SEC Form N-CSRS filed by Eaton Vance Short Diversified Income Fund Eaton Vance Short Du
$EVG
Investment Managers
Finance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-21563
Eaton Vance Short Duration Diversified Income Fund
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Deidre E. Walsh
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
April 30, 2023
Date of Reporting Period
Item 1. Reports to Stockholders
Eaton Vance
Short Duration Diversified Income Fund (EVG)
Semiannual Report
April 30, 2023
Commodity Futures Trading Commission Registration. The Commodity Futures Trading Commission (“CFTC”) has adopted regulations 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 and a commodity trading advisor.
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.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Performance
Portfolio Manager(s) Catherine
C. McDermott, Andrew Szczurowski, CFA, Eric Stein, CFA, Akbar A. Causer and Federico Sequeda, CFA
| % Average Annual Total Returns1,2 | Inception Date | Six Months | One Year | Five Years | Ten Years |
| Fund at NAV | 02/28/2005 | 7.23% | (0.22)% | 1.28% | 2.69% |
| Fund at Market Price | — | (2.19) | (0.18) | 1.84 | 2.09 |
|
| |||||
| Bloomberg U.S. Aggregate Bond Index | — | 6.91% | (0.43)% | 1.18% | 1.32% |
| Blended Index | — | 5.81 | 1.20 | 1.25 | — |
| % Premium/Discount to NAV3 | |
| As of period end | (7.39)% |
| Distributions 4 | |
| Total Distributions per share for the period | $0.523 |
| Distribution Rate at NAV | 8.52% |
| Distribution Rate at Market Price | 9.20 |
| % Total Leverage5 | |
| Borrowings | 12.77% |
| Derivatives | 19.20 |
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. Furthermore, returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. 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.
2
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Fund Profile
| Asset Allocation (% of total investments)1 |
Footnotes:
| 1 | Including the Fund’s use of leverage, Asset Allocation as a percentage of the Fund’s net assets amounted to 135.3%. |
3
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Endnotes and
Additional Disclosures
4
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited)
5
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
6
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
21
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
22
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
| Forward Foreign Currency Exchange Contracts (Centrally Cleared) | |||||
| Currency Purchased | Currency Sold | Settlement
Date |
Value/Unrealized
Appreciation (Depreciation) | ||
| EUR | 78,028 | USD | 85,613 | 6/21/23 | $ 607 |
| USD | 374,836 | EUR | 341,629 | 6/21/23 | (2,659) |
| USD | 207,474 | EUR | 192,929 | 6/21/23 | (5,709) |
| USD | 307,144 | EUR | 285,611 | 6/21/23 | (8,452) |
| USD | 531,381 | EUR | 494,129 | 6/21/23 | (14,622) |
| USD | 1,630,479 | EUR | 1,516,173 | 6/21/23 | (44,866) |
| $ (75,701) | |||||
| Forward Foreign Currency Exchange Contracts (OTC) | |||||||
| Currency Purchased | Currency Sold | Counterparty | Settlement
Date |
Unrealized
Appreciation |
Unrealized
(Depreciation) | ||
| USD | 1,482,910 | EUR | 1,362,717 | Standard Chartered Bank | 5/3/23 | $ — | $ (18,668) |
| USD | 1,506,998 | EUR | 1,362,716 | Standard Chartered Bank | 6/2/23 | 2,825 | — |
| $2,825 | $(18,668) | ||||||
| Futures Contracts | |||||
| Description | Number
of Contracts |
Position | Expiration
Date |
Notional
Amount |
Value/Unrealized
Appreciation (Depreciation) |
| Interest Rate Futures | |||||
| Euro-Bobl | (9) | Short | 6/8/23 | $(1,169,921) | $ (30,371) |
| Euro-Bund | (2) | Short | 6/8/23 | (298,747) | (7,781) |
| Euro-Buxl | (3) | Short | 6/8/23 | (461,145) | (21,241) |
| U.S. 5-Year Treasury Note | (20) | Short | 6/30/23 | (2,194,844) | (21,086) |
| U.S. 10-Year Treasury Note | (8) | Short | 6/21/23 | (921,625) | 1,909 |
| U.S. Ultra-Long Treasury Bond | (12) | Short | 6/21/23 | (1,696,875) | (80,072) |
| $ (158,642) | |||||
| Credit Default Swaps - Sell Protection (Centrally Cleared) | |||||||
| Reference Entity | Notional
Amount* (000's omitted) |
Contract
Annual Fixed Rate** |
Current
Market Annual Fixed Rate*** |
Termination
Date |
Value | Unamortized
Upfront Receipts (Payments) |
Unrealized
Appreciation (Depreciation) |
| Brazil | $ 2,518 | 1.00%
(pays quarterly)(1) |
2.17% | 6/20/28 | $(130,512) | $181,334 | $ 50,822 |
| Colombia | 5,000 | 1.00%
(pays quarterly)(1) |
2.93 | 6/20/28 | (419,752) | 522,033 | 102,281 |
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
| Credit Default Swaps - Sell Protection (Centrally Cleared) (continued) | |||||||
| Reference Entity | Notional
Amount* (000's omitted) |
Contract
Annual Fixed Rate** |
Current
Market Annual Fixed Rate*** |
Termination
Date |
Value | Unamortized
Upfront Receipts (Payments) |
Unrealized
Appreciation (Depreciation) |
| Croatia | $ 5,000 | 1.00%
(pays quarterly)(1) |
0.94% | 6/20/28 | $ 18,829 | $ (6,910) | $ 11,919 |
| Hungary | 2,200 | 1.00%
(pays quarterly)(1) |
1.69 | 6/20/28 | (66,197) | 74,032 | 7,835 |
| Indonesia | 3,000 | 1.00%
(pays quarterly)(1) |
0.94 | 6/20/28 | 11,369 | 18,953 | 30,322 |
| Mexico | 1,946 | 1.00%
(pays quarterly)(1) |
1.13 | 6/20/28 | (9,055) | 36,100 | 27,045 |
| Peru | 2,000 | 1.00%
(pays quarterly)(1) |
1.00 | 6/20/28 | 2,677 | 22,792 | 25,469 |
| Poland | 2,500 | 1.00%
(pays quarterly)(1) |
0.25 | 6/20/23 | 5,554 | (1,738) | 3,816 |
| Total | $24,164 | $ (587,087) | $846,596 | $259,509 | |||
| Credit Default Swaps - Sell Protection (OTC) | ||||||||
| Reference Entity | Counterparty | Notional
Amount* (000's omitted) |
Contract
Annual Fixed Rate** |
Current
Market Annual Fixed Rate*** |
Termination
Date |
Value | Unamortized
Upfront Receipts (Payments) |
Unrealized
Appreciation (Depreciation) |
| Brazil | Citibank, N.A. | $ 1,050 | 1.00%
(pays quarterly)(1) |
2.93% | 12/20/31 | $ (134,380) | $ 131,484 | $ (2,896) |
| Dubai | Bank of America, N.A. | 3,000 | 1.00%
(pays quarterly)(1) |
0.27 | 6/20/23 | 6,672 | 373 | 7,045 |
| Mexico | Citibank, N.A. | 688 | 1.00%
(pays quarterly)(1) |
1.74 | 12/20/31 | (35,216) | 26,567 | (8,649) |
| Romania | Barclays Bank PLC | 4,000 | 1.00%
(pays quarterly)(1) |
2.00 | 6/20/28 | (174,898) | 218,689 | 43,791 |
| Total | $8,738 | $ (337,822) | $377,113 | $39,291 | ||||
| * | If the Fund is the seller of credit protection, the notional amount is the maximum potential amount of future payments the Fund could be required to make if a credit event, as defined in the credit default swap agreement, were to occur. At April 30, 2023, such maximum potential amount for all open credit default swaps in which the Fund is the seller was $32,902,000. |
| ** | The contract annual fixed rate represents the fixed rate of interest received by the Fund (as a seller of protection) on the notional amount of the credit default swap contract. |
