200 | ||||
| Audit-Related Fees(1) |
$ | 0 | $ | 0 | ||||
| Tax Fees(2) |
$ | 13,306 | $ | 8,796 | ||||
| All Other Fees(3) |
$ | 0 | $ | 0 | ||||
|
|
|
|
|
|||||
| Total |
$ | 65,556 | $ | 58,996 | ||||
|
|
|
|
|
|||||
| (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.
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(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, 2019 and October 31, 2020; 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 |
10/31/19 | 10/31/20 | ||||||
| Registrant |
$ | 13,306 | $ | 8,796 | ||||
| Eaton Vance(1) |
$ | 59,903 | $ | 51,800 | ||||
| (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. George J. Gorman (Chair), William H. Park, Helen Frame Peters and Scott E. Wennerholm 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 the Fund 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 Policies annually. 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, or any committee, sub-committee or group of independent trustees identified by the Board, which will instruct the investment adviser on the appropriate course of action. If the Board Members are unable to meet and the failure to vote a proxy would have a material adverse impact on the Fund, the investment adviser may vote such proxy, provided that it discloses the existence of the material conflict to the Chairperson of the Fund’s Board as soon as practicable and to the Board at its next meeting.
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”),
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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 in accordance with customized proxy voting guidelines (the “Guidelines”) and/or refer them back to the investment adviser pursuant to the Policies.
The Agent is required to establish and maintain adequate internal controls and policies in connection with the provision of proxy voting services, including methods to reasonably ensure that its analysis and recommendations are not influenced by a conflict of interest. The Guidelines include voting guidelines for matters relating to, among other things, the election of directors, approval of independent auditors, executive compensation, corporate structure and anti-takeover defenses. The investment adviser may cause the Fund to abstain from voting from time to time where it determines that the costs associated with voting a proxy outweigh the benefits derived from exercising the right to vote or it is unable to access or access timely ballots or other proxy information, among other stated reasons. The Agent will refer Fund proxies to the investment adviser for instructions under circumstances where, among others: (1) the application of the Guidelines is unclear; (2) a particular proxy question is not covered by the Guidelines; or (3) the Guidelines require input from the investment adviser. When a proxy voting issue has been referred to the investment adviser, the analyst (or portfolio manager if applicable) covering the company subject to the proxy proposal determines the final vote (or decision not to vote) and the investment adviser’s Proxy Administrator (described below) instructs the Agent to vote accordingly for securities held by the Fund. Where more than one analyst covers a particular company and the recommendations of such analysts voting a proposal conflict, the investment adviser’s Global Proxy Group (described below) will review such recommendations and any other available information related to the proposal and determine the manner in which it should be voted, which may result in different recommendations for the Fund that may differ from other clients of the investment adviser.
The investment adviser has appointed a Proxy Administrator to assist in the coordination of the voting of client proxies (including the Fund’s) in accordance with the Guidelines and the Policies. The investment adviser and its affiliates have also established a Global Proxy Group. The Global Proxy Group develops the investment adviser’s positions on all major corporate issues, creates the Guidelines and oversees the proxy voting process. The Proxy Administrator maintains a record of all proxy questions that have been referred by the Agent, all applicable recommendations, analysis and research received and any resolution of the matter. Before instructing the Agent to vote contrary to the Guidelines or the recommendation of the Agent, the Proxy Administrator will provide the Global Proxy Group with the Agent’s recommendation for the proposal along with any other relevant materials, including the basis for the analyst’s recommendation. The Proxy Administrator will then instruct the Agent to vote the proxy in the manner determined by the Global Proxy Group. A similar process will be followed if the Agent has a conflict of interest with respect to a proxy. The investment adviser will report to the Fund’s Board any votes cast contrary to the Guidelines or Agent recommendations, as applicable, no less than annually.
The investment adviser’s Global Proxy Group is responsible for monitoring and resolving possible material conflicts with respect to proxy voting. Because the Guidelines are predetermined and designed to be in the best interests of shareholders, application of the Guidelines to vote client proxies should, in most cases, adequately address any possible conflict of interest. The investment adviser will monitor situations that may result in a conflict of interest between any of its clients and the investment adviser or any of its affiliates by maintaining a list of significant existing and prospective corporate clients. The Proxy Administrator will compare such list with the names of companies of which he or she has been referred a proxy statement (the “Proxy Companies”). If a company on the list is also a Proxy Company, the Proxy Administrator will report that fact to the Global Proxy Group. If the Proxy Administrator intends to instruct the Agent to vote in a manner inconsistent with the Guidelines, the Global Proxy Group will first determine, in consultation with legal counsel if necessary, whether a material conflict exists. If it is determined that a material conflict exists, the investment adviser will seek instruction on how the proxy should be voted from the Fund’s Board, or any committee or subcommittee identified by the Board. If a matter is referred to the Global Proxy Group, the decision made and basis for the decision will be documented by the Proxy Administrator and/or Global Proxy Group.
