nvcsrza
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-21563
Eaton Vance Short Duration Diversified Income Fund
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Maureen A. Gemma
Two International Place, Boston, Massachusetts 02110
(Name and Address of Agent for Services)
(617) 482-8260
(Registrant’s Telephone Number)
October 31
Date of Fiscal Year End
October 31, 2011
Date of Reporting Period
EXPLANATORY NOTE:
The Registrant is filing this amendment to its Form N-CSR for the period ended October 31, 2011, originally filed with the Securities and Exchange Commission on December 23, 2011 (Accession Number 0000950123-11-103952) to include Items 12(c)(1)-(6): 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. Other than the aforementioned revision, this Form N-CSR/A does not reflect events occurring after the filing of the original Form N-CSR, or modify or update the disclosures therein in any way.
 
 

 


 

Item 1. Reports to Stockholders

 


 

     
Eaton Vance
Short Duration Diversified
Income Fund (EVG)

Annual Report
October 31, 2011
 
(STOPWATCH GRAPHIC)

 
 
 
(EATON VANCE INVESTMENT MANAGERS LOGO)


 

 
 
Managed Distribution Plan. On March 10, 2009, the Fund received authorization from the Securities and Exchange Commission to distribute long-term capital gains to shareholders more frequently than once per year. In this connection, the Board of Trustees formally approved the implementation of a Managed Distribution Plan (MDP) to make monthly cash distributions to common shareholders, stated in terms of a fixed amount per common share.
 
The Fund intends to pay monthly cash distributions equal to $0.09 per share. 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.
 
With each distribution, the Fund will issue a notice to shareholders and an accompanying press release which will provide detailed information required by the Fund’s exemptive order. The Fund’s Board of Trustees 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.
 
Fund shares are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Shares are subject to investment risks, including possible loss of principal invested.


 

Annual Report October 31, 2011
Eaton Vance
Short Duration Diversified Income Fund
         
Table of Contents        
 
Management’s Discussion of Fund Performance
    2  
Performance
    3  
Fund Profile
    3  
Endnotes and Additional Disclosures
    4  
Consolidated Financial Statements
    5  
Report of Independent Registered Public Accounting Firm
    47  
Federal Tax Information
    48  
Notice to Shareholders
    49  
Dividend Reinvestment Plan
    50  
Management and Organization
    52  
Important Notices
    54  


 

Eaton Vance
Short Duration Diversified Income Fund
October 31, 2011
Management’s Discussion of Fund Performance1
 
Economic and Market Conditions
During the 12 months ending October 31, 2011, the markets digested a significant number of historical events that established price volatility as norm rather than the exception in global financial markets. Citing a lack of political will in the United States, Standard & Poor’s lowered its credit rating on U.S. sovereign debt, which was the first time in history that the United States had been rated below the highest ranking of investment grade. The European sovereign debt crisis deteriorated, as policymakers within the eurozone squandered opportunities to address the issues in a meaningful manner. The tragic Tohoku earthquake and tsunami in Japan seriously disrupted global supply chains and adversely affected global economic growth.
The United States and the eurozone economies grew at an anemic pace during the period, as annual growth lagged 2.0% in both regions. The U.S. economy continued to suffer from an unemployment rate that stubbornly averaged above 9.0% during the period and headline inflation that more than tripled to 3.9% by the end of the period. The debt issues in the eurozone evolved from original concerns regarding Greece’s liquidity to a full-fledged solvency crisis surrounding additional periphery countries, including Italy and Spain, and European banks. European consumer and business confidence indicators trended lower in response, dragging economic growth to a near standstill by the end of the period. In contrast to the economic weakness in the U.S. and the eurozone, emerging-market economies led global growth. Most Asian and Latin American economies grew at annual rates above 4.0%. Most Central European economies grew at faster rates than their eurozone counterparts, and growth rates in the Middle East and Africa were roughly evenly mixed.
Global bond markets generally favored the most liquid instruments over riskier assets. Despite the fiscal concerns in the United States and the eurozone, U.S. Treasuries and German Bund yields fell across the curve. In contrast, sovereign yields in the larger economies of the eurozone rose significantly in response to the markets’ concerns about solvency and future growth prospects. Emerging-market growth was strong for most of the year, but moderated towards the end of the period as the global inventory cycle slowed and the crisis in Europe intensified. French, Spanish and Italian 10-year credit spreads rose 67, 152 and 214 basis points, respectively, above the corresponding maturity German Bunds. The so-called “hard currencies” of Switzerland, the “dollar bloc” countries (Canada, Australia and New Zealand), and non-euro Scandinavia appreciated versus the U.S. dollar and euro and, most emerging-market currencies also appreciated versus the U.S. dollar and the euro.
Fund Performance
The Fund is a closed-end fund that trades on the New York Stock Exchange (NYSE) under the symbol EVG. For the fiscal year ending October 31, 2011, the Fund had a total return of 4.35% at net asset value (NAV).
Investments in mortgage-backed securities (MBS) contributed to the Fund’s performance. In general, the Fund focused on seasoned/higher-coupon MBS, which have lower durations. Despite mortgage rates hovering around all-time lows, principal prepayment rates in the Fund’s seasoned MBS holdings remained stable for the year, while prepayments of less seasoned MBS showed much greater volatility. A dramatic flattening of the yield curve led to stronger performance of longer-duration assets, which caused seasoned MBS to underperform newer-issue/low-coupon MBS on an absolute basis.
The Fund’s exposure to international markets contributed positively to performance, including long/short local markets, credit default swaps (CDS), sovereign bonds and currencies. Positions in Africa, Asia, Latin America, and Europe were the main contributors to positive performance in our foreign strategy. Investments in commodities and a short position in NZD (New Zealand) slightly detracted from performance.
The Fund’s investments in senior secured loans benefited the Fund during the first half of the period. These instruments detracted from performance during the second half, however, as investors became preoccupied with uncertainty about the stability of the eurozone, the U.S. debt ceiling crisis and political unrest in the Middle East.
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested. Fund performance at market price will differ from its results at NAV due to factors such as changing perceptions about the Fund, market conditions, fluctuations in supply and demand for Fund shares, or changes in Fund distributions. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, current Fund performance may be lower or higher than the quoted return. For performance as of the most recent month end, please refer to www.eatonvance.com.

2


 

Eaton Vance
Short Duration Diversified Income Fund
October 31, 2011
Performance2
 
Portfolio Managers Scott H. Page, CFA; Payson F. Swaffield, CFA; Mark S. Venezia, CFA; Catherine C. McDermott; Andrew Szczurowski, CFA
                   
                Since  
% Average Annual Total Returns
  Inception Date   1 Year   5 Years   Inception  
   
Fund at NAV
  2/28/2005   4.35%   7.22%   6.82 %  
Fund at Market
  —         –0.51        6.20      5.47  
 
                 
% Premium/Discount to NAV
                 
   
 
              –8.15 %
 
                 
Distributions3
                 
   
Total Distributions per share for the period
              $1.160  
Distribution Rate at NAV
              6.07 %
Distribution Rate at Market Price
              6.61 %
 
                 
% Total Leverage4
                 
   
Derivatives
              34.0 %
Borrowings
              15.0  
Fund Profile
 
Asset Allocation (% of total leveraged assets)5
 
(PI CHART)
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested. Fund performance at market price will differ from its results at NAV due to factors such as changing perceptions about the Fund, market conditions, fluctuations in supply and demand for Fund shares, or changes in Fund distributions. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, current Fund performance may be lower or higher than the quoted return. For performance as of the most recent month end, please refer to www.eatonvance.com.

3


 

Eaton Vance
Short Duration Diversified Income Fund
October 31, 2011
Endnotes and Additional Disclosures
 
 
1   The views expressed in this report are those of portfolio manager(s) and are current only through the date stated at the top of this page. These views are subject to change at any time based upon market or other conditions, and Eaton Vance and the Fund(s) disclaim any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. This commentary may contain statements that are not historical facts, referred to as forward looking statements. The Fund’s actual future results may differ significantly from those stated in any forward looking statement, depending on factors such as changes in securities or financial markets or general economic conditions, the volume of sales and purchases of Fund shares, the continuation of investment advisory, administrative and service contracts, and other risks discussed from time to time in the Fund’s filings with the Securities and Exchange Commission.
 
2   Performance results reflect the effects of leverage.
 
3   The Distribution Rate is based on the Fund’s last regular distribution per share in the period (annualized) divided by the Fund’s NAV or market price at the end of the period. The Fund’s distributions may be comprised of ordinary income, net realized capital gains and return of capital.
 
4   The Fund employs leverage through derivatives and borrowings. Use of leverage creates an opportunity for income, but creates risks including greater price volatility. The cost of borrowings rises and falls with changes in short-term interest rates. The Fund is required to maintain prescribed asset coverage for its borrowings, which could be reduced if Fund asset values decline.
 
5   Total leveraged assets include all assets of the Fund (including those acquired with financial leverage), the notional value of long and short forward foreign currency contracts and other foreign obligations derivatives held by the Fund. Asset Allocation as a percentage of the Fund’s net assets amounted to 194.5%. Please refer to the definition of total leveraged assets within the Notes to Consolidated Financial Statements included herein.
Important Notice to Shareholders
Effective November 1, 2011, Andrew Szczurowski became a portfolio manager of the Fund to replace Susan Schiff, who will continue to serve as portfolio manager for other Eaton Vance funds. Mr. Szczurowski supported Ms. Schiff in her role as portfolio manager. He joined Scott H. Page, Payson F. Swaffield, Mark S. Venezia, and Catherine C. McDermott. Mr. Szczurowski is an Assistant Vice President of Eaton Vance Management and an analyst on Eaton Vance’s global/fixed-income MBS team. Andrew joined the MBS team of the global/fixed-income department in 2007. Prior to joining Eaton Vance, he was affiliated with Bank of New York Mellon.
Fund profile subject to change due to active management.

4


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments

                         
Senior Floating-Rate Interests — 42.2%(1)
 
        Principal
           
        Amount*
           
Borrower/Tranche Description       (000’s omitted)     Value      
 
 
 
Aerospace and Defense — 0.5%
 
DAE Aviation Holdings, Inc.
Term Loan, 5.43%, Maturing July 31, 2014
        110     $ 107,081      
Term Loan, 5.43%, Maturing July 31, 2014
        115       111,734      
Dundee Holdco 4, Ltd.
Term Loan, 4.25%, Maturing May 15, 2015
        113       93,528      
Term Loan, 4.75%, Maturing May 13, 2016
        113       93,528      
Term Loan - Second Lien, 6.71%, Maturing January 13, 2016
  GBP     250       290,762      
Sequa Corp.
Term Loan, 3.62%, Maturing December 3, 2014
        397       383,406      
TASC, Inc.
Term Loan, 4.50%, Maturing December 18, 2015
        299       297,973      
TransDigm, Inc.
Term Loan, 4.00%, Maturing February 14, 2017
        447       445,788      
 
 
                $ 1,823,800      
 
 
 
 
Air Transport — 0.2%
 
Orbitz Worldwide, Inc.
Term Loan, 3.31%, Maturing July 25, 2014
        764     $ 664,822      
 
 
                $ 664,822      
 
 
 