| *** | Current market annual fixed rates, utilized in determining the net unrealized appreciation or depreciation as of period end, serve as an indicator of the market’s perception of the current status of the payment/performance risk associated with the credit derivative. The current market annual fixed rate of a particular reference entity reflects the cost, as quoted by the pricing vendor, of selling protection against default of that entity as of period end and may include upfront payments required to be made to enter into the agreement. The higher the fixed rate, the greater the market perceived risk of a credit event involving the reference entity. A rate identified as “Defaulted” indicates a credit event has occurred for the reference entity. |
| (1) | Upfront payment is exchanged with the counterparty as a result of the standardized trading coupon. |
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Portfolio of
Investments (Unaudited) — continued
| Abbreviations: | |
| COF | – Cost of Funds 11th District |
| DIP | – Debtor In Possession |
| EURIBOR | – Euro Interbank Offered Rate |
| GDP | – Gross Domestic Product |
| LIBOR | – London Interbank Offered Rate |
| OTC | – Over-the-counter |
| PIK | – Payment In Kind |
| REITs | – Real Estate Investment Trusts |
| SOFR | – Secured Overnight Financing Rate |
| TBA | – To Be Announced |
| Currency Abbreviations: | |
| EUR | – Euro |
| USD | – United States Dollar |
25
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Statement of Assets
and Liabilities (Unaudited)
| April 30, 2023 | |
| Assets | |
| Unaffiliated investments, at value (identified cost $202,840,703) | $ 177,562,419 |
| Affiliated investments, at value (identified cost $9,815,439) | 9,349,279 |
| Cash | 1,318,654 |
| Deposits for derivatives collateral: | |
| Futures contracts | 207,045 |
| Centrally cleared derivatives | 4,313,320 |
| OTC derivatives - swap contracts | 162,000 |
| Foreign currency, at value (identified cost $1,083,035) | 1,087,690 |
| Interest receivable | 1,429,840 |
| Interest and dividends receivable from affiliated investments | 35,220 |
| Receivable for investments sold | 57,461 |
| Receivable for variation margin on open centrally cleared derivatives | 41,395 |
| Receivable for open forward foreign currency exchange contracts | 2,825 |
| Receivable for open swap contracts | 50,836 |
| Prepaid upfront fees on notes payable | 32,659 |
| Prepaid expenses and other assets | 8,255 |
| Total assets | $195,658,898 |
| Liabilities | |
| Notes payable | $ 27,000,000 |
| Payable for investments purchased | 478,756 |
| Payable for when-issued/delayed delivery/forward commitment securities | 23,371,499 |
| Payable for variation margin on open futures contracts | 52,134 |
| Payable for open forward foreign currency exchange contracts | 18,668 |
| Payable for open swap contracts | 11,545 |
| Upfront receipts on open non-centrally cleared swap contracts | 377,113 |
| Payable to affiliates: | |
| Investment adviser fee | 144,334 |
| Trustees' fees | 998 |
| Accrued expenses | 560,723 |
| Total liabilities | $ 52,015,770 |
| Net Assets | $143,643,128 |
| Sources of Net Assets | |
| Common shares, $0.01 par value, unlimited number of shares authorized | $ 134,427 |
| Additional paid-in capital | 194,406,911 |
| Accumulated loss | (50,898,210) |
| Net Assets | $143,643,128 |
| Common Shares Issued and Outstanding | 13,442,697 |
| Net Asset Value Per Common Share | |
| Net assets ÷ common shares issued and outstanding | $ 10.69 |
26
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Statement of
Operations (Unaudited)
| Six Months Ended | |
| April 30, 2023 | |
| Investment Income | |
| Dividend income | $ 3,294 |
| Dividend income from affiliated investments | 153,697 |
| Interest and other income | 6,618,867 |
| Interest income from affiliated investments | 45,426 |
| Total investment income | $ 6,821,284 |
| Expenses | |
| Investment adviser fee | $ 770,568 |
| Trustees’ fees and expenses | 5,590 |
| Custodian fee | 83,565 |
| Transfer and dividend disbursing agent fees | 8,989 |
| Legal and accounting services | 76,779 |
| Printing and postage | 58,014 |
| Interest expense and fees | 889,900 |
| Miscellaneous | 17,790 |
| Total expenses | $ 1,911,195 |
| Deduct: | |
| Waiver and/or reimbursement of expenses by affiliate | $ 5,974 |
| Total expense reductions | $ 5,974 |
| Net expenses | $ 1,905,221 |
| Net investment income | $ 4,916,063 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss): | |
| Investment transactions | $ (885,064) |
| Futures contracts | 931,654 |
| Swap contracts | 706,735 |
| Foreign currency transactions | 150,069 |
| Forward foreign currency exchange contracts | (320,718) |
| Net realized gain | $ 582,676 |
| Change in unrealized appreciation (depreciation): | |
| Investments | $ 5,092,905 |
| Investments - affiliated investments | (84,947) |
| Futures contracts | (1,148,303) |
| Swap contracts | 437,937 |
| Foreign currency | 71,703 |
| Forward foreign currency exchange contracts | (112,498) |
| Net change in unrealized appreciation (depreciation) | $ 4,256,797 |
| Net realized and unrealized gain | $ 4,839,473 |
| Net increase in net assets from operations | $ 9,755,536 |
27
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Statements of Changes
in Net Assets
| Six
Months Ended April 30, 2023 (Unaudited) |
Year
Ended October 31, 2022 | |
| Increase (Decrease) in Net Assets | ||
| From operations: | ||
| Net investment income | $ 4,916,063 | $ 7,502,830 |
| Net realized gain (loss) | 582,676 | (10,891,448) |
| Net change in unrealized appreciation (depreciation) | 4,256,797 | (18,552,322) |
| Net increase (decrease) in net assets from operations | $ 9,755,536 | $ (21,940,940) |
| Distributions to shareholders | $ (7,034,252)* | $ (8,946,641) |
| Tax return of capital to shareholders | $ — | $ (7,133,373) |
| Capital share transactions: | ||
| Reinvestment of distributions | $ 38,345 | $ 253,334 |
| Net increase in net assets from capital share transactions | $ 38,345 | $ 253,334 |
| Net increase (decrease) in net assets | $ 2,759,629 | $ (37,767,620) |
| Net Assets | ||
| At beginning of period | $ 140,883,499 | $ 178,651,119 |
| At end of period | $143,643,128 | $140,883,499 |
| * | A portion of the distributions may be deemed a tax return of capital at year-end. See Note 2. |
28
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Statement of Cash
Flows (Unaudited)
| Six Months Ended | |
| April 30, 2023 | |
| Cash Flows From Operating Activities | |
| Net increase in net assets from operations | $ 9,755,536 |
| Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: | |
| Investments purchased | (218,214,900) |
| Investments sold and principal repayments | 226,121,731 |
| Increase in short-term investments, net | (2,006,322) |
| Net amortization/accretion of premium (discount) | 271,655 |
| Amortization of prepaid upfront fees on notes payable | 20,314 |