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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 |
Eaton Vance Management (“EVM” or “Eaton Vance”) is the investment adviser of the Fund. Michael A. Allison and G.R. Nelson are responsible for the overall and day-to-day management of the Fund’s investments.
Mr. Allison is a Vice President of EVM, is a member of EVM’s Equity Strategy Committee and has been a portfolio manager of the Fund since November 2006. Mr. Nelson is a Vice President of Eaton Vance, has been an equity analyst at EVM since 2004 and has been a portfolio manager of the Fund since December 2019. Mr. Allison has managed other Eaton Vance portfolios for more than five years. This information is provided as of the date of filing 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 |
|||||||||||||
| Michael A. Allison(1) |
||||||||||||||||
| Registered Investment Companies |
17 | $ | 38,321.0 | 0 | $ | 0 | ||||||||||
| Other Pooled Investment Vehicles |
14 | $ | 26,775.0 | (2) | 0 | $ | 0 | |||||||||
| Other Accounts |
1 | $ | 0.5 | 0 | $ | 0 | ||||||||||
| G.R. Nelson |
||||||||||||||||
| Registered Investment Companies |
3 | $ | 2,996.0 | 0 | $ | 0 | ||||||||||
| Other Pooled Investment Vehicles |
0 | $ | 0 | 0 | $ | 0 | ||||||||||
| Other Accounts |
1 | $ | 1.2 | 0 | $ | 0 | ||||||||||
| (1) | This portfolio manager serves as portfolio manager of one or more registered investment companies that invests or may invest in one or more underlying registered investment companies in the Eaton Vance family of funds or other pooled investment vehicles sponsored by Eaton Vance. The underlying investment companies may be managed by this portfolio manager or another portfolio manager. |
| (2) | Certain of these “Other Pooled Investment Vehicles” invest a substantial portion of their assets either in a registered investment company in the Eaton Vance family of funds and/or in a separate pooled investment vehicle sponsored by Eaton Vance which may be managed by this portfolio manager or another portfolio manager. |
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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 Beneficially Owned in the Fund | |
| Michael A. Allison |
$50,001 - $100,000 | |
| G.R. Nelson |
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 the 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 advises. In addition, due to differences in the investment strategies or restrictions between the Fund and the other accounts, the 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 the portfolio manager in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, the portfolio manager will endeavor to exercise his discretion in a manner that he 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 that govern the investment adviser’s trading practices, including among other things the aggregation and allocation of trades among clients, brokerage allocations, cross trades and best execution.
Compensation Structure for EVM
Compensation of EVM’s portfolio managers and other investment professionals has the following primary components: (1) a base salary, (2) an annual cash bonus, (3) annual non-cash compensation consisting of options to purchase shares of Eaton Vance Corp. (“EVC”) nonvoting common stock and/or restricted shares of EVC nonvoting common stock that generally are subject to a vesting schedule and (4) (for equity portfolio managers) a Deferred Alpha Incentive Plan, which pays a deferred cash award tied to future excess returns in certain equity strategy portfolios. 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 Sharpe ratio, which uses standard deviation and excess return to determine reward per unit of risk. 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
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and accounts. Funds and accounts that have performance-based advisory fees are not accorded disproportionate weightings in measuring aggregate portfolio manager performance. Pursuant to the Deferred Alpha Incentive Plan, a portion of the compensation payable to equity portfolio managers and investment professionals will be determined based on the ability of one or more accounts managed by such manager, that are not advised by Calvert Management and Research to achieve a specified target average annual gross return over a three year period in excess of the account benchmark. The cash award to be payable at the end of the three year term will be established at the inception of the term and will be adjusted positively or negatively to the extent that the average annual gross return varies from the specified target return.
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 generally based on a substantially fixed percentage of pre-bonus adjusted 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 |
No such purchases this period.
| 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 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. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies |
No activity to report for the registrant’s most recent fiscal year end.
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| Item 13. | 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. | |
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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 Tax-Managed Diversified Equity Income Fund
| By: | /s/ Edward J. Perkin | |
| Edward J. Perkin | ||
| President | ||
| Date: | December 21, 2020 | |
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 21, 2020 | |
| By: | /s/ Edward J. Perkin | |
| Edward J. Perkin | ||
| President | ||
| Date: | December 21, 2020 | |