 
Automotive — 2.9%
 
Allison Transmission, Inc.
Term Loan, 2.75%, Maturing August 7, 2014
        736     $ 714,261      
Chrysler Group, LLC
Term Loan, 6.00%, Maturing May 24, 2017
        1,398       1,324,659      
Delphi Corp.
Term Loan, 3.50%, Maturing March 31, 2017
        385       384,864      
Federal-Mogul Corp.
Term Loan, 2.18%, Maturing December 29, 2014
        939       890,478      
Term Loan, 2.18%, Maturing December 28, 2015
        555       525,792      
Goodyear Tire & Rubber Co.
Term Loan - Second Lien, 1.93%, Maturing April 30, 2014
        3,175       3,107,531      
Metaldyne, LLC
Term Loan, 5.25%, Maturing May 18, 2017
        797       790,271      
SRAM, LLC
Term Loan, 4.76%, Maturing June 7, 2018
        220       218,694      
TI Automotive, Ltd.
Term Loan, 9.50%, Maturing July 29, 2016
        499       499,987      
Tomkins, LLC
Term Loan, 4.25%, Maturing September 21, 2016
        406       405,488      
Veyance Technologies, Inc.
Term Loan, 2.75%, Maturing July 31, 2014
        84       76,429      
Term Loan, 2.75%, Maturing July 31, 2014
        588       533,610      
Term Loan - Second Lien, 6.00%, Maturing July 31, 2015
        200       169,000      
 
 
                $ 9,641,064      
 
 
 
 
Building and Development — 0.3%
 
Goodman Global Holdings, Inc.
Term Loan, 5.75%, Maturing October 28, 2016
        349     $ 349,624      
Panolam Industries International, Inc.
Term Loan, 8.25%, Maturing December 31, 2013
        106       96,604      
RE/MAX International, Inc.
Term Loan, 5.50%, Maturing April 15, 2016
        413       411,183      
 
 
                $ 857,411      
 
 
 
 
Business Equipment and Services — 3.8%
 
Acosta, Inc.
Term Loan, 4.75%, Maturing March 1, 2018
        249     $ 246,263      
Acxiom Corp.
Term Loan, 3.38%, Maturing March 15, 2015
        289       290,500      
Advantage Sales & Marketing, Inc.
Term Loan, 5.25%, Maturing December 18, 2017
        372       366,605      
Affinion Group, Inc.
Term Loan, 5.00%, Maturing October 10, 2016
        1,036       956,776      
Altegrity, Inc.
Term Loan, 2.99%, Maturing February 21, 2015
        404       373,862      
Brand Energy and Infrastructure Services, Inc.
Term Loan, 3.63%, Maturing February 7, 2014
        183       151,837      
Brickman Group Holdings, Inc.
Term Loan, 7.25%, Maturing October 14, 2016
        248       248,125      
ClientLogic Corp.
Term Loan, 7.14%, Maturing January 30, 2017
        165       150,658      
Crawford & Company
Term Loan, 5.00%, Maturing October 30, 2013
        323       320,729      
Go Daddy Group, Inc. (The)
Term Loan, Maturing September 29, 2017(2)
        275       275,172      
KAR Auction Services, Inc.
Term Loan, 5.00%, Maturing May 19, 2017
        574       573,562      
Language Line, LLC
Term Loan, 6.25%, Maturing June 20, 2016
        438       434,807      
Mitchell International, Inc.
Term Loan, 2.38%, Maturing March 28, 2014
        186       176,902      

 
See Notes to Consolidated Financial Statements.
5


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Borrower/Tranche Description       (000’s omitted)     Value      
 
 
Business Equipment and Services (continued)
 
                         
MSCI, Inc.
Term Loan, 3.75%, Maturing March 14, 2017
        687     $ 694,249      
N.E.W. Holdings I, LLC
Term Loan, 6.00%, Maturing March 23, 2016
        383       374,212      
National CineMedia, LLC
Term Loan, 1.84%, Maturing February 13, 2015
        550       534,417      
Protection One Alarm Monitoring, Inc.
Term Loan, 6.00%, Maturing June 4, 2016
        347       344,168      
Quintiles Transnational Corp.
Term Loan, 5.00%, Maturing June 8, 2018
        848       840,456      
Sabre, Inc.
Term Loan, 2.30%, Maturing September 30, 2014
        1,337       1,176,745      
Sensus USA, Inc.
Term Loan, 4.75%, Maturing May 9, 2017
        124       122,509      
SunGard Data Systems, Inc.
Term Loan, 1.99%, Maturing February 28, 2014
        79       78,246      
Term Loan, 3.90%, Maturing February 26, 2016
        2,238       2,218,135      
Travelport, LLC
Term Loan, 6.05%, Maturing August 21, 2015
  EUR     370       438,624      
West Corp.
Term Loan, 2.75%, Maturing October 24, 2013
        139       137,847      
Term Loan, 4.61%, Maturing July 15, 2016
        965       958,249      
Term Loan, 4.63%, Maturing July 15, 2016
        339       336,958      
 
 
                $ 12,820,613      
 
 
 
 
Cable and Satellite Television — 2.2%
 
Atlantic Broadband Finance, LLC
Term Loan, 4.00%, Maturing March 8, 2016
        238     $ 234,055      
BBHI Acquisition, LLC
Term Loan, 4.50%, Maturing December 14, 2017
        223       222,196      
CSC Holdings, Inc.
Term Loan, 1.99%, Maturing March 29, 2016
        1,447       1,436,492      
Insight Midwest Holdings, LLC
Term Loan, 1.99%, Maturing April 7, 2014
        904       896,980      
Lavena Holdings 4 GmbH
Term Loan, 4.20%, Maturing March 6, 2015
  EUR     56       65,743      
Term Loan, 4.45%, Maturing March 4, 2016
  EUR     56       65,743      
MCC Iowa, LLC
Term Loan, 1.95%, Maturing January 30, 2015
        1,929       1,832,658      
NDS Finance, Ltd.
Term Loan, 4.00%, Maturing March 12, 2018
        274       269,179      
UPC Broadband Holding B.V.
Term Loan, 5.11%, Maturing December 31, 2016
  EUR     1,394       1,856,230      
YPSO Holding SA
Term Loan, 4.87%, Maturing June 6, 2016(3)
  EUR     93       110,006      
Term Loan, 4.87%, Maturing June 6, 2016(3)
  EUR     152       179,484      
Term Loan, 4.87%, Maturing June 6, 2016(3)
  EUR     228       268,184      
 
 
                $ 7,436,950      
 
 
 
 
Chemicals and Plastics — 2.4%
 
Ashland, Inc.
Term Loan, 3.75%, Maturing August 23, 2018
        400     $ 402,333      
Celanese U.S. Holdings, LLC
Term Loan, 3.12%, Maturing October 31, 2016
        1,024       1,030,390      
Huntsman International, LLC
Term Loan, 1.83%, Maturing April 21, 2014
        567       557,749      
Term Loan, 2.80%, Maturing April 19, 2017
        1,547       1,498,683      
Ineos US Finance, LLC
Term Loan, 7.50%, Maturing December 16, 2013
        751       772,496      
Term Loan, 8.00%, Maturing December 16, 2014
        751       772,971      
MacDermid, Inc.
Term Loan, 3.56%, Maturing April 11, 2014
  EUR     319       430,143      
Momentive Performance Materials, Inc. (Nautilus)
Term Loan, 3.75%, Maturing May 5, 2015
        494       467,202      
Nalco Co.
Term Loan, 4.50%, Maturing October 5, 2017
        297       297,325      
Norit NV
Term Loan, 6.75%, Maturing July 7, 2017
        250       243,750      
Rockwood Specialties Group, Inc.
Term Loan, 3.50%, Maturing February 9, 2018
        473       475,106      
Solutia, Inc.
Term Loan, 3.50%, Maturing August 1, 2017
        509       511,077      
Styron S.A.R.L.
Term Loan, 6.00%, Maturing August 2, 2017
        397       364,992      
Univar, Inc.
Term Loan, 5.00%, Maturing June 30, 2017
        298       291,795      
 
 
                $ 8,116,012      
 
 
 
 
Conglomerates — 1.7%
 
Education Management, LLC
Term Loan, 2.13%, Maturing June 3, 2013
        837     $ 796,497      
Financiere SPIE S.A.S.
Term Loan, 6.12%, Maturing June 29, 2018
  EUR     500       653,798      
Jarden Corp.
Term Loan, 3.25%, Maturing March 30, 2018
        527       526,918      
Rexnord Corp.
Term Loan, 2.87%, Maturing July 19, 2013
        2,000       1,982,500      

 
See Notes to Consolidated Financial Statements.
6


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Borrower/Tranche Description       (000’s omitted)     Value      
 
 
Conglomerates (continued)
 
                         
RGIS Holdings, LLC
Term Loan, 2.87%, Maturing April 30, 2014
        37     $ 34,638      
Term Loan, 2.87%, Maturing April 30, 2014
        731       692,772      
Spectrum Brands, Inc.
Term Loan, 5.00%, Maturing June 17, 2016
        502       501,437      
Walter Energy, Inc.
Term Loan, 4.00%, Maturing April 2, 2018
        438       437,951      
 
 
                $ 5,626,511      
 
 
 
 
Containers and Glass Products — 0.7%
 
Berry Plastics Corp.
Term Loan, 2.24%, Maturing April 3, 2015
        522     $ 497,795      
Consolidated Container Co.
Term Loan, 2.50%, Maturing March 28, 2014
        291       272,208      
Reynolds Group Holdings, Inc.
Term Loan, 6.50%, Maturing February 9, 2018
        985       984,434      
Term Loan, 6.50%, Maturing August 9, 2018
        550       548,682      
 
 
                $ 2,303,119      
 
 
 
 
Cosmetics / Toiletries — 0.3%
 
Bausch & Lomb, Inc.
Term Loan, 3.50%, Maturing April 24, 2015
        113     $ 112,592      
Term Loan, 3.59%, Maturing April 24, 2015
        464       461,968      
Prestige Brands, Inc.
Term Loan, 4.77%, Maturing March 24, 2016
        336       337,620      
 
 
                $ 912,180      
 
 
 
 
Drugs — 0.3%
 
Capsugel Healthcare, Ltd.
Term Loan, 5.25%, Maturing August 1, 2018
        250     $ 250,937      
Endo Pharmaceuticals Holdings, Inc.
Term Loan, 4.00%, Maturing June 18, 2018
        221       222,067      
Warner Chilcott Corp.
Term Loan, 4.25%, Maturing March 15, 2018
        154       152,619      
Term Loan, 4.25%, Maturing March 15, 2018
        307       305,238      
WC Luxco S.A.R.L.
Term Loan, 4.25%, Maturing March 15, 2018
        211       209,851      
 
 
                $ 1,140,712      
 
 
 
 
Ecological Services and Equipment — 0.1%
 
Big Dumpster Merger Sub, Inc.
Term Loan, 4.50%, Maturing February 5, 2013
        92     $ 74,438      
Term Loan, 4.50%, Maturing February 5, 2013
        377       306,230      
 
 
                $ 380,668      
 
 
 
 
Electronics / Electrical — 2.4%
 
Aspect Software, Inc.
Term Loan, 6.25%, Maturing May 6, 2016
        369     $ 371,222      
CommScope, Inc.
Term Loan, 5.00%, Maturing January 14, 2018
        398       396,507      
Dealer Computer Services, Inc.
Term Loan, 3.75%, Maturing April 20, 2018
        474       473,102      
DG FastChannel, Inc.
Term Loan, 5.75%, Maturing July 26, 2018
        299       296,257      
Eagle Parent, Inc.
Term Loan, 5.00%, Maturing May 16, 2018
        524       513,541      
Edwards (Cayman Island II), Ltd.
Term Loan, 5.50%, Maturing May 31, 2016
        223       209,728      
Freescale Semiconductor, Inc.
Term Loan, 4.49%, Maturing December 1, 2016
        933       900,094      
Infor Enterprise Solutions Holdings
Term Loan, 5.75%, Maturing March 3, 2014
        250       200,000      
Term Loan, 6.00%, Maturing July 28, 2015
        373       353,478      
Term Loan, 6.00%, Maturing July 28, 2015
        716       688,233      
Term Loan - Second Lien, 6.50%, Maturing March 3, 2014
        92       75,625      
Term Loan - Second Lien, 6.50%, Maturing March 3, 2014
        158       129,042      
Microsemi Corp.
Term Loan, 5.75%, Maturing February 2, 2018
        300       302,250      
NXP B.V.
Term Loan, 4.50%, Maturing March 3, 2017
        547       528,096      
Open Solutions, Inc.
Term Loan, 2.55%, Maturing January 23, 2014
        310       267,903      
Sensata Technologies Finance Co., LLC
Term Loan, 4.00%, Maturing May 11, 2018
        698       696,068      
Serena Software, Inc.
Term Loan, 4.34%, Maturing March 10, 2016
        1,185       1,125,750      
SS&C Technologies, Inc.
Term Loan, 2.25%, Maturing November 23, 2012
        230       229,231      
Web.com Group, Inc.
Term Loan, Maturing October 27, 2017(2)
        400       359,250      
 