| Increase in interest receivable | (43,483) |
| Increase in interest and dividends receivable from affiliated investments | (10,559) |
| Decrease in receivable for variation margin on open futures contracts | 74,179 |
| Increase in receivable for variation margin on open centrally cleared derivatives | (41,395) |
| Increase in receivable for open forward foreign currency exchange contracts | (2,716) |
| Increase in receivable for open swap contracts | (3,628) |
| Decrease in receivable for closed swap contracts | 100,384 |
| Decrease in receivable from the transfer agent | 37,822 |
| Increase in prepaid expenses and other assets | (4,387) |
| Decrease in payable for variation margin on open centrally cleared derivatives | (38,094) |
| Increase in payable for variation margin on open futures contracts | 52,134 |
| Increase in payable for open forward foreign currency exchange contracts | 8,449 |
| Decrease in payable for open swap contracts | (49,837) |
| Decrease in upfront receipts on open non-centrally cleared swap contracts | (276,946) |
| Increase in payable to affiliate for investment adviser fee | 1,060 |
| Decrease in payable to affiliate for Trustees' fees | (400) |
| Increase in accrued expenses | 192,971 |
| Decrease in unfunded loan commitments | (61,226) |
| Net change in unrealized appreciation (depreciation) from investments | (5,007,958) |
| Net realized loss from investments | 885,064 |
| Net cash provided by operating activities | $ 11,759,448 |
| Cash Flows From Financing Activities | |
| Cash distributions paid | $ (6,995,907) |
| Repayments of notes payable | (5,000,000) |
| Payment of prepaid upfront fees on notes payable | (37,500) |
| Net cash used in financing activities | $ (12,033,407) |
| Net decrease in cash and restricted cash* | $ (273,959) |
| Cash and restricted cash at beginning of period (including foreign currency) | $ 7,362,668 |
| Cash and restricted cash at end of period (including foreign currency) | $ 7,088,709 |
| Supplemental disclosure of cash flow information: | |
| Noncash financing activities not included herein consist of: | |
| Reinvestment of dividends and distributions | $ 38,345 |
| Cash paid for interest and fees on borrowings | 712,704 |
| * | Includes net change in unrealized appreciation (depreciation) on foreign currency of $10,454. |
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See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Statement of Cash
Flows (Unaudited) — continued
The
following table provides a reconciliation of cash and restricted cash reported within the Statement of Assets and Liabilities that sum to the total of such amounts shown on the Statement of Cash Flows.
| April 30, 2023 | |
| Cash | $ 1,318,654 |
| Deposits for derivatives collateral: | |
| Futures contracts | 207,045 |
| Centrally cleared derivatives | 4,313,320 |
| OTC derivatives - swap contracts | 162,000 |
| Foreign currency | 1,087,690 |
| Total cash and restricted cash as shown on the Statement of Cash Flows | $7,088,709 |
30
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Financial
Highlights
| Six
Months Ended April 30, 2023 (Unaudited) |
Year Ended October 31, | |||||
| 2022 | 2021 | 2020 | 2019 | 2018 | ||
| Net asset value — Beginning of period | $ 10.480 | $ 13.310 | $ 13.230 | $ 14.520 | $ 14.750 | $ 15.310 |
| Income (Loss) From Operations | ||||||
| Net investment income(1) | $ 0.366 | $ 0.559 | $ 0.708 | $ 0.486 | $ 0.731 | $ 0.688 |
| Net realized and unrealized gain (loss) | 0.367 | (2.191) | 0.428 | (0.871) | (0.121) | (0.399) |
| Total income (loss) from operations | $ 0.733 | $ (1.632) | $ 1.136 | $ (0.385) | $ 0.610 | $ 0.289 |
| Less Distributions | ||||||
| From net investment income | $ (0.523)* | $ (0.667) | $ (0.602) | $ (0.764) | $ (0.840) | $ (0.849) |
| Tax return of capital | — | (0.531) | (0.490) | (0.141) | — | — |
| Total distributions | $ (0.523) | $ (1.198) | $ (1.092) | $ (0.905) | $ (0.840) | $ (0.849) |
| Discount on tender offer(1) | $ — | $ — | $ 0.036 | $ — | $ — | $ — |
| Net asset value — End of period | $ 10.690 | $ 10.480 | $ 13.310 | $ 13.230 | $ 14.520 | $ 14.750 |
| Market value — End of period | $ 9.900 | $ 10.640 | $ 13.530 | $ 11.850 | $ 13.210 | $ 12.700 |
| Total Investment Return on Net Asset Value(2) | 7.23% (3) | (12.67)% | 9.29% | (1.80)% | 4.93% | 2.56% |
| Total Investment Return on Market Value(2) | (2.19)% (3) | (12.71)% | 23.94% | (3.32)% | 10.87% | (4.63)% |
| Ratios/Supplemental Data | ||||||
| Net assets, end of period (000’s omitted) | $143,643 | $140,883 | $178,651 | $236,628 | $259,649 | $263,711 |
| Ratios (as a percentage of average daily net assets): | ||||||
| Expenses excluding interest and fees | 1.41% (4)(5) | 1.47% (5) | 1.35% | 1.48% | 1.41% | 1.43% |
| Interest and fee expense(6) | 1.24% (4) | 0.75% | 0.28% | 0.57% | 1.14% | 0.93% |
| Total expenses | 2.65% (4)(5) | 2.22% (5) | 1.63% | 2.05% | 2.55% | 2.36% |
| Net investment income | 6.84% (4) | 4.70% | 5.16% | 3.59% | 4.97% | 4.57% |
| Portfolio Turnover | 121% (3)(7) | 182% (7) | 76% (7) | 47% | 46% | 32% |
| Senior Securities: | ||||||
| Total notes payable outstanding (in 000’s) | $ 27,000 | $ 32,000 | $ 43,000 | $ 55,000 | $ 85,000 | $ 76,000 |
| Asset coverage per $1,000 of notes payable(8) | $ 6,320 | $ 5,403 | $ 5,155 | $ 5,302 | $ 4,055 | $ 4,470 |
| (1) | Computed using average common shares outstanding. |
| (2) | Returns are historical and are calculated by determining the percentage change in net asset value or market value with all distributions reinvested. Distributions are assumed to be reinvested at prices obtained under the Fund's dividend reinvestment plan. |
| (3) | Not annualized. |
| (4) | Annualized. |
| (5) | Includes a reduction by the investment adviser of a portion of its adviser fee due to the Fund’s investment in the Liquidity Fund (equal to less than 0.005% of average daily net assets for the six months ended April 30, 2023 and year ended October 31, 2022). |
| (6) | Interest and fee expense relates to borrowings for the purpose of financial leverage (see Note 7). |
| (7) | Includes the effect of To-Be-Announced (TBA) transactions. |
| (8) | Calculated by subtracting the Fund’s total liabilities (not including the notes payable) from the Fund’s total assets, and dividing the result by the notes payable balance in thousands. |
| * | A portion of the distributions may be deemed a tax return of capital at year-end. See Note 2. |
31
See Notes to Financial Statements.
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited)
1 Significant Accounting Policies
Eaton Vance Short Duration Diversified Income Fund (the Fund)
is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company. The Fund’s investment objective is to provide a high level of current
income. The Fund may, as a secondary objective, also seek capital appreciation to the extent consistent with its primary goal of high current income.