 
                $ 8,115,377      
 
 
 

 
See Notes to Consolidated Financial Statements.
7


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Borrower/Tranche Description       (000’s omitted)     Value      
 
 
Equipment Leasing — 0.2%
 
Delos Aircraft, Inc.
Term Loan, 7.00%, Maturing March 17, 2016
        300     $ 302,500      
International Lease Finance Corp.
Term Loan, 6.75%, Maturing March 17, 2015
        500       504,844      
 
 
                $ 807,344      
 
 
 
 
Financial Intermediaries — 1.1%
 
Citco III, Ltd.
Term Loan, 6.25%, Maturing June 29, 2018
        324     $ 315,272      
Fifth Third Processing Solutions, LLC
Term Loan, 4.50%, Maturing November 3, 2016
        248       247,539      
First Data Corp.
Term Loan, 2.99%, Maturing September 24, 2014
        1,000       926,875      
HarbourVest Partners, LLC
Term Loan, 6.25%, Maturing December 14, 2016
        243       242,596      
LPL Holdings, Inc.
Term Loan, 2.02%, Maturing June 28, 2013
        113       111,760      
Term Loan, 4.25%, Maturing June 25, 2015
        355       352,600      
Mondrian Investment Partners, Ltd.
Term Loan, 5.50%, Maturing July 12, 2018
        249       249,375      
Nuveen Investments, Inc.
Term Loan, 3.39%, Maturing November 13, 2014
        231       223,374      
Term Loan, 5.89%, Maturing May 12, 2017
        269       259,721      
RPI Finance Trust
Term Loan, 4.00%, Maturing May 9, 2018
        673       670,157      
 
 
                $ 3,599,269      
 
 
 
 
Food Products — 1.0%
 
Del Monte Foods Co.
Term Loan, 4.50%, Maturing March 8, 2018
        1,247     $ 1,218,820      
Dole Food Company, Inc.
Term Loan, 5.05%, Maturing July 6, 2018
        192       192,739      
NBTY, Inc.
Term Loan, 4.25%, Maturing October 2, 2017
        447       446,253      
Pierre Foods, Inc.
Term Loan, 7.00%, Maturing September 30, 2016
        272       270,322      
Pinnacle Foods Holdings Corp.
Term Loan, 2.77%, Maturing April 2, 2014
        1,029       1,017,543      
Solvest, Ltd.
Term Loan, 5.03%, Maturing July 6, 2018
        357       357,943      
 
 
                $ 3,503,620      
 
 
 
 
Food Service — 2.0%
 
Aramark Corp.
Term Loan, 2.11%, Maturing January 27, 2014
        43     $ 42,149      
Term Loan, 2.24%, Maturing January 27, 2014
        529       523,207      
Term Loan, 2.95%, Maturing January 27, 2014
  GBP     524       800,222      
Term Loan, 3.44%, Maturing July 26, 2016
        77       76,214      
Term Loan, 3.62%, Maturing July 26, 2016
        1,168       1,158,882      
Buffets, Inc.
Term Loan, 14.00%, Maturing April 21, 2015(3)
        296       140,833      
Term Loan, 9.62%, Maturing April 22, 2015(3)
        35       15,790      
Burger King Corp.
Term Loan, 4.50%, Maturing October 19, 2016
        596       594,011      
DineEquity, Inc.
Term Loan, 4.32%, Maturing October 19, 2017
        321       321,898      
Dunkin’ Brands, Inc.
Term Loan, 4.00%, Maturing November 23, 2017
        546       545,882      
JRD Holdings, Inc.
Term Loan, 2.50%, Maturing July 2, 2014
        552       545,381      
OSI Restaurant Partners, LLC
Term Loan, 2.80%, Maturing June 14, 2013
        63       60,179      
Term Loan, 2.56%, Maturing June 14, 2014
        633       605,669      
Selecta
Term Loan, 4.15%, Maturing June 28, 2015
  EUR     741       803,435      
U.S. Foodservice, Inc.
Term Loan, 2.75%, Maturing July 3, 2014
        497       462,957      
 
 
                $ 6,696,709      
 
 
 
 
Food / Drug Retailers — 1.3%
 
Alliance Boots Holdings, Ltd.
Term Loan, 4.15%, Maturing July 9, 2015
  EUR     1,000     $ 1,301,172      
General Nutrition Centers, Inc.
Term Loan, 4.25%, Maturing March 2, 2018
        581       580,523      
Rite Aid Corp.
Term Loan, 2.00%, Maturing June 4, 2014
        952       915,031      
Term Loan, 4.50%, Maturing March 2, 2018
        413       392,411      
Roundy’s Supermarkets, Inc.
Term Loan, 7.00%, Maturing November 3, 2013
        638       624,696      
Supervalu, Inc.
Term Loan, 4.50%, Maturing April 28, 2018
        647       621,689      
 
 
                $ 4,435,522      
 
 
 

 
See Notes to Consolidated Financial Statements.
8


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Borrower/Tranche Description       (000’s omitted)     Value      
 
 
Health Care — 4.4%
 
Alere, Inc.
Term Loan, 4.50%, Maturing June 30, 2017
        475     $ 467,875      
Aveta Holdings, LLC
Term Loan, 8.50%, Maturing April 14, 2015
        122       121,375      
Term Loan, 8.50%, Maturing April 14, 2015
        122       121,375      
Biomet, Inc.
Term Loan, 3.32%, Maturing March 25, 2015
        744       734,933      
Carestream Health, Inc.
Term Loan, 5.00%, Maturing February 25, 2017
        249       223,916      
Carl Zeiss Vision Holding GmbH
Term Loan, 4.00%, Maturing September 30, 2019(3)
        42       34,940      
Catalent Pharma Solutions
Term Loan, 2.50%, Maturing April 10, 2014
        407       389,388      
Community Health Systems, Inc.
Term Loan, 2.57%, Maturing July 25, 2014
        70       68,232      
Term Loan, 2.57%, Maturing July 25, 2014
        1,365       1,327,492      
Term Loan, 3.82%, Maturing January 25, 2017
        685       665,749      
Dako EQT Project Delphi
Term Loan - Second Lien, 4.12%, Maturing December 12, 2016
        250       214,063      
DaVita, Inc.
Term Loan, 4.50%, Maturing October 20, 2016
        645       644,924      
DJO Finance, LLC
Term Loan, 3.25%, Maturing May 20, 2014
        159       153,503      
Drumm Investors, LLC
Term Loan, 5.00%, Maturing May 4, 2018
        299       273,548      
Emdeon Business Services, LLC
Term Loan, 4.25%, Maturing November 18, 2013
        423       425,018      
Emergency Medical Services Corp.
Term Loan, 5.25%, Maturing May 25, 2018
        500       490,500      
Fenwal, Inc.
Term Loan, 2.57%, Maturing February 28, 2014
        71       66,005      
Term Loan, 2.57%, Maturing February 28, 2014
        413       384,947      
Grifols, Inc.
Term Loan, 6.00%, Maturing June 1, 2017
        449       450,839      
HCA, Inc.
Term Loan, 3.62%, Maturing March 31, 2017
        1,091       1,061,522      
Term Loan, 3.62%, Maturing May 1, 2018
        455       440,074      
Health Management Associates, Inc.
Term Loan, 2.12%, Maturing February 28, 2014
        1,005       987,518      
Iasis Healthcare, LLC
Term Loan, 5.00%, Maturing May 3, 2018
        323       316,908      
inVentiv Health, Inc.
Term Loan, 6.50%, Maturing August 4, 2016
        494       482,665      
Kindred Healthcare, Inc.
Term Loan, 5.25%, Maturing June 1, 2018
        349       326,432      
Kinetic Concepts, Inc.
Term Loan, Maturing November 2, 2018(2)
        850       853,386      
MultiPlan, Inc.
Term Loan, 4.75%, Maturing August 26, 2017
        496       481,373      
RadNet Management, Inc.
Term Loan, 5.75%, Maturing April 1, 2016
        246       236,400      
Select Medical Corp.
Term Loan, 5.50%, Maturing May 25, 2018
        599       556,605      
TriZetto Group, Inc. (The)
Term Loan, 4.75%, Maturing May 2, 2018
        299       294,948      
Vanguard Health Holding Co., II, LLC
Term Loan, 5.00%, Maturing January 29, 2016
        741       736,351      
VWR Funding, Inc.
Term Loan, 2.75%, Maturing June 30, 2014
        929       896,510      
 
 
                $ 14,929,314      
 
 
 
 
Home Furnishings — 0.5%
 
National Bedding Co., LLC
Term Loan, 3.88%, Maturing November 28, 2013
        971     $ 962,338      
Oreck Corp.
Term Loan - Second Lien, 3.85%, Maturing March 19, 2016(4)
        85       76,104      
Yankee Candle Company, Inc. (The)
Term Loan, 2.25%, Maturing February 6, 2014
        531       521,479      
 
 
                $ 1,559,921      
 
 
 
 
Industrial Equipment — 0.5%
 
Generac CCMP Acquisition Corp.
Term Loan, 2.78%, Maturing November 11, 2013
        252     $ 245,022      
Husky Injection Molding Systems, Ltd.
Term Loan, Maturing June 30, 2018(2)
        500       500,209      
Polypore, Inc.
Term Loan, 2.25%, Maturing July 3, 2014
        795       782,185      
 
 
                $ 1,527,416      
 
 
 
 
Insurance — 1.2%
 
Alliant Holdings I, Inc.
Term Loan, 3.37%, Maturing August 21, 2014
        477     $ 474,328      
Applied Systems, Inc.
Term Loan, 5.50%, Maturing December 8, 2016
        298       291,795      

 
See Notes to Consolidated Financial Statements.
9


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Borrower/Tranche Description       (000’s omitted)     Value      
 
 
Insurance (continued)
 
                         
Asurion Corp.
Term Loan, 5.50%, Maturing May 24, 2018
        1,126     $ 1,115,212      
Term Loan - Second Lien, 9.00%, Maturing May 24, 2019
        225       221,906      
C.G. JCF Corp.
Term Loan, 3.25%, Maturing August 1, 2014
        136       131,873      
CCC Information Services Group, Inc.
Term Loan, 5.50%, Maturing November 11, 2015
        249       249,061      
CNO Financial Group, Inc.
Term Loan, 6.25%, Maturing September 30, 2016
        215       217,075      
HUB International Holdings, Inc.
Term Loan, 2.87%, Maturing June 13, 2014
        127       124,833      
Term Loan, 2.87%, Maturing June 13, 2014
        567       555,331      
U.S.I. Holdings Corp.
Term Loan, 2.75%, Maturing May 5, 2014
        701       667,719      
 
 
                $ 4,049,133      
 
 
 
 
Leisure Goods / Activities / Movies — 2.4%
 
AMC Entertainment, Inc.
Term Loan, 3.49%, Maturing December 16, 2016
        1,928     $ 1,907,498      
AMC Networks, Inc.
Term Loan, 4.00%, Maturing December 31, 2018
        274       272,027      
Bombardier Recreational Products
Term Loan, 2.90%, Maturing June 28, 2013
        522       507,400      
Cinemark USA, Inc.
Term Loan, 3.52%, Maturing April 29, 2016
        972       968,194      
Clubcorp Operations, Inc.
Term Loan, 6.00%, Maturing November 9, 2016
        500       498,750      
Live Nation Entertainment, Inc.
Term Loan, 4.50%, Maturing November 7, 2016
        517       516,479      
Regal Cinemas Corp.
Term Loan, 3.37%, Maturing August 23, 2017
        1,216       1,202,591      
Revolution Studios Distribution Co., LLC
Term Loan, 4.03%, Maturing December 21, 2014
        270       198,774      
Term Loan - Second Lien, 7.25%, Maturing June 21, 2015(4)
        225       69,615      
SeaWorld Parks & Entertainment, Inc.
Term Loan, 3.00%, Maturing February 17, 2016
        248       245,369      
Term Loan, 4.00%, Maturing August 17, 2017
        228       226,919      
Six Flags Theme Parks, Inc.
Term Loan, 5.25%, Maturing June 30, 2016
        605       606,597      
Town Sports International, Inc.
Term Loan, 7.00%, Maturing May 4, 2018
        197       195,523      
Zuffa, LLC
Term Loan, 2.25%, Maturing June 19, 2015
        479       459,600      
 
 
                $ 7,875,336      
 
 
 
 
Lodging and Casinos — 0.9%
 
Affinity Gaming, LLC
Term Loan, 10.00%, Maturing December 31, 2015
        409     $ 408,210      
Caesars Entertainment Operating Co.
Term Loan, 3.36%, Maturing January 28, 2015
        403       356,528      
Term Loan, 3.42%, Maturing January 28, 2015
        1,557       1,377,564      
Las Vegas Sands, LLC
Term Loan, 2.84%, Maturing November 23, 2016
        107       103,275      
Term Loan, 2.84%, Maturing November 23, 2016
        528       511,434      
VML US Finance, LLC
Term Loan, 4.75%, Maturing May 25, 2012
        107       107,042      
Term Loan, 4.75%, Maturing May 27, 2013
        214       214,085      
 
 
                $ 3,078,138      
 
 
 
 
Nonferrous Metals / Minerals — 0.4%
 
Fairmount Minerals, Ltd.
Term Loan, 5.25%, Maturing March 15, 2017
        535     $ 533,413      
Noranda Aluminum Acquisition
Term Loan, 2.00%, Maturing May 16, 2014
        341       330,354      
Novelis, Inc.
Term Loan, 3.75%, Maturing March 10, 2017
        422       420,297      
 
 
                $ 1,284,064      
 
 
 
 
Oil and Gas — 0.8%
 
CITGO Petroleum Corp.
Term Loan, 9.00%, Maturing June 23, 2017
        568     $ 579,737      
Frac Tech International, LLC
Term Loan, 6.25%, Maturing May 6, 2016
        415       413,230      
Gibson Energy
Term Loan, 5.75%, Maturing June 14, 2018
        399       399,997      
MEG Energy Corp.
Term Loan, 4.00%, Maturing March 16, 2018
        250       249,974      
Obsidian Natural Gas Trust
Term Loan, 7.00%, Maturing November 2, 2015
        739       742,863      
Sheridan Production Partners I, LLC
Term Loan, 6.50%, Maturing April 20, 2017
        25       24,625      

 
See Notes to Consolidated Financial Statements.
10


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Borrower/Tranche Description       (000’s omitted)     Value      
 
 
Oil and Gas (continued)
 
                         
Term Loan, 6.50%, Maturing April 20, 2017
        40     $ 40,315      
Term Loan, 6.50%, Maturing April 20, 2017
        304       304,246      
 
 
                $ 2,754,987      
 
 
 
 
Publishing — 1.9%
 
Ascend Learning
Term Loan, 7.01%, Maturing December 6, 2016
        223     $ 217,544      
Aster Zweite Beteiligungs GmbH
Term Loan, 6.00%, Maturing December 30, 2016
  EUR     793       998,153      
Cengage Learning Acquisitions, Inc.
Term Loan, 2.50%, Maturing July 3, 2014
        482       416,231      
GateHouse Media Operating, Inc.
Term Loan, 2.25%, Maturing August 28, 2014
        307       75,798      
Term Loan, 2.25%, Maturing August 28, 2014
        731       180,220      
Getty Images, Inc.
Term Loan, 5.25%, Maturing November 7, 2016
        1,226       1,230,969      
Interactive Data Corp.
Term Loan, 4.50%, Maturing February 12, 2018
        448       445,092      
Laureate Education, Inc.
Term Loan, 5.25%, Maturing August 15, 2018
        942       883,953      
MediaNews Group, Inc.
Term Loan, 8.50%, Maturing March 19, 2014
        31       30,395      
Nielsen Finance, LLC
Term Loan, 2.24%, Maturing August 9, 2013
        1,519       1,513,679      
SGS International, Inc.
Term Loan, 3.75%, Maturing September 30, 2013
        361       357,066      
 
 
                $ 6,349,100      
 
 
 
 
Radio and Television — 1.1%
 
Block Communications, Inc.
Term Loan, 2.25%, Maturing December 21, 2012
        259     $ 259,188      
Cumulus Media, Inc.
Term Loan, 5.75%, Maturing September 17, 2018
        825       816,750      
Miramax Film NY, LLC
Term Loan, 7.75%, Maturing May 20, 2016
        168       167,692      
Mission Broadcasting, Inc.
Term Loan, 5.00%, Maturing September 30, 2016
        125       124,540      
New Young Broadcasting Holding Co., Inc.
Term Loan, 8.00%, Maturing June 30, 2015
        108       106,912      
Nexstar Broadcasting, Inc.
Term Loan, 5.00%, Maturing September 30, 2016
        196       194,796      
Tyrol Acquisition 2 SAS
Term Loan, 5.37%, Maturing January 29, 2016
  EUR     250       294,901      
Term Loan, 5.37%, Maturing January 29, 2016
  EUR     250       294,901      
Univision Communications, Inc.
Term Loan, 2.25%, Maturing September 29, 2014
        667       643,542      
Term Loan, 4.50%, Maturing March 31, 2017
        667       605,994      
Weather Channel
Term Loan, 4.25%, Maturing February 13, 2017
        269       269,825      
 
 
                $ 3,779,041      
 
 
 
 
Retailers (Except Food and Drug) — 1.4%
 
Amscan Holdings, Inc.
Term Loan, 6.75%, Maturing December 4, 2017
        322     $ 317,427      
Dollar General Corp.
Term Loan, 2.99%, Maturing July 7, 2014
        500       499,271      
FTD, Inc.
Term Loan, 4.75%, Maturing June 6, 2018
        200       195,759      
Harbor Freight Tools USA, Inc.
Term Loan, 6.50%, Maturing December 22, 2017
        369       367,896      
J. Crew Operating Corp.
Term Loan, 4.75%, Maturing March 7, 2018
        348       327,616      
Jo-Ann Stores, Inc.
Term Loan, 4.75%, Maturing March 16, 2018
        348       336,061      
Michaels Stores, Inc.
Term Loan, 2.66%, Maturing October 31, 2013
        463       454,947      
Neiman Marcus Group, Inc.
Term Loan, 4.75%, Maturing May 16, 2018
        600       583,875      
PETCO Animal Supplies, Inc.
Term Loan, 4.50%, Maturing November 24, 2017
        248       245,953      
Pilot Travel Centers, LLC
Term Loan, 4.25%, Maturing March 30, 2018
        341       341,468      
Savers, Inc.
Term Loan, 4.25%, Maturing March 3, 2017
        224       222,896      
Service Master Co.
Term Loan, 2.75%, Maturing July 24, 2014
        45       43,096      
Term Loan, 2.76%, Maturing July 24, 2014
        451       432,760      
Visant Holding Corp.
Term Loan, 5.25%, Maturing December 22, 2016
        273       259,632      
 
 
                $ 4,628,657      
 
 
 
 
Steel — 0.1%
 
JMC Steel Group, Inc.
Term Loan, 4.75%, Maturing April 3, 2017
        149     $ 148,504      
Niagara Corp.
Term Loan, 10.50%, Maturing June 29, 2014(3)(4)
        201       197,038      
 
 
                $ 345,542      
 
 
 

 
See Notes to Consolidated Financial Statements.
11


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Borrower/Tranche Description       (000’s omitted)     Value      
 
 
Surface Transport — 0.3%
 
Hertz Corp.
Term Loan, 3.75%, Maturing March 9, 2018
        697     $ 692,271      
Swift Transportation Co., Inc.
Term Loan, 6.00%, Maturing December 21, 2016
        415       416,225      
 
 
                $ 1,108,496      
 
 
 
 
Telecommunications — 2.1%
 
Alaska Communications Systems Holdings, Inc.
Term Loan, 5.50%, Maturing October 21, 2016
        372     $ 366,139      
ERC Luxembourg Holdings, Ltd.
Term Loan, 3.24%, Maturing September 30, 2014
  EUR     368       365,807      
Term Loan, 3.49%, Maturing September 30, 2015
  EUR     369       365,860      
Term Loan - Second Lien, 5.62%, Maturing March 31, 2016
  EUR     500       80,057      
Intelsat Jackson Holdings SA
Term Loan, 5.25%, Maturing April 2, 2018
        2,139       2,133,234      
IPC Systems, Inc.
Term Loan, 3.21%, Maturing May 31, 2014
  GBP     241       367,121      
Macquarie UK Broadcast, Ltd.
Term Loan, 2.96%, Maturing December 1, 2014
  GBP     219       299,785      
MetroPCS Wireless
Term Loan, 4.00%, Maturing March 16, 2018
        1,193       1,177,094      
SBA Finance
Term Loan, 3.75%, Maturing June 29, 2018
        175       173,581      
Syniverse Technologies, Inc.
Term Loan, 5.25%, Maturing December 21, 2017
        298       298,680      
Telesat Canada, Inc.
Term Loan, 3.25%, Maturing October 31, 2014
        39       38,312      
Term Loan, 3.25%, Maturing October 31, 2014
        452       446,011      
Windstream Corp.
Term Loan, 3.12%, Maturing December 17, 2015
        841       836,851      
 
 
                $ 6,948,532      
 
 
 
 
Utilities — 0.8%
 
AES Corp.
Term Loan, 4.25%, Maturing June 1, 2018
        498     $ 497,562      
Calpine Corp.
Term Loan, 4.50%, Maturing April 2, 2018
        200       198,004      
Term Loan, 4.50%, Maturing April 2, 2018
        547       542,633      
NRG Energy, Inc.
Term Loan, 4.00%, Maturing July 2, 2018
        873       874,630      
TXU Texas Competitive Electric Holdings Co., LLC
Term Loan, 4.76%, Maturing October 10, 2017
        851       582,115      
 
 
                $ 2,694,944      
 
 
             
Total Senior Floating-Rate Interests
           
(identified cost $144,862,504)
  $ 141,794,324      
 
 
                         
                         
Collateralized Mortgage Obligations — 5.4%
 
        Principal
           
        Amount
           
Security       (000’s omitted)     Value      
 
 
Federal Home Loan Mortgage Corp.:
Series 2113, Class QG, 6.00%, 1/15/29
      $ 3,446     $ 3,752,643      
Series 2167, Class BZ, 7.00%, 6/15/29
        2,028       2,163,504      
Series 2182, Class ZB, 8.00%, 9/15/29
        2,779       3,092,154      
 