The following is a summary of significant accounting policies
of the Fund. The policies are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The Fund is an investment company and follows accounting and reporting guidance in the Financial
Accounting Standards Board (FASB) Accounting Standards Codification Topic 946.
A Investment
Valuation—The following methodologies are used to determine the market value or fair value of
investments.
Senior Floating-Rate Loans. Interests in senior floating-rate loans (Senior Loans) are valued generally at the average mean of bid and ask quotations obtained from a third party pricing service. Senior Loans, for which a valuation is not available
or deemed unreliable, are fair valued by the investment adviser utilizing one or more of the valuation techniques described below to assess the likelihood that the borrower will make a full repayment of the loan underlying such Senior Loan. If the
investment adviser believes that there is a reasonable likelihood of full repayment, the investment adviser will determine fair value using a matrix pricing approach that considers the yield on the Senior Loan relative to yields on other Senior
Loans issued by companies of comparable credit quality. If the investment adviser believes there is not a reasonable likelihood of full repayment, the investment adviser will determine fair value using analyses that include, but are not limited to:
(i) a comparison of the value of the borrower’s outstanding equity and debt to that of comparable public companies; (ii) a discounted cash flow analysis; or (iii) when the investment adviser believes it is likely that a borrower will be
liquidated or sold, an analysis of the terms of such liquidation or sale. In certain cases, the investment adviser will use a combination of analytical methods to determine fair value, such as when only a portion of a borrower’s assets are
likely to be sold. In conducting its assessment and analyses for purposes of determining fair value of a Senior Loan, the investment adviser will use its discretion and judgment in considering and appraising relevant factors. Junior Loans (i.e.,
subordinated loans and second lien loans) are valued in the same manner as Senior Loans.
Debt Obligations. Debt
obligations are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and
ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, interest rates, anticipated prepayments, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The
pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term debt obligations purchased with a remaining maturity of sixty days or
less for which a valuation from a third party pricing service is not readily available may be valued at amortized cost, which approximates fair value.
Equity Securities.Equity
securities listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and ask prices on the exchange where such
securities are principally traded. Equity securities listed on the NASDAQ National Market System 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. Futures contracts
are valued at the closing settlement price established by the board of trade or exchange on which they are traded. Forward foreign currency exchange contracts are generally valued at the mean of the average bid and average ask prices that are
reported by currency dealers to a third party pricing service at the valuation time. Such third party pricing service valuations are supplied for specific settlement periods and the Fund’s forward foreign currency exchange contracts are valued
at an interpolated rate between the closest preceding and subsequent settlement period reported by the third party pricing service. Swaps are normally valued using valuations provided by a third party pricing service. Such pricing service valuations
are based on the present value of fixed and projected floating rate cash flows over the term of the swap contract, and in the case of credit default swaps, based on credit spread quotations obtained from broker/dealers and expected default recovery
rates determined by the pricing service using proprietary models. Future cash flows on swaps are discounted to their present value using swap rates provided by electronic data services or by broker/dealers.
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.
Other.
Investments in management investment companies (including money market funds) that do not trade on an exchange are valued at the net asset value as of the close of each business day.
Fair Valuation. In connection
with Rule 2a-5 of the 1940 Act, the Trustees have designated the Fund’s investment adviser as its valuation designee. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued by the
investment adviser, as valuation designee, at fair value using methods that most fairly reflect 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,
32
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
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—Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount. Fees associated
with loan amendments are recognized immediately. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities.
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 April 30, 2023, the Fund had
no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue
Service for a period of three years from the date of filing.
E 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 Unfunded Loan Commitments—The Fund may enter into certain loan agreements all or a portion of which may be unfunded. The Fund is
obligated to fund these commitments at the borrower's discretion. These commitments, if any, are disclosed in the accompanying Portfolio of Investments. At April 30, 2023, the Fund had sufficient cash and/or securities to cover these
commitments.
G 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.
H 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.
I Futures
Contracts—Upon entering into a futures contract, the Fund is required to deposit with the broker,
either in cash or securities, an amount equal to a certain percentage of the contract amount (initial margin). Subsequent payments, known as variation margin, are made or received by the Fund each business day, depending on the daily
fluctuations in the value of the underlying security, and are recorded as unrealized gains or losses by the Fund. Gains (losses) are realized upon the expiration or closing of the futures contracts. Should market conditions change unexpectedly, the
Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. Futures contracts have minimal counterparty risk as they are exchange traded and the clearinghouse for the exchange is substituted as the counterparty,
guaranteeing counterparty performance.
J Forward Foreign Currency Exchange Contracts—The Fund may enter into forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded as unrealized until such time as the
contracts have been closed. While forward foreign currency exchange contracts are privately negotiated agreements between the Fund and a counterparty, certain contracts may be “centrally cleared”, whereby all payments made or
received by the Fund pursuant to the contract are with a central clearing party (CCP) rather than the original counterparty. The CCP guarantees the performance of the original parties to the contract. Upon entering into centrally cleared
contracts, the Fund is required to deposit with the CCP, either in cash or securities, an amount of initial margin determined by the CCP, which is subject to adjustment. For centrally cleared contracts, the daily change in valuation is recorded
as a receivable or payable for variation margin and settled in cash with the CCP daily. Risks may arise upon entering forward foreign currency exchange contracts from the potential inability of counterparties to meet the terms of their contracts and
from movements in the value of a foreign currency relative to the U.S. dollar. In the case of centrally cleared contracts, counterparty risk is minimal due to protections provided by the CCP.
33
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
K Credit Default
Swaps—When the Fund is the buyer of a credit default swap contract, the Fund is entitled to receive
the par (or other agreed-upon) value of a referenced debt obligation (or basket of debt obligations) from the counterparty (or CCP in the case of a centrally cleared swap) to the contract if a credit event by a third party, such as a U.S. or foreign
corporate issuer or sovereign issuer, on the debt obligation occurs. In return, the Fund pays the counterparty a periodic stream of payments over the term of the contract provided that no credit event has occurred. If no credit event occurs, the
Fund would have spent the stream of payments and received no proceeds from the contract. When the Fund is the seller of a credit default swap contract, it receives the stream of payments, but is obligated to pay to the buyer of the protection an
amount up to the notional amount of the swap and in certain instances take delivery of securities of the reference entity upon the occurrence of a credit event, as defined under the terms of that particular swap agreement. Credit events are contract
specific but may include bankruptcy, failure to pay, restructuring, obligation acceleration and repudiation/moratorium. If the Fund is a seller of protection and a credit event occurs, the maximum potential amount of future payments that the Fund
could be required to make would be an amount equal to the notional amount of the agreement. This potential amount would be partially offset by any recovery value of the respective referenced obligation, or net amount received from the settlement of
a buy protection credit default swap agreement entered into by the Fund for the same referenced obligation. As the seller, the Fund may create economic leverage to its portfolio because, in addition to its total net assets, the Fund is subject to
investment exposure on the notional amount of the swap. The interest fee paid or received on the swap contract, which is based on a specified interest rate on a fixed notional amount, is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as realized gain upon receipt or realized loss upon payment. The Fund also records an increase or decrease to unrealized appreciation (depreciation) in an amount equal to the daily valuation. For centrally cleared
swaps, the daily change in valuation is recorded as a receivable or payable for variation margin and settled in cash with the CCP daily. All upfront payments and receipts, if any, are amortized over the life of the swap contract as realized gains or
losses. Those upfront payments or receipts for non-centrally cleared swaps are recorded as other assets or other liabilities, respectively, net of amortization. For financial reporting purposes, unamortized upfront payments or receipts, if any, are
netted with unrealized appreciation or depreciation on swap contracts to determine the market value of swaps as presented in Notes 6 and 9. These transactions involve certain risks, including the risk that the seller may be unable to fulfill the
transaction. In the case of centrally cleared swaps, counterparty risk is minimal due to protections provided by the CCP.
L When-Issued Securities and Delayed Delivery
Transactions—The Fund may purchase securities on a delayed delivery, when-issued or forward
commitment basis, including TBA (To Be Announced) securities. Payment and delivery may take place after the customary settlement period for that security. At the time the transaction is negotiated, the price of the security that will be delivered is
fixed. Securities purchased on a delayed delivery, when-issued or forward commitment basis are marked-to-market daily and begin earning interest on settlement date. Such security purchases are subject to the risk that when delivered they will be
worth less than the agreed upon payment price. Losses may also arise if the counterparty does not perform under the contract. A forward purchase commitment may also be closed by entering into an offsetting commitment. If an offsetting commitment is
entered into, the Fund will realize a gain or loss on investments based on the price established when the Fund entered into the commitment.
M Stripped Mortgage-Backed Securities—The Fund may invest in Interest Only (IO) and Principal Only (PO) securities, a form of stripped
mortgage-backed securities, whereby the IO security receives all the interest and the PO security receives all the principal on a pool of mortgage assets. The yield to maturity on an IO security is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the yield to maturity from these securities. If the underlying mortgages experience greater than
anticipated prepayments of principal, the Fund may fail to recoup its initial investment in an IO security. The market value of IO and PO securities can be unusually volatile due to changes in interest rates.
N Interim Financial Statements—The interim financial statements relating to April 30, 2023 and for the six months then ended have not
been audited by an independent registered public accounting firm, but in the opinion of the Fund’s management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial
statements.
2 Distributions to
Shareholders and Income Tax Information
The Fund intends
to make monthly distributions to shareholders and at least one distribution annually of all or substantially all of its net realized capital gains. In its distributions, the Fund intends to include amounts attributable to the imputed interest on
foreign currency exposures through long and short positions in forward currency exchange contracts (represented by the difference between the foreign currency spot rate and the foreign currency forward rate) and the imputed interest derived from
certain other derivative positions. Distributions are recorded on the ex-dividend date. Distributions to shareholders are determined in accordance with income tax regulations, which may differ from U.S. GAAP. As required by U.S. GAAP, only
distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax
purposes, distributions from short-term capital gains are considered to be from ordinary income. In certain circumstances, a portion of distributions to shareholders may include a return of capital component. For the six months ended April 30, 2023,
the amount of distributions estimated to be a tax return of capital was approximately $1,581,000. The final determination of tax characteristics of the Fund’s distributions will occur at the end of the year, at which time it will be
reported to the shareholders.
34
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
At
October 31, 2022, the Fund, for federal income tax purposes, had deferred capital losses of $22,492,803 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, can be carried forward for an unlimited period, and retain the same short-term or long-term character as when originally deferred. Of the deferred capital losses at October 31, 2022, $10,483,258
are short-term and $12,009,545 are long-term.
The cost
and unrealized appreciation (depreciation) of investments, including open derivative contracts, of the Fund at April 30, 2023, as determined on a federal income tax basis, were as follows:
| Aggregate cost | $ 213,480,427 |
| Gross unrealized appreciation | $ 2,978,533 |
| Gross unrealized depreciation | (29,498,648) |
| Net unrealized depreciation | $ (26,520,115) |
3 Investment Adviser Fee and Other Transactions
with Affiliates
The investment adviser fee is earned by
Eaton Vance Management (EVM), an indirect, wholly-owned subsidiary of Morgan Stanley, as compensation for investment advisory services rendered to the Fund. The fee is computed at an annual rate of 0.75% of the Fund’s average daily total
leveraged assets, subject to the limitation described below, and is payable monthly. Total leveraged assets as referred to herein represent the value of all assets of the Fund (including assets acquired with financial leverage), plus the notional
value of long and short forward foreign currency contracts and futures contracts and swaps based upon foreign currencies, issuers or markets held by the Fund, minus all accrued expenses incurred in the normal course of operations, but not excluding
any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility/commercial paper program or the issuance of debt securities), (ii)
the issuance of preferred stock or other similar preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Fund’s investment objectives and policies, and/or (iv) any other means. Accrued
expenses includes other liabilities other than indebtedness attributable to leverage. The notional value of a contract for purposes of calculating total leveraged assets is the stated dollar value of the underlying reference instrument at the time
the derivative position is entered into and remains constant throughout the life of the derivative contract. However, the derivative contracts are marked-to-market daily and any unrealized appreciation or depreciation is reflected in the
Fund’s net assets. When the Fund holds both long and short forward currency contracts in the same foreign currency, the offsetting positions are netted for purposes of determining total leveraged assets. When the Fund holds other long and
short positions in foreign obligations in a given country denominated in the same currency, total leveraged assets are calculated by excluding the smaller of the long or short position.
The investment advisory agreement provides that if investment
leverage exceeds 40% of the Fund's total leveraged assets, EVM shall not be entitled to receive the above described compensation with respect to total leveraged assets in excess of this amount. As of April 30, 2023, the Fund's investment leverage
was 32% of its total leveraged assets. For the six months ended April 30, 2023, the investment adviser fee amounted to $770,568 or 0.75% (annualized) of the Fund’s average daily total leveraged assets and 1.07% (annualized) of the Fund's
average daily net assets.
The Fund may invest in a money
market fund, the Institutional Class of the Morgan Stanley Institutional Liquidity Funds - Government Portfolio (the “Liquidity Fund”), an open-end management investment company managed by Morgan Stanley Investment Management Inc., a
wholly-owned subsidiary of Morgan Stanley. The investment adviser fee paid by the Fund is reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Fund. For the
six months ended April 30, 2023, the investment adviser fee paid was reduced by $5,974 relating to the Fund’s investment in the Liquidity Fund.
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 six months ended April 30, 2023, no significant amounts have been deferred. Certain officers and Trustees of the Fund are officers of EVM.
35
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
4 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term
obligations and including maturities, paydowns, principal repayments on Senior Loans and TBA transactions, for the six months ended April 30, 2023 were as follows:
| Purchases | Sales | |
| Investments (non-U.S. Government) | $ 15,764,051 | $ 20,495,049 |
| U.S. Government and Agency Securities | 203,241,576 | 204,348,778 |
| $219,005,627 | $224,843,827 |
5 Common Shares of
Beneficial Interest
Common shares issued by the Fund
pursuant to its dividend reinvestment plan for the six months ended April 30, 2023 and the year ended October 31, 2022 were 3,567 and 21,555, respectively.
In November 2013, 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 six months ended April 30, 2023 and the year ended October 31, 2022.
6 Financial Instruments
The Fund may trade in financial instruments with off-balance
sheet risk in the normal course of its investing activities. These financial instruments may include forward foreign currency exchange contracts, futures contracts and swap contracts 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 April
30, 2023 is included in the Portfolio of Investments. At April 30, 2023, the Fund had sufficient cash and/or securities to cover commitments under these contracts.