 
                $ 9,008,301      
 
 
Federal National Mortgage Association:
Series 1989-89, Class H, 9.00%, 11/25/19
      $ 119     $ 138,583      
Series 1991-122, Class N, 7.50%, 9/25/21
        374       426,517      
Series 1993-84, Class M, 7.50%, 6/25/23
        3,154       3,641,535      
Series 1994-42, Class K, 6.50%, 4/25/24
        1,086       1,224,087      
Series 1997-28, Class ZA, 7.50%, 4/20/27
        976       1,154,754      
Series 1997-38, Class N, 8.00%, 5/20/27
        886       1,051,264      
Series G-33, Class PT, 7.00%, 10/25/21
        1,253       1,393,324      
 
 
                $ 9,030,064      
 
 
             
Total Collateralized Mortgage Obligations
           
(identified cost $16,883,393)
  $ 18,038,365      
 
 
                         
                         
Commercial Mortgage-Backed Securities — 2.6%
 
        Principal
           
        Amount
           
Security       (000’s omitted)     Value      
 
 
CSFB, Series 2003-C3, Class D, 4.131%, 5/15/38
      $ 835     $ 817,381      
CSFB, Series 2004-C3, Class A5, 5.113%, 7/15/36(5)
        595       643,426      
GCCFC, Series 2003-C1, Class D, 4.29%, 7/5/35(6)
        160       163,332      
GECMC, Series 2004-C3, Class A4, 5.189%, 7/10/39(5)
        1,250       1,350,498      
GSMS, Series 2004-GG2, Class A6, 5.396%, 8/10/38(5)
        1,250       1,344,310      
JPMCC, Series 2010-C2, Class C, 5.531%, 11/15/43(5)(6)
        500       469,923      
MLMT, Series 2004-BPC1, Class A4, 4.724%, 10/12/41(5)
        1,000       1,045,791      

 
See Notes to Consolidated Financial Statements.
12


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount
           
Security       (000’s omitted)     Value      
 
 
MSC, Series 2003-IQ6, Class A4, 4.97%, 12/15/41
      $ 500     $ 531,501      
RBSCF, Series 2010-MB1, Class C, 4.672%, 4/15/24(5)(6)
        675       655,722      
WBCMT, Series 2004-C12, Class A4, 5.316%, 7/15/41(5)
        1,225       1,322,251      
WFCM, Series 2010-C1, Class C, 5.59%, 11/15/43(5)(6)
        500       475,003      
 
 
             
Total Commercial Mortgage-Backed Securities
           
(identified cost $8,112,766)
  $ 8,819,138      
 
 
                         
                         
Mortgage Pass-Throughs — 38.5%
 
        Principal
           
        Amount
           
Security       (000’s omitted)     Value      
 
 
Federal Home Loan Mortgage Corp.:
2.929%, with maturity at 2035(7)
      $ 5,310     $ 5,565,535      
5.00%, with various maturities to 2023(8)
        7,904       8,524,749      
6.00%, with various maturities to 2029
        5,354       5,999,048      
6.15%, with maturity at 2027
        1,490       1,641,938      
6.50%, with various maturities to 2032
        10,883       12,321,675      
7.00%, with various maturities to 2035
        9,194       10,725,728      
7.50%, with various maturities to 2035
        4,030       4,766,137      
8.00%, with various maturities to 2032
        4,475       5,117,182      
8.50%, with various maturities to 2031
        4,340       5,298,068      
9.00%, with maturity at 2031
        416       527,232      
9.50%, with various maturities to 2022
        292       339,834      
11.50%, with maturity at 2019
        436       475,317      
 
 
                $ 61,302,443      
 
 
Federal National Mortgage Association:
5.50%, with various maturities to 2029
      $ 2,826     $ 3,140,500      
6.00%, with maturity at 2023
        4,469       5,010,388      
6.324%, with maturity at 2032(7)
        2,438       2,658,950      
6.50%, with various maturities to 2030
        9,834       11,061,213      
7.00%, with various maturities to 2033
        12,132       14,178,883      
7.50%, with various maturities to 2031
        9,529       11,349,382      
8.00%, with various maturities to 2029
        2,471       2,929,690      
8.50%, with various maturities to 2027
        556       641,736      
9.00%, with various maturities to 2029
        1,238       1,481,445      
9.50%, with maturity at 2014
        11       11,469      
10.00%, with various maturities to 2031
        1,000       1,174,121      
 
 
                $ 53,637,777      
 
 
Government National Mortgage Association:
7.50%, with maturity at 2025
      $ 4,262     $ 5,057,318      
8.00%, with various maturities to 2027
        4,716       5,776,068      
9.00%, with various maturities to 2026
        2,331       2,906,761      
9.50%, with maturity at 2025
        357       433,462      
11.00%, with maturity at 2018
        394       446,696      
 
 
                $ 14,620,305      
 
 
             
Total Mortgage Pass-Throughs
           
(identified cost $120,701,295)
  $ 129,560,525      
 
 
                         
                         
Asset-Backed Securities — 0.1%
 
        Principal
           
        Amount
           
Security       (000’s omitted)     Value      
 
 
Centurion CDO 9 Ltd., Series 2005-9A, Class D1, 5.153%, 7/17/19(9)
      $ 500     $ 327,521      
 
 
             
Total Asset-Backed Securities
           
(identified cost $500,000)
  $ 327,521      
 
 
                         
                         
Corporate Bonds & Notes — 0.4%
 
        Principal
           
        Amount
           
Security       (000’s omitted)     Value      
 
 
 
Utilities — 0.4%
 
Calpine Corp., Sr. Notes
7.50%, 2/15/21(6)
      $ 575     $ 606,625      
7.875%, 1/15/23(6)
        675       715,500      
 
 
             
Total Corporate Bonds & Notes
           
(identified cost $1,250,000)
  $ 1,322,125      
 
 
                         
                         
Foreign Corporate Bonds & Notes — 0.8%
 
        Principal
           
        Amount
           
Security       (000’s omitted)     Value      
 
 
 
Chile — 0.8%
 
JPMorgan Chilean Inflation Linked Note
3.80%, 11/17/15(10)
      $ 2,465     $ 2,622,544      
 
 
Total Chile
              $ 2,622,544      
 
 
             
Total Foreign Corporate Bonds & Notes
           
(identified cost $2,000,000)
  $ 2,622,544      
 
 
                         
                         

 
See Notes to Consolidated Financial Statements.
13


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
Foreign Government Bonds — 16.3%
 
        Principal
           
        Amount*
           
Security       (000’s omitted)     Value      
 
 
Bermuda — 0.2%
 
Government of Bermuda, 5.603%, 7/20/20(6)
        619     $ 682,973      
 
 
Total Bermuda
              $ 682,973      
 
 
 
 
Brazil — 0.6%
 
Nota Do Tesouro Nacional, 6.00%, 5/15/15(10)
  BRL     3,467     $ 2,080,126      
 
 
Total Brazil
              $ 2,080,126      
 
 
 
 
Chile — 0.8%
 
Government of Chile, 6.00%, 3/1/18
  CLP     1,280,000     $ 2,712,100      
 
 
Total Chile
              $ 2,712,100      
 
 
 
 
Congo — 0.5%
 
Republic of Congo, 3.00%, 6/30/29
        2,270     $ 1,565,990      
 
 
Total Congo
              $ 1,565,990      
 
 
 
 
Dominican Republic — 1.2%
 
Dominican Republic “Bonos Internos” Total Return Linked Bond (Citibank, N.A.), 13.00%, 2/25/13(11)
  DOP     31,000     $ 796,416      
Dominican Republic “Bonos Internos” Total Return Linked Bond (Citibank, N.A.), 15.00%, 3/12/12(11)
  DOP     24,000       629,745      
Dominican Republic “Bonos Internos” Total Return Linked Bond (Citibank, N.A.), 16.00%, 7/10/20(11)
  DOP     94,600       2,457,979      
 
 
Total Dominican Republic
              $ 3,884,140      
 
 
 
 
Israel — 0.8%
 
Israel Government Bond, 3.00%, 10/31/19(10)
  ILS     2,517     $ 754,590      
Israel Government Bond, 5.00%, 4/30/15(10)
  ILS     6,191       1,938,119      
 
 
Total Israel
              $ 2,692,709      
 
 
 
 
Mexico — 0.2%
 
Mexican Bonos, 7.00%, 6/19/14
  MXN     9,645     $ 768,776      
 
 
Total Mexico
              $ 768,776      
 
 
 
 
Philippines — 0.7%
 
Philippine Government International Bond, 6.25%, 1/14/36
  PHP     98,000     $ 2,240,556      
 
 
Total Philippines
              $ 2,240,556      
 
 
 
 
Poland — 0.7%
 
Poland Government Bond, 3.00%, 8/24/16(10)
  PLN     7,831     $ 2,483,530      
 
 
Total Poland
              $ 2,483,530      
 
 
 
 
Serbia — 2.7%
 
Serbia Treasury Bill, 0.00%, 8/9/12
  RSD     115,840     $ 1,449,512      
Serbia Treasury Bill, 0.00%, 9/6/12
  RSD     171,270       2,122,762      
Serbia Treasury Bill, 0.00%, 9/6/12
  RSD     194,870       2,415,267      
Serbia Treasury Bill, 0.00%, 11/22/12
  RSD     223,410       2,696,166      
Serbia Treasury Bill, 0.00%, 4/25/13
  RSD     30,290       347,080      
 
 
Total Serbia
              $ 9,030,787      
 
 
 
 
South Africa — 3.3%
 
Republic of South Africa, 6.50%, 6/2/14
        5,854     $ 6,490,330      
South Africa Government Bond - CPI Linked, 2.50%, 1/31/17(10)
  ZAR     14,352       1,938,414      
South Africa Government Bond - CPI Linked, 2.60%, 3/31/28(10)
  ZAR     15,649       1,970,113      
South Africa Government Bond - CPI Linked, 2.75%, 1/31/22(10)
  ZAR     3,116       404,560      
South Africa Government Bond - CPI Linked, 5.50%, 12/7/23(10)
  ZAR     2,799       455,709      
 
 
Total South Africa
              $ 11,259,126      
 
 
 
 
Taiwan — 0.3%
 
Taiwan Government Bond, 0.25%, 2/10/12
  TWD     28,300     $ 945,173      
 
 
Total Taiwan
              $ 945,173      
 
 
 
 
Turkey — 2.5%
 
Turkey Government Bond, 0.00%, 4/25/12
  TRY     1,080     $ 582,690      
Turkey Government Bond, 0.00%, 8/8/12
  TRY     644       338,624      
Turkey Government Bond, 0.00%, 11/7/12
  TRY     7,302       3,744,909      
Turkey Government Bond, 3.00%, 1/6/21(10)
  TRY     6,733       3,836,059      
 
 
Total Turkey
              $ 8,502,282      
 
 
 
 
Uruguay — 1.1%
 
Monetary Regulation Bill, 0.00%, 8/15/13
  UYU     12,600     $ 547,764      
Republic of Uruguay, 5.00%, 9/14/18(10)
  UYU     55,082       3,078,558      
 
 
Total Uruguay
              $ 3,626,322      
 
 
 

 
See Notes to Consolidated Financial Statements.
14


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Security       (000’s omitted)     Value      
 
 
Venezuela — 0.7%
 
Bolivarian Republic of Venezuela, 7.00%, 3/31/38(12)
        3,383     $ 1,953,683      
Bolivarian Republic of Venezuela, 9.25%, 5/7/28(12)
        650       435,500      
 
 
Total Venezuela
              $ 2,389,183      
 
 
             
Total Foreign Government Bonds
           
(identified cost $54,062,414)
  $ 54,863,773      
 
 
                         