In the normal course of pursuing its investment objectives, the
Fund is subject to the following risks:
Credit Risk: The
Fund enters into credit default swap contracts to enhance total return and/or as a substitute for the purchase of securities.
Foreign Exchange Risk: The Fund holds foreign currency
denominated investments. The value of these investments and related receivables and payables may change due to future changes in foreign currency exchange rates. To hedge against this risk, the Fund enters into forward foreign currency exchange
contracts.
Interest Rate Risk: The Fund utilizes various
interest rate derivatives including futures contracts to manage the duration of its portfolio and to hedge against fluctuations in securities prices due to interest rates.
The Fund enters into over-the-counter (OTC) derivatives
that may contain provisions whereby the counterparty may terminate the contract under certain conditions, including but not limited to a decline in the Fund's net assets below a certain level over a certain period of time, which would trigger a
payment by the Fund for those derivatives in a liability position. At April 30, 2023, the fair value of derivatives with credit-related contingent features in a net liability position was $363,162. The aggregate fair value of assets pledged as
collateral by the Fund for such liability was $334,428 at April 30, 2023.
The OTC derivatives in which the Fund invests are subject
to the risk that the counterparty to the contract fails to perform its obligations under the contract. To mitigate this risk, the Fund has entered into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master
Agreement”) or similar agreement with substantially all its derivative counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains,
among other things, set-off provisions in the event of a default and/or termination event as defined under the relevant ISDA Master Agreement. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the
counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the
event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy or insolvency.
Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA
Master Agreements, which would cause the counterparty to accelerate payment by the Fund of any net liability owed to it.
36
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
The
collateral requirements for derivatives traded under an ISDA Master Agreement are governed by a Credit Support Annex to the ISDA Master Agreement. Collateral requirements are determined at the close of business each day and are typically based on
changes in market values for each transaction under an ISDA Master Agreement and netted into one amount for such agreement. Generally, the amount of collateral due from or to a counterparty is subject to a minimum transfer threshold amount before a
transfer is required, which may vary by counterparty. Collateral pledged for the benefit of the Fund and/or counterparty is held in segregated accounts by the Fund’s custodian and cannot be sold, re-pledged, assigned or otherwise used
while pledged. The portion of such collateral representing cash, if any, is reflected as deposits for derivatives collateral and, in the case of cash pledged by a counterparty for the benefit of the Fund, a corresponding liability on the Statement
of Assets and Liabilities. Securities pledged by the Fund as collateral, if any, are identified as such in the Portfolio of Investments.
The fair value of open derivative instruments (not considered
to be hedging instruments for accounting disclosure purposes) by risk exposure at April 30, 2023 was as follows:
| Fair Value | ||||
| Statement of Assets and Liabilities Caption | Credit | Foreign
Exchange |
Interest
Rate |
Total |
| Accumulated loss | $ 38,429* | $ 607* | $ 1,909* | $ 40,945 |
| Receivable for open forward foreign currency exchange contracts | — | 2,825 | — | 2,825 |
| Receivable/Payable for open swap contracts; Upfront payments/receipts on open non-centrally cleared swap contracts | 6,672 | — | — | 6,672 |
| Total Asset Derivatives | $ 45,101 | $ 3,432 | $ 1,909 | $ 50,442 |
| Derivatives not subject to master netting or similar agreements | $ 38,429 | $ 607 | $ 1,909 | $ 40,945 |
| Total Asset Derivatives subject to master netting or similar agreements | $ 6,672 | $ 2,825 | $ — | $ 9,497 |
| Accumulated loss | $ (625,516)* | $ (76,308)* | $ (160,551)* | $ (862,375) |
| Payable for open forward foreign currency exchange contracts | — | (18,668) | — | (18,668) |
| Payable/Receivable for open swap contracts; Upfront payments/receipts on open non-centrally cleared swap contracts | (344,494) | — | — | (344,494) |
| Total Liability Derivatives | $(970,010) | $(94,976) | $(160,551) | $(1,225,537) |
| Derivatives not subject to master netting or similar agreements | $(625,516) | $(76,308) | $(160,551) | $ (862,375) |
| Total Liability Derivatives subject to master netting or similar agreements | $(344,494) | $(18,668) | $ — | $ (363,162) |
| * | For futures contracts and centrally cleared derivatives, amount represents value as shown in the Portfolio of Investments. Only the current day’s variation margin on open futures contracts and centrally cleared derivatives is reported within the Statement of Assets and Liabilities as Receivable or Payable for variation margin on open futures contracts and centrally cleared derivatives, as applicable. |
The Fund's derivative assets and liabilities at fair value by
risk, which are reported gross in the Statement of Assets and Liabilities, are presented in the table above. The following tables present the Fund's derivative assets and liabilities by counterparty, net of amounts available for offset under a
master netting agreement and net of the related collateral received by the Fund for such assets and pledged by the Fund for such liabilities as of April 30, 2023.
| Counterparty | Derivative
Assets Subject to Master Netting Agreement |
Derivatives
Available for Offset |
Non-cash
Collateral Received(a) |
Cash
Collateral Received(a) |
Net
Amount of Derivative Assets(b) |
| Bank of America, N.A. | $ 6,672 | $ — | $ — | $ — | $ 6,672 |
| Standard Chartered Bank | 2,825 | (2,825) | — | — | — |
| $9,497 | $(2,825) | $ — | $ — | $6,672 |
37
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
| Counterparty | Derivative
Liabilities Subject to Master Netting Agreement |
Derivatives
Available for Offset |
Non-cash
Collateral Pledged(a) |
Cash
Collateral Pledged(a) |
Net
Amount of Derivative Liabilities(c) |
| Barclays Bank PLC | $ (174,898) | $ — | $ 172,428 | $ — | $ (2,470) |
| Citibank, N.A. | (169,596) | — | — | 162,000 | (7,596) |
| Standard Chartered Bank | (18,668) | 2,825 | — | — | (15,843) |
| $(363,162) | $2,825 | $172,428 | $162,000 | $(25,909) |
| (a) | In some instances, the total collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | Net amount represents the net amount due from the counterparty in the event of default. |
| (c) | Net amount represents the net amount payable to the counterparty in the event of default. |
The effect of derivative instruments (not considered to be
hedging instruments for accounting disclosure purposes) on the Statement of Operations by risk exposure for the six months ended April 30, 2023 was as follows:
| Statement of Operations Caption | Credit | Foreign
Exchange |
Interest
Rate |
Total |
| Net realized gain (loss): | ||||
| Futures contracts | $ — | $ — | $ 931,654 | $ 931,654 |
| Swap contracts | 706,735 | — | — | 706,735 |
| Forward foreign currency exchange contracts | — | (320,718) | — | (320,718) |
| Total | $706,735 | $(320,718) | $ 931,654 | $ 1,317,671 |
| Change in unrealized appreciation (depreciation): | ||||
| Futures contracts | $ — | $ — | $ (1,148,303) | $(1,148,303) |
| Swap contracts | 437,937 | — | — | 437,937 |
| Forward foreign currency exchange contracts | — | (112,498) | — | (112,498) |
| Total | $437,937 | $(112,498) | $(1,148,303) | $ (822,864) |
The average notional cost of futures contracts and average
notional amounts of other derivative contracts outstanding during the six months ended April 30, 2023, which are indicative of the volume of these derivative types, were approximately as follows:
| Futures
Contracts — Long |
Futures
Contracts — Short |
Forward
Foreign Currency Exchange Contracts* |
Swap
Contracts |
| $48,000 | $13,519,000 | $5,977,000 | $34,583,000 |
| * | The average notional amount for forward foreign currency exchange contracts is based on the absolute value of notional amounts of currency purchased and currency sold. |
38
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
7 Credit Agreement
The Fund has entered into a Credit Agreement (the Agreement)
with a bank to borrow up to a limit of $75 million ($85 million prior to March 14, 2023) pursuant to a 364-day revolving line of credit. Borrowings under the Agreement are secured by the assets of the Fund. Interest is charged at a rate above the
Secured Overnight Financing Rate (SOFR) and is payable monthly. Under the terms of the Agreement, in effect through March 12, 2024, the Fund pays a commitment fee of 0.15% on the borrowing limit. In connection with the renewal of the Agreement on
March 14, 2023, the Fund paid an upfront fee of $37,500, which is being amortized to interest expense through March 12, 2024. The unamortized balance at April 30, 2023 is approximately $33,000 and is included in prepaid upfront fees on notes payable
on the Statement of Assets and Liabilities. Also included in interest expense is $15,473 of amortization of previously paid upfront fees related to the period from November 1, 2022 through March 14, 2023 when the Agreement was renewed. The Fund is
required to maintain certain net asset levels during the term of the Agreement. At April 30, 2023, the Fund had borrowings outstanding under the Agreement of $27,000,000 at an annual interest rate of 5.85%. Based on the short-term nature of the
borrowings under the Agreement and the variable interest rate, the carrying amount of the borrowings at April 30, 2023 approximated its fair value. If measured at fair value, borrowings under the Agreement would have been considered as Level 2 in
the fair value hierarchy (see Note 9) at April 30, 2023. For the six months ended April 30, 2023, the average borrowings under the Agreement and the average annual interest rate (excluding fees) were $ 29,011,050 and 5.58%, respectively.