                         
Common Stocks — 1.3%
 
Security       Shares     Value      
 
 
Affinity Gaming, LLC(4)(13)(14)
        23,498     $ 143,573      
Buffets, Inc.(4)(13)(14)
        6,477       0      
Dayco Products, LLC(13)(14)
        8,898       363,706      
Euramax International, Inc.(13)(14)
        234       66,312      
Hayes Lemmerz International, Inc.(4)(13)(14)
        30,203       1,585,658      
Ion Media Networks, Inc.(4)(13)(14)
        1,357       1,085,600      
KNIA Holdings, Inc.(4)(13)(14)
        3,419       75,671      
MediaNews Group, Inc.(4)(13)(14)
        3,023       59,825      
Metro-Goldwyn-Mayer Holdings, Inc.(13)(14)
        19,828       358,143      
New Young Broadcasting Holding Co., Inc.(13)(14)
        178       489,500      
Oreck Corp.(4)(13)(14)
        1,510       106,017      
SuperMedia, Inc.(13)(14)
        1,346       2,329      
United Subcontractors, Inc.(4)(13)(14)
        154       9,003      
 
 
             
Total Common Stocks
           
(identified cost $1,820,645)
  $ 4,345,337      
 
 
                         
                         
Warrants — 0.0%
 
Security       Shares     Value      
 
 
 
United States — 0.0%
 
Oriental Trading Co., Inc., Expires 2/11/16(4)(13)(14)
        1,636     $ 0      
Oriental Trading Co., Inc., Expires 2/11/16(4)(13)(14)
        1,795       0      
 
 
             
Total Warrants
           
(identified cost $0)
  $ 0      
 
 
                         
                         
Precious Metals — 2.2%
 
Description       Troy Ounces     Value      
 
 
Gold(13)
        1,983     $ 3,408,561      
Platinum(13)
        2,364       3,784,519      
 
 
             
Total Precious Metals
           
(identified cost $6,775,524)
  $ 7,193,080      
 
 
 
                                     
Currency Options Purchased — 0.0%(15)
 
    Principal Amount
                       
    of Contracts
    Strike
    Expiration
           
Description   (000’s omitted)     Price     Date     Value      
 
 
Euro Put Option
    EUR 11,837       EUR 1.17       5/3/12     $ 118,075      
 
 
             
Total Currency Options Purchased
           
(identified cost $540,846)
  $ 118,075      
 
 
                                     
                                     
Put Options Purchased — 0.0%(15)
 
    Number of
    Strike
    Expiration
           
Description   Contracts     Price     Date     Value      
 
 
Light Sweet Crude Oil Future 12/11
    5     $ 80       11/15/11     $ 1,400      
 
 
             
Total Put Options Purchased
           
(identified cost $34,750)
  $ 1,400      
 
 
 
                         
Short-Term Investments — 20.3%
 
Foreign Government Securities — 12.9%
 
        Principal
           
        Amount*
           
Security       (000’s omitted)     Value      
 
 
 
Brazil — 0.4%
 
Letras Do Tesouro Nacional, 0.00%, 4/1/12
  BRL     2,494     $ 1,391,105      
 
 
Total Brazil
              $ 1,391,105      
 
 
 
 
Chile — 0.1%
 
Banco Central de Chile, 0.00%, 1/18/12
  CLP     75,000     $ 151,716      
 
 
Total Chile
              $ 151,716      
 
 
 
 
Georgia — 0.2%
 
Bank of Georgia Promissory Note, 9.00%, 12/7/11
        775     $ 779,342      
 
 
Total Georgia
              $ 779,342      
 
 
 
 
Ghana — 0.3%
 
Ghana Government Bond, 14.47%, 12/15/11
  GHS     1,541     $ 969,271      
 
 
Total Ghana
              $ 969,271      
 
 
 
 
Iceland — 1.1%
 
Iceland Treasury Bill, 0.00%, 4/16/12
  ISK     505,000     $ 3,691,104      
 
 
Total Iceland
              $ 3,691,104      
 
 
 

 
See Notes to Consolidated Financial Statements.
15


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Security       (000’s omitted)     Value      
 
 
Indonesia — 0.2%
 
Indonesia Treasury Bill, 0.00%, 1/19/12
  IDR     4,030,000     $ 450,329      
Indonesia Treasury Bill, 0.00%, 2/9/12
  IDR     663,000       73,956      
 
 
Total Indonesia
              $ 524,285      
 
 
 
 
Kazakhstan — 0.3%
 
Kazakhstan National Bank, 0.00%, 11/25/11
  KZT     146,476     $ 989,537      
Kazakhstan National Bank, 0.00%, 3/4/12
  KZT     3,767       25,362      
 
 
Total Kazakhstan
              $ 1,014,899      
 
 
 
 
Lebanon — 0.0%(15)
 
Lebanon Treasury Note, 9.06%, 11/10/11
  LBP     150,710     $ 100,239      
 
 
Total Lebanon
              $ 100,239      
 
 
 
 
Malaysia — 2.9%
 
Bank Negara Monetary Note, 0.00%, 11/1/11
  MYR     2,584     $ 842,203      
Bank Negara Monetary Note, 0.00%, 11/10/11
  MYR     2,584       841,367      
Bank Negara Monetary Note, 0.00%, 11/15/11
  MYR     2,309       751,814      
Bank Negara Monetary Note, 0.00%, 11/17/11
  MYR     7,474       2,433,169      
Bank Negara Monetary Note, 0.00%, 11/24/11
  MYR     2,733       889,249      
Bank Negara Monetary Note, 0.00%, 12/8/11
  MYR     3,297       1,071,651      
Bank Negara Monetary Note, 0.00%, 12/15/11
  MYR     1,645       534,382      
Bank Negara Monetary Note, 0.00%, 12/22/11
  MYR     358       116,230      
Bank Negara Monetary Note, 0.00%, 1/10/12
  MYR     4,636       1,502,965      
Bank Negara Monetary Note, 0.00%, 1/12/12
  MYR     2,662       862,860      
 
 
Total Malaysia
              $ 9,845,890      
 
 
 
 
Philippines — 0.7%
 
Philippine Treasury Bill, 0.00%, 12/7/11
  PHP     23,010     $ 538,493      
Philippine Treasury Bill, 0.00%, 1/11/12
  PHP     20,870       488,214      
Philippine Treasury Bill, 0.00%, 2/22/12
  PHP     25,390       593,216      
Philippine Treasury Bill, 0.00%, 3/7/12
  PHP     24,650       575,384      
Philippine Treasury Bill, 0.00%, 8/22/12
  PHP     10,310       238,915      
 
 
Total Philippines
              $ 2,434,222      
 
 
 
 
Romania — 1.8%
 
Romania Treasury Bill, 0.00%, 12/28/11
  RON     980     $ 309,540      
Romania Treasury Bill, 0.00%, 3/21/12
  RON     6,240       1,941,768      
Romania Treasury Bill, 0.00%, 4/11/12
  RON     5,590       1,732,186      
Romania Treasury Bill, 0.00%, 5/2/12
  RON     5,670       1,752,791      
Romania Treasury Bill, 0.00%, 6/20/12
  RON     480       147,049      
Romania Treasury Bill, 0.00%, 7/11/12
  RON     440       134,259      
 
 
Total Romania
              $ 6,017,593      
 
 
 
 
Serbia — 0.9%
 
Serbia Treasury Bill, 0.00%, 12/13/11
  RSD     22,940     $ 310,271      
Serbia Treasury Bill, 0.00%, 3/22/12
  RSD     110,190       1,443,772      
Serbia Treasury Bill, 0.00%, 4/5/12
  RSD     17,930       233,855      
Serbia Treasury Bill, 0.00%, 6/7/12
  RSD     29,000       370,358      
Serbia Treasury Bill, 0.00%, 7/6/12
  RSD     58,780       743,991      
 
 
Total Serbia
              $ 3,102,247      
 
 
 
 
Sri Lanka — 2.3%
 
Sri Lanka Treasury Bill, 0.00%, 1/20/12
  LKR     91,000     $ 813,166      
Sri Lanka Treasury Bill, 0.00%, 3/9/12
  LKR     30,490       269,899      
Sri Lanka Treasury Bill, 0.00%, 3/16/12
  LKR     36,270       320,626      
Sri Lanka Treasury Bill, 0.00%, 3/23/12
  LKR     67,120       592,529      
Sri Lanka Treasury Bill, 0.00%, 4/27/12
  LKR     61,000       535,311      
Sri Lanka Treasury Bill, 0.00%, 5/11/12
  LKR     200,370       1,755,819      
Sri Lanka Treasury Bill, 0.00%, 7/13/12
  LKR     230,890       1,998,393      
Sri Lanka Treasury Bill, 0.00%, 8/3/12
  LKR     135,510       1,166,566      
Sri Lanka Treasury Bill, 0.00%, 10/5/12
  LKR     35,800       303,215      
 
 
Total Sri Lanka
              $ 7,755,524      
 
 
 
 
Turkey — 1.1%
 
Turkey Government Bond, 0.00%, 11/16/11
  TRY     3,891     $ 2,191,603      
Turkey Government Bond, 0.00%, 1/25/12
  TRY     2,634       1,458,098      
 
 
Total Turkey
              $ 3,649,701      
 
 
 
 
Uruguay — 0.2%
 
Monetary Regulation Bill, 0.00%, 11/17/11
  UYU     2,700     $ 140,130      
Monetary Regulation Bill, 0.00%, 12/22/11
  UYU     8,000       411,923      
Monetary Regulation Bill, 0.00%, 8/24/12
  UYU     3,025       145,732      
 
 
Total Uruguay
              $ 697,785      
 
 
 
 
Zambia — 0.4%
 
Zambia Treasury Bill, 0.00%, 12/12/11
  ZMK     865,000     $ 174,365      
Zambia Treasury Bill, 0.00%, 12/12/11
  ZMK     1,140,000       229,799      
Zambia Treasury Bill, 0.00%, 12/12/11
  ZMK     1,910,000       385,015      
Zambia Treasury Bill, 0.00%, 3/12/12
  ZMK     505,000       99,033      

 
See Notes to Consolidated Financial Statements.
16


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

                         
        Principal
           
        Amount*
           
Security       (000’s omitted)     Value      
 
 
Zambia (continued)
 
                         
Zambia Treasury Bill, 0.00%, 3/19/12
  ZMK     2,390,000     $ 467,473      
 
 
Total Zambia
              $ 1,355,685      
 
 
             
Total Foreign Government Securities
           
(identified cost $44,326,023)
  $ 43,480,608      
 
 
                         
                         
U.S. Treasury Obligations — 1.4%
 
        Principal
           
        Amount
           
Security       (000’s omitted)     Value      
 
 
U.S. Treasury Bill, 0.00%, 11/10/11(8)
      $ 2,630     $ 2,629,995      
U.S. Treasury Bill, 0.00%, 11/17/11(8)
        2,056       2,056,087      
 
 
             
Total U.S. Treasury Obligations
           
(identified cost $4,686,082)
  $ 4,686,082      
 
 
                         
                         
Repurchase Agreements — 3.8%
 
        Principal
           
        Amount
           
Description       (000’s omitted)     Value      
 
 
Bank of America:
                       
Dated 8/19/11 with a maturity date of 11/10/11, an interest rate of 0.84% and repurchase proceeds of EUR 1,450,870, collateralized by EUR 1,300,000 Government of France 3.75%, due 4/25/17 and a market value, including accrued interest, of $1,967,694.
  EUR     1,448     $ 2,003,874      
Dated 10/12/11 with a maturity date of 11/17/11, an interest rate of 0.85% payable by the Fund and repurchase proceeds of $813,454, collateralized by $1,080,000 Republic of Belarus 8.75%, due 8/3/15 and a market value, including accrued interest, of $941,100.
  $     814       814,050      
Dated 10/21/11 with a maturity date of 11/22/11, an interest rate of 0.72% and repurchase proceeds of EUR 2,712,590, collateralized by EUR 2,660,000 Government of France 4.00%, due 10/25/38 and a market value, including accrued interest, of $3,752,430.
  EUR     2,711       3,751,311      
Dated 10/31/11 with a maturity date of 12/5/11, an interest rate of 0.47% and repurchase proceeds of EUR 1,400,585, collateralized by EUR 1,280,000 Government of France 3.75%, due 4/25/17 and a market value, including accrued interest, of $1,937,422.
  EUR     1,400       1,937,180      
Citibank:
Dated 10/19/11 with a maturity date of 11/25/11, an interest rate of 0.48% and repurchase proceeds of EUR 1,479,611, collateralized by EUR 1,450,000 Government of France 4.00%, due 10/25/38 and a market value, including accrued interest, of $2,045,497.
  EUR     1,479       2,046,492      
Dated 10/25/11 with a maturity date of 11/28/11, an interest rate of 0.68% and repurchase proceeds of EUR 1,508,258, collateralized by EUR 1,550,000 Belgium Kingdom Government Bond 3.75%, due 9/28/20 and a market value, including accrued interest, of $2,082,828.
  EUR     1,507       2,085,755      
 
 
             
Total Repurchase Agreements
           
(identified cost $12,732,269)
  $ 12,638,662      
 
 
                         
                         
Other Securities — 2.2%
 
        Interest/
           
        Principal
           
        Amount
           
Description       (000’s omitted)     Value      
 
 
Eaton Vance Cash Reserves Fund, LLC, 0.12%(16)
      $ 6,248     $ 6,247,651      
State Street Bank and Trust Euro Time Deposit, 0.01%, 11/1/11
        1,154       1,153,709      
 
 
             
Total Other Securities
           
(identified cost $7,401,360)
  $ 7,401,360      
 
 
             
Total Short-Term Investments
           
(identified cost $69,145,734)
  $ 68,206,712      
 
 
             
Total Investments — 130.1%
           
(identified cost $426,689,871)
  $ 437,212,919      
 
 
                     
Other Assets, Less Liabilities — (30.1)%
          $ (101,048,225 )    
 
 
                     
Net Assets — 100.0%
          $ 336,164,694      
 
 
 
The percentage shown for each investment category in the Consolidated Portfolio of Investments is based on net assets.

 
See Notes to Consolidated Financial Statements.
17


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

 
     
CSFB
 
- Credit Suisse First Boston Mortgage Securities Corp.
GCCFC
 
- Greenwich Capital Commercial Funding Corp.
GECMC
 
- General Electric Commercial Mortgage Corp.
GSMS
 
- Goldman Sachs Mortgage Securities Corporation II
JPMCC
 
- JPMorgan Chase Commercial Mortgage Securities Corp.
MLMT
 
- Merrill Lynch Mortgage Trust
MSC
 
- Morgan Stanley Capital I
RBSCF
 
- Royal Bank of Scotland Commercial Funding
WBCMT
 
- Wachovia Bank Commercial Mortgage Trust
WFCM
 
- Wells Fargo Commercial Mortgage Trust
BRL
 
- Brazilian Real
CLP
 
- Chilean Peso
DOP
 
- Dominican Peso
EUR
 
- Euro
GBP
 
- British Pound Sterling
GHS
 
- Ghanaian Cedi
IDR
 
- Indonesian Rupiah
ILS
 
- Israeli Shekel
ISK
 
- Icelandic Krona
KZT
 
- Kazak Tenge
LBP
 
- Lebanese Pound
LKR
 
- Sri Lankan Rupee
MXN
 
- Mexican Peso
MYR
 
- Malaysian Ringgit
PHP
 
- Philippine Peso
PLN
 
- Polish Zloty
RON
 
- Romanian Leu
RSD
 
- Serbian Dinar
TRY
 
- New Turkish Lira
TWD
 
- New Taiwan Dollar
UYU
 
- Uruguayan Peso
ZAR
 
- South African Rand
ZMK
 
- Zambian Kwacha
 
* In U.S. dollars unless otherwise indicated.
 
(1) Senior floating-rate interests (Senior Loans) often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. However, Senior Loans will have an expected average life of approximately two to four years. The stated interest rate represents the weighted average interest rate of all contracts within the senior loan facility and includes commitment fees on unfunded loan commitments, if any. Senior Loans typically have rates of interest which are redetermined either daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium. These base lending rates are primarily the London Interbank Offered Rate (“LIBOR”) and secondarily, the prime rate offered by one or more major United States banks (the “Prime Rate”) and the certificate of deposit (“CD”) rate or other base lending rates used by commercial lenders.
 
(2) This Senior Loan will settle after October 31, 2011, at which time the interest rate will be determined.
 
 
(3) Represents a payment-in-kind security which may pay all or a portion of interest in additional par.
 
(4) Security valued at fair value using methods determined in good faith by or at the direction of the Trustees.
 
(5) Weighted average fixed-rate coupon that changes/updates monthly.
 
(6) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be sold in certain transactions (normally to qualified institutional buyers) and remain exempt from registration. At October 31, 2011, the aggregate value of these securities is $3,769,078 or 1.1% of the Fund’s net assets.
 
(7) Adjustable rate mortgage security. Rate shown is the rate at October 31, 2011.
 
(8) Security (or a portion thereof) has been pledged to cover collateral requirements on open financial contracts.
 
(9) Variable rate security. The stated interest rate represents the rate in effect at October 31, 2011.
 
(10) Inflation-linked security whose principal is adjusted for inflation based on changes in a designated inflation index or inflation rate for the applicable country. Interest is calculated based on the inflation-adjusted principal.
 
(11) Represents a structured security whose market value and interest rate are linked to the performance of the underlying security.
 
(12) Security exempt from registration under Regulation S of the Securities Act of 1933, which exempts from registration securities offered and sold outside the United States. Security may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
 
(13) Non-income producing.
 
(14) Security was acquired in connection with a restructuring of a Senior Loan and may be subject to restrictions on resale.
 
(15) Amount is less than 0.05%
 
(16) Affiliated investment company available to Eaton Vance portfolios and funds which invests in high quality, U.S. dollar denominated money market instruments. The rate shown is the annualized seven-day yield as of October 31, 2011.
 

 
See Notes to Consolidated Financial Statements.
18


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Portfolio of Investments — continued

 
                     
Securities Sold Short
Foreign Government Bonds
 
    Principal
           
    Amount
           
Security   (000’s omitted)     Value      
 
 
Belarus
 
Republic of Belarus, 8.75%, 8/3/15(12)
  $ (380 )   $ (323,000 )    
 
 
Total Belarus
          $ (323,000 )    
 
 
Belgium
 
Belgium Kingdom Government Bond, 3.75%, 9/28/20
  EUR  (1,550 )   $ (2,075,336 )    
 
 
Total Belgium
          $ (2,075,336 )    
 
 
France
 
Government of France, 3.75%, 4/25/17
  EUR  (2,580 )   $ (3,835,429 )    
Government of France, 4.00%, 10/25/38
  EUR  (4,110 )     (5,793,564 )    
 
 
Total France
          $ (9,628,993 )    
 
 
     
Total Foreign Government Bonds
   
(proceeds $12,227,078)
  $ (12,027,329 )    
 
 
     
Total Securities Sold Short
   
(proceeds $12,227,078)
  $ (12,027,329 )    
 
 
 

 
See Notes to Consolidated Financial Statements.
19


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Statement of Assets and Liabilities

 
             
Assets   October 31, 2011    
 
Investments —
           
Securities of unaffiliated issuers, at value (identified cost, $413,666,696)
  $ 423,772,188      
Affiliated investment, at value (identified cost, $6,247,651)
    6,247,651      
Precious metals, at value (identified cost, $6,775,524)
    7,193,080      
 
 
Total Investments, at value (identified cost, $426,689,871)
  $ 437,212,919      
 
 
Cash
  $ 1,950,620      
Restricted cash*
    430,000      
Foreign currency — Yuan Renminbi, at value (identified cost, $672,976)
    672,660      
Foreign currency — other, at value (identified cost, $1,009,106)
    1,018,678      
Interest receivable
    2,483,194      
Interest receivable from affiliated investment
    496      
Receivable for investments sold
    3,488,918      
Receivable for variation margin on open futures contracts
    126,400      
Receivable for open forward foreign currency exchange contracts
    2,903,168      
Receivable for closed forward foreign currency exchange contracts
    175,494      
Receivable for open swap contracts
    2,950,175      
Premium paid on open swap contracts
    2,150,977      
Tax reclaims receivable
    43,553      
Prepaid expenses and other assets
    140,163      
 
 
Total assets
  $ 455,747,415      
 
 
             
             
 
Liabilities
 
Notes payable
  $ 98,000,000      
Payable for investments purchased
    6,552,665      
Payable for open forward commodity contracts
    394,615      
Payable for open forward foreign currency exchange contracts
    756,981      
Payable for closed forward foreign currency exchange contracts
    14,268      
Payable for open swap contracts
    1,000,241      
Premium received on open swap contracts
    9,437      
Payable for securities sold short, at value (proceeds, $12,227,078)
    12,027,329      
Payable to affiliates:
           
Investment adviser fee
    306,083      
Trustees’ fees
    949      
Interest payable for securities sold short
    91,191      
Accrued expenses
    428,962      
 
 
Total liabilities
  $ 119,582,721      
 
 
Net Assets
  $ 336,164,694      
 
 
             
             
 
Sources of Net Assets
 
Common shares, $0.01 par value, unlimited number of shares authorized, 18,886,596 shares issued and outstanding
  $ 188,866      
Additional paid-in capital
    353,111,691      
Accumulated net realized loss
    (32,293,455 )    
Accumulated undistributed net investment income
    606,073      
Net unrealized appreciation
    14,551,519      
 
 
Net Assets
  $ 336,164,694      
 
 
             
             
 
Net Asset Value
 
($336,164,694 ¸ 18,886,596 common shares issued and outstanding)
  $ 17.80      
 
 
 
* Represents restricted cash on deposit at custodian for open financial contracts.