8 Affiliated Investments
At April 30, 2023, the value of the Fund’s investment in
issuers and funds that may be deemed to be affiliated was $9,349,279, which represents 6.5% of the Fund’s net assets. Transactions in such investments by the Fund for the six months ended April 30, 2023 were as follows:
| Name | Value,
beginning of period |
Purchases | Sales
proceeds |
Net
realized gain (loss) |
Change
in unrealized appreciation (depreciation) |
Value,
end of period |
Interest/
Dividend income |
Principal
amount/ Shares, end of period |
| Commercial Mortgage-Backed Securities | ||||||||
| Morgan Stanley Bank of America Merrill Lynch Trust: | ||||||||
| Series 2014-C16, Class B, 4.458%, 6/15/47 | $ — | $ 218,550 | $ — | $ — | $ 8,242 | $ 226,956 | $ 2,206 | $ 240,000 |
| Series 2016-C29, Class D, 3.00%, 5/15/49 | 755,772 | — | — | — | (49,866) | 708,780 | 17,874 | 1,000,000 |
| Series 2016-C32, Class D, 3.396%, 12/15/49 | 181,046 | — | — | — | (17,604) | 164,233 | 5,035 | 250,000 |
| Morgan Stanley Capital I Trust, Series 2016-UBS12, Class D, 3.312%, 12/15/49 | 529,537 | — | — | — | (25,719) | 507,570 | 20,311 | 1,000,000 |
| Short-Term Investments | ||||||||
| Liquidity Fund | 5,734,874 | 31,379,332 | (29,372,466) | — | — | 7,741,740 | 153,697 | 7,741,740 |
| Total | $ — | $(84,947) | $9,349,279 | $199,123 | ||||
9 Fair Value Measurements
Under generally accepted accounting principles for fair value
measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
| • | 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.
39
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
At
April 30, 2023, 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 |
| Asset-Backed Securities | $ — | $ 24,313,736 | $ — | $ 24,313,736 |
| Collateralized Mortgage Obligations | — | 12,886,412 | — | 12,886,412 |
| Commercial Mortgage-Backed Securities | — | 13,546,304 | — | 13,546,304 |
| Common Stocks | 68,951 | 59,470 | 43,959 | 172,380 |
| Corporate Bonds | — | 19,178,079 | — | 19,178,079 |
| Preferred Stocks | — | 155,120 | — | 155,120 |
| Senior Floating-Rate Loans (Less Unfunded Loan Commitments) | — | 55,664,991 | 89,436 | 55,754,427 |
| Sovereign Government Bonds | — | 17,771,835 | — | 17,771,835 |
| Sovereign Loans | — | 1,384,338 | — | 1,384,338 |
| U.S. Government Agency Mortgage-Backed Securities | — | 33,533,295 | — | 33,533,295 |
| Warrants | — | 0 | 0 | 0 |
| Short-Term Investments: | ||||
| Affiliated Fund | 7,741,740 | — | — | 7,741,740 |
| U.S. Treasury Obligations | — | 474,032 | — | 474,032 |
| Total Investments | $ 7,810,691 | $ 178,967,612 | $ 133,395 | $ 186,911,698 |
| Forward Foreign Currency Exchange Contracts | $ — | $ 3,432 | $ — | $ 3,432 |
| Futures Contracts | 1,909 | — | — | 1,909 |
| Swap Contracts | — | 45,101 | — | 45,101 |
| Total | $ 7,812,600 | $ 179,016,145 | $ 133,395 | $ 186,962,140 |
| Liability Description | ||||
| Forward Foreign Currency Exchange Contracts | $ — | $ (94,976) | $ — | $ (94,976) |
| Futures Contracts | (160,551) | — | — | (160,551) |
| Swap Contracts | — | (970,010) | — | (970,010) |
| Total | $ (160,551) | $ (1,064,986) | $ — | $ (1,225,537) |
| * | None of the unobservable inputs for Level 3 assets, individually or collectively, had a material impact on the Fund. |
Level 3 investments at the beginning and/or end of the period
in relation to net assets were not significant and accordingly, a reconciliation of Level 3 assets for the six months ended April 30, 2023 is not presented.
10 Risks and Uncertainties
Risks Associated with Foreign Investments
Foreign investments can be adversely affected by political,
economic and market developments abroad, including the imposition of economic and other sanctions by the United States or another country. There may be less publicly available information about foreign issuers because they may not be subject to
reporting practices, requirements or regulations comparable to those to which United States companies are subject. Foreign markets may be smaller, less liquid and more volatile than the major markets in the United States. Trading in foreign markets
typically involves higher expense than trading in the United States. The Fund may have difficulties enforcing its legal or contractual rights in a foreign country. Securities that trade or are denominated in currencies other than the U.S. dollar may
be adversely affected by fluctuations in currency exchange rates.
40
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Notes to Financial
Statements (Unaudited) — continued
Emerging market securities often involve greater risks than
developed market securities. Investment markets within emerging market countries are typically smaller, less liquid, less developed and more volatile than those in more developed markets like the United States, and may be focused in certain economic
sectors. The information available about an emerging market issuer may be less reliable than for comparable issuers in more developed capital markets. Governmental actions can have a significant effect on the economic conditions in emerging market
countries. It may be more difficult to make a claim or obtain a judgment in the courts of these countries than it is in the United States. The possibility of fraud, negligence, undue influence being exerted by an issuer or refusal to recognize
ownership exists in some emerging markets. Disruptions due to work stoppages and trading improprieties in foreign securities markets have caused such markets to close. Emerging market securities are also subject to speculative trading, which
contributes to their volatility.