 
See Notes to Consolidated Financial Statements.
20


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Statement of Operations

 
             
    Year Ended
   
Investment Income   October 31, 2011    
 
Interest (net of foreign taxes, $217,027)
  $ 22,004,659      
Interest allocated from affiliated investment
    12,745      
Expenses allocated from affiliated investment
    (1,082 )    
 
 
Total investment income
  $ 22,016,322      
 
 
             
             
 
Expenses
 
Investment adviser fee
  $ 4,291,298      
Trustees’ fees and expenses
    11,433      
Custodian fee
    705,487      
Transfer and dividend disbursing agent fees
    19,836      
Legal and accounting services
    179,739      
Printing and postage
    110,983      
Interest expense and fees
    1,567,987      
Interest expense on securities sold short
    188,837      
Miscellaneous
    80,336      
 
 
Total expenses
  $ 7,155,936      
 
 
Deduct —
           
Reduction of investment adviser fee
  $ 666,146      
Reduction of custodian fee
    445      
 
 
Total expense reductions
  $ 666,591      
 
 
             
Net expenses
  $ 6,489,345      
 
 
             
Net investment income
  $ 15,526,977      
 
 
             
             
 
Realized and Unrealized Gain (Loss)
 
Net realized gain (loss) —
           
Investment transactions
  $ 4,771,907      
Investment transactions allocated from affiliated investment
    337      
Futures contracts
    (551,737 )    
Swap contracts
    (631,042 )    
Forward commodity contracts
    (484,498 )    
Foreign currency and forward foreign currency exchange contract transactions
    (3,908,389 )    
 
 
Net realized loss
  $ (803,422 )    
 
 
Change in unrealized appreciation (depreciation) —
           
Investments (including net increase of $351,564 from precious metals)
  $ (8,242,076 )    
Securities sold short
    199,749      
Futures contracts
    256,943      
Swap contracts
    2,575,603      
Forward commodity contracts
    (394,615 )    
Foreign currency and forward foreign currency exchange contracts
    3,881,156      
 
 
Net change in unrealized appreciation (depreciation)
  $ (1,723,240 )    
 
 
             
Net realized and unrealized loss
  $ (2,526,662 )    
 
 
             
Net increase in net assets from operations
  $ 13,000,315      
 
 

 
See Notes to Consolidated Financial Statements.
21


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Statements of Changes in Net Assets

 
                     
    Year Ended October 31,    
   
Increase (Decrease) in Net Assets   2011   2010    
 
From operations —
                   
Net investment income
  $ 15,526,977     $ 19,851,609      
Net realized loss from investment transactions, futures contracts, swap contracts, written options, forward commodity contracts, and foreign currency and forward foreign currency exchange contract transactions
    (803,422 )     (1,431,899 )    
Net change in unrealized appreciation (depreciation) from investments, securities sold short, futures contracts, swap contracts, written options, forward commodity contracts, foreign currency and forward foreign currency exchange contracts
    (1,723,240 )     13,566,557      
 
 
Net increase in net assets from operations
  $ 13,000,315     $ 31,986,267      
 
 
Distributions to shareholders —
                   
From net investment income
  $ (21,908,451 )   $ (20,397,524 )    
 
 
Total distributions
  $ (21,908,451 )   $ (20,397,524 )    
 
 
                     
Net increase (decrease) in net assets
  $ (8,908,136 )   $ 11,588,743      
 
 
                     
                     
 
Net Assets
 
At beginning of year
  $ 345,072,830     $ 333,484,087      
 
 
At end of year
  $ 336,164,694     $ 345,072,830      
 
 
                     
                     
 
Accumulated undistributed net investment income
included in net assets
 
At end of year
  $ 606,073     $ 5,229,713      
 
 

 
See Notes to Consolidated Financial Statements.
22


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Statement of Cash Flows

 
             
    Year Ended
   
Cash Flows From Operating Activities   October 31, 2011    
 
Net increase in net assets from operations
  $ 13,000,315      
Adjustments to reconcile net increase in net assets from operations to
           
net cash provided by operating activities:
           
Investments purchased
    (263,675,608 )    
Investments sold and principal repayments
    290,894,447      
Increase in short-term investments, excluding foreign government securities
    (6,681,410 )    
Net amortization/accretion of premium (discount)
    (3,520,303 )    
Amortization of structuring fee on notes payable
    48,935      
Decrease in restricted cash
    60,000      
Decrease in interest receivable
    22,431      
Decrease in interest receivable from affiliated investment
    1,323      
Increase in receivable for investments sold
    (2,555,314 )    
Increase in receivable for variation margin on open futures contracts
    (126,400 )    
Increase in receivable for open forward foreign currency exchange contracts
    (2,176,111 )    
Decrease in receivable for closed forward foreign currency exchange contracts
    112,969      
Increase in receivable for open swap contracts
    (1,930,035 )    
Decrease in premium paid on open swap contracts
    417,880      
Increase in tax reclaims receivable
    (16,201 )    
Decrease in prepaid expenses and other assets
    3,729      
Decrease in payable for investments purchased
    (11,855,007 )    
Decrease in payable for variation margin on open futures contracts
    (514 )    
Increase in payable for open forward commodity contracts
    394,615      
Decrease in payable for open forward foreign currency exchange contracts
    (1,695,797 )    
Decrease in payable for closed forward foreign currency exchange contracts
    (208,007 )    
Decrease in payable for open swap contracts
    (645,568 )    
Increase in premium received on open swap contracts
    822      
Increase in payable for securities sold short, at value
    12,027,329      
Increase in payable to affiliate for investment adviser fee
    13,829      
Decrease in payable to affiliate for Trustees’ fees
    (113 )    
Increase in interest payable for securities sold short
    91,191      
Decrease in accrued expenses
    (92,296 )    
Decrease in unfunded loan commitments
    (252,485 )    
Net change in unrealized (appreciation) depreciation from investments
    8,242,076      
Net realized gain from investments
    (4,772,244 )    
 
 
Net cash provided by operating activities
  $ 25,128,478      
 
 
             
             
 
Cash Flows From Financing Activities
 
Distributions paid, net of reinvestments
  $ (21,908,451 )    
Proceeds from notes payable
    78,000,000      
Repayment of notes payable
    (78,000,000 )    
 
 
Net cash used in financing activities
  $ (21,908,451 )    
 
 
             
Net increase in cash*
  $ 3,220,027      
 
 
             
Cash at beginning of year(1)
  $ 421,931      
 
 
             
Cash at end of year(1)
  $ 3,641,958      
 
 
             
             
 
Supplemental disclosure of cash flow information:
 
Cash paid for interest and fees on borrowings
  $ 1,522,564      
 
 
 
(1) Balance includes foreign currency, at value.
* Includes net change in unrealized appreciation (depreciation) on foreign currency of $4,634.

 
See Notes to Consolidated Financial Statements.
23


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Consolidated Financial Highlights

 
                                             
    Year Ended October 31,    
   
    2011   2010   2009   2008   2007    
 
Net asset value — Beginning of year
  $ 18.270     $ 17.660     $ 14.970     $ 18.510     $ 18.420      
 
 
                                             
                                             
 
Income (Loss) From Operations
 
Net investment income(1)
  $ 0.822     $ 1.051     $ 1.130     $ 1.147     $ 1.129      
Net realized and unrealized gain (loss)
    (0.132)       0.639       2.670       (3.321 )     0.381      
 
 
Total income (loss) from operations
  $ 0.690     $ 1.690     $ 3.800     $ (2.174 )   $ 1.510      
 
 
                                             
                                             
 
Less Distributions
 
From net investment income
  $ (1.160)     $ (1.080 )   $ (1.001 )   $ (1.366 )   $ (1.420 )    
Tax return of capital
                (0.109 )                
 
 
Total distributions
  $ (1.160)     $ (1.080 )   $ (1.110 )   $ (1.366 )   $ (1.420 )    
 
 
                                             
Net asset value — End of year
  $ 17.800     $ 18.270     $ 17.660     $ 14.970     $ 18.510      
 
 
                                             
Market value — End of year
  $ 16.350     $ 17.600     $ 15.570     $ 12.620     $ 16.500      
 
 
                                             
Total Investment Return on Net Asset Value(2)
    4.35 %     10.26 %     28.04 %     (11.57 )%     8.82 %    
 
 
                                             
Total Investment Return on Market Value(2)
    (0.51) %     20.48 %     33.90 %     (16.36 )%     0.66 %    
 
 
                                             
                                             
 
Ratios/Supplemental Data
 
Net assets, end of year (000’s omitted)
  $ 336,165     $ 345,073     $ 333,484     $ 282,735     $ 349,620      
Ratios (as a percentage of average daily net assets):
                                           
Expenses excluding interest and fees(3)
    1.38 %     1.27 %     1.22 %     1.15 %     1.14 %    
Interest and fee expense(4)
    0.51 %     0.46 %     0.41 %     0.06 %          
Total expenses(3)
    1.89 %     1.73 %     1.63 %     1.21 %     1.14 %    
Net investment income
    4.52 %     5.81 %     7.17 %     6.54 %     6.12 %    
Portfolio Turnover
    35 %     21 %     32 %     31 %     114 %    
 
 
Senior Securities:
                                           
Total notes payable outstanding (in 000’s)
  $ 98,000     $ 98,000     $ 111,000     $ 70,900     $      
Asset coverage per $1,000 of notes payable(5)
  $ 4,430     $ 4,521     $ 4,004     $ 4,988     $      
 
 
 
(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.
(3) Excludes the effect of custody fee credits, if any, of less than 0.005%.
(4) Interest expense relates to borrowings for the purpose of financial leverage (see Note 8) and securities sold short.
(5) Calculated by subtracting the Fund’s total liabilities (not including the notes payable) from the Fund’s total assets, and dividing the result by the notes payable balance in thousands.

 
See Notes to Consolidated Financial Statements.
24


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements

 
1 Significant Accounting Policies
 
Eaton Vance Short Duration Diversified Income Fund (the Fund) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company. The Fund’s primary investment objective is to provide a high level of current income, with a secondary objective of seeking capital appreciation to the extent consistent with its primary goal.
 
The Fund seeks to gain exposure to the commodity markets, in whole or in part, through investments in Eaton Vance EVG Commodity Subsidiary, Ltd. (the Subsidiary), a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands with the same objective and investment policies and restrictions as the Fund. The Fund may invest up to 25% of its total assets in the Subsidiary. The net assets of the Subsidiary at October 31, 2011 were $12,593,848 or 3.7% of the Fund’s consolidated net assets. The accompanying consolidated financial statements include the accounts of the Subsidiary. Intercompany balances and transactions have been eliminated in consolidation.
 
The following is a summary of significant accounting policies of the Fund. The policies are in conformity with accounting principles generally accepted in the United States of America.
 
A Investment Valuation — Interests in senior floating-rate loans (Senior Loans) for which reliable market quotations are readily available are valued generally at the average mean of bid and ask quotations obtained from a third party pricing service. Other Senior Loans are valued at fair value by the investment adviser under procedures approved by the Trustees. In fair valuing a Senior Loan, the investment adviser utilizes one or more of the valuation techniques described in (i) through (iii) below to assess the likelihood that the borrower will make a full repayment of the loan underlying such Senior Loan relative to yields on other Senior Loans issued by companies of comparable credit quality. If the investment adviser believes that there is a reasonable likelihood of full repayment, the investment adviser will determine fair value using a matrix pricing approach that considers the yield on the Senior Loan. If the investment adviser believes there is not a reasonable likelihood of full repayment, the investment adviser will determine fair value using analyses that include, but are not limited to: (i) a comparison of the value of the borrower’s outstanding equity and debt to that of comparable public companies; (ii) a discounted cash flow analysis; or (iii) when the investment adviser believes it is likely that a borrower will be liquidated or sold, an analysis of the terms of such liquidation or sale. In certain cases, the investment adviser will use a combination of analytical methods to determine fair value, such as when only a portion of a borrower’s assets are likely to be sold. In conducting its assessment and analyses for purposes of determining fair value of a Senior Loan, the investment adviser will use its discretion and judgment in considering and appraising relevant factors. Fair value determinations are made by the portfolio managers of the Fund based on information available to such managers. The portfolio managers of other funds managed by the investment adviser that invest in Senior Loans may not possess the same information about a Senior Loan borrower as the portfolio managers of the Fund. At times, the fair value of a Senior Loan determined by the portfolio managers of other funds managed by the investment adviser that invest in Senior Loans may vary from the fair value of the same Senior Loan determined by the portfolio managers of the Fund. The fair value of each Senior Loan is periodically reviewed and approved by the investment adviser’s Valuation Committee and by the Trustees based upon procedures approved by the Trustees. Junior Loans (i.e., subordinated loans and second lien loans) are valued in the same manner as Senior Loans.
 
Debt obligations (including short-term obligations with a remaining maturity of more than sixty days and excluding most seasoned, fixed-rate 30-year mortgage-backed securities as noted below) are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics, 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. Most seasoned, fixed-rate 30-year mortgage-backed securities are valued through the use of the investment adviser’s matrix pricing system, which takes into account bond prices, yield differentials, anticipated prepayments and interest rates provided by dealers. Short-term debt obligations purchased with a remaining maturity of sixty days or less (excluding those that are non-U.S. dollar denominated, which typically are valued by a pricing