Economic data as
reported by sovereign entities may be delayed, inaccurate or fraudulent. In the event of a default by a sovereign entity, there are typically no assets to be seized or cash flows to be attached. Furthermore, the willingness or ability of a sovereign
entity to restructure defaulted debt may be limited. Therefore, losses on sovereign defaults may far exceed the losses from the default of a similarly rated U.S. debt issuer.
LIBOR Transition Risk
Certain instruments held by the Fund may pay an interest rate
based on the London Interbank Offered Rate (“LIBOR”), which is the average offered rate for various maturities of short-term loans between certain major international banks. LIBOR is used throughout global banking and financial
industries to determine interest rates for a variety of financial instruments (such as debt instruments and derivatives) and borrowing arrangements. The ICE Benchmark Administration Limited, the administrator of LIBOR, ceased publishing certain
LIBOR settings on December 31, 2021, and is expected to cease publishing the remaining LIBOR settings on June 30, 2023. Although the transition process away from LIBOR has become increasingly well-defined, the impact on certain debt securities,
derivatives and other financial instruments that utilize LIBOR remains uncertain. The phase-out of LIBOR may result in, among other things, increased volatility or illiquidity in markets for instruments based on LIBOR and changes in the value of
such instruments.
Pandemic Risk
An outbreak of respiratory disease caused by a novel
coronavirus was first detected in China in late 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 of disease, 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, as well as the economies of individual countries and industries, and could continue to affect the market
in significant and unforeseen ways. Other epidemics and pandemics that may arise in the future may have similar effects. Any such impact could adversely affect the Fund's performance, or the performance of the securities in which the Fund
invests.
41
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Annual Meeting of
Shareholders (Unaudited)
The
Fund held its Annual Meeting of Shareholders on February 9, 2023. The following action was taken by the shareholders:
Proposal 1: The election of Mark R. Fetting, Valerie A. Mosley,
Marcus L. Smith and Nancy A. Wiser as Class III Trustees of the Fund for a three-year term expiring in 2026.
| Number of Shares | ||||
| Nominees for Trustee | For | Withheld | ||
| Mark R. Fetting | 9,077,988 | 200,634 | ||
| Valerie A. Mosley | 9,004,784 | 273,838 | ||
| Marcus L. Smith | 9,076,142 | 202,480 | ||
| Nancy A. Wiser | 8,947,962 | 330,660 | ||
42
Eaton Vance
Short Duration Diversified Income Fund
April 30, 2023
Officers and
Trustees
| Officers | |
| Eric
A. Stein President |
Nicholas
S. Di Lorenzo Secretary |
| Deidre
E. Walsh Vice President and Chief Legal Officer |
Richard F.
Froio Chief Compliance Officer |
| James
F. Kirchner Treasurer |
|
| Trustees |
| * | Interested Trustee |
| (1) | Mr. Bowser began serving as Trustee effective January 4, 2023. |
| (2) | Ms. Pachnanda began serving as Trustee effective April 1, 2023. |
43
Eaton Vance Funds
| Privacy Notice | April 2021 |
| FACTS | WHAT
DOES EATON VANCE DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The
types of personal information we collect and share depend on the product or service you have with us. This information can include:■ Social Security number and income ■ investment experience and risk tolerance ■ checking account number and wire transfer instructions |
| How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Eaton Vance chooses to share; and whether you can limit this sharing. |
| Reasons
we can share your personal information |
Does
Eaton Vance share? |
Can
you limit this sharing? |
| For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No |
| For our marketing purposes — to offer our products and services to you | Yes | No |
| For joint marketing with other financial companies | No | We don’t share |
| For our investment management affiliates’ everyday business purposes — information about your transactions, experiences, and creditworthiness | Yes | Yes |
| For our affiliates’ everyday business purposes — information about your transactions and experiences | Yes | No |
| For our affiliates’ everyday business purposes — information about your creditworthiness | No | We don’t share |
| For our investment management affiliates to market to you | Yes | Yes |
| For our affiliates to market to you | No | We don’t share |
| For nonaffiliates to market to you | No | We don’t share |
| To
limit our sharing |
Call toll-free 1-800-262-1122 or email: [email protected]Please note:If you are a new customer, we can begin sharing your information 30 days from the date we sent this notice. When you are no longer our customer, we continue to share your information as described in this notice. However, you can contact us at any time to limit our sharing. |
| Questions? | Call toll-free 1-800-262-1122 or email: [email protected] |
44
Eaton Vance Funds
| Privacy Notice — continued | April 2021 |
Page 2
| Who we are | |
| Who is providing this notice? | Eaton Vance Management, 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, Eaton Vance and Calvert Fund Families and our investment advisory affiliates (“Eaton Vance”) (see Investment Management Affiliates definition below) |
| What we do | |
| How
does Eaton Vance protect my personal information? |
To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. We have policies governing the proper handling of customer information by personnel and requiring third parties that provide support to adhere to appropriate security standards with respect to such information. |
| How
does Eaton Vance collect my personal information? |
We
collect your personal information, for example, when you■ open an account or make deposits or withdrawals from your account ■ buy securities from us or make a wire transfer ■ give us your contact informationWe also collect your personal information from others, such as credit bureaus, affiliates, or other companies. |
| Why can’t I limit all sharing? | Federal
law gives you the right to limit only■ sharing for affiliates’ everyday business purposes — information about your creditworthiness ■ affiliates from using your information to market to you ■ sharing for nonaffiliates to market to youState laws and individual companies may give you additional rights to limit sharing. See below for more on your rights under state law. |
| Definitions | |
| Investment
Management Affiliates |
Eaton Vance Investment Management Affiliates include registered investment advisers, registered broker- dealers, and registered and unregistered funds. Investment Management Affiliates does not include entities associated with Morgan Stanley Wealth Management, such as Morgan Stanley Smith Barney LLC and Morgan Stanley & Co. |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.■ Our affiliates include companies with a Morgan Stanley name and financial companies such as Morgan Stanley Smith Barney LLC and Morgan Stanley & Co. |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.■ Eaton Vance does not share with nonaffiliates so they can market to you. |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.■ Eaton Vance doesn’t jointly market. |
| Other important information | |
| Vermont: Except as permitted by law, we will not share personal information we collect about Vermont residents with Nonaffiliates unless you provide us with your written consent to share such information.California: Except as permitted by law, we will not share personal information we collect about California residents with Nonaffiliates and we will limit sharing such personal information with our Affiliates to comply with California privacy laws that apply to us. | |
45
Eaton Vance Funds
IMPORTANT NOTICES
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 “Closed-End Funds & Term Trusts.”
46
Item 2. Code of Ethics
Not required in this filing.
Item 3. Audit Committee Financial Expert
Not required in this filing.
Item 4. Principal Accountant Fees and Services
Not required in this filing.
Item 5. Audit Committee of Listed Registrants
Not required in this filing.
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
Not required in this filing.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not required in this filing.
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.
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. | |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Eaton Vance Short Duration Diversified Income Fund
| By: | /s/ Eric A. Stein | |
| Eric A. Stein | ||
| President | ||
Date: June 23, 2023
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: June 23, 2023
| By: | /s/ Eric A. Stein | |
| Eric A. Stein | ||
| President | ||
Date: June 23, 2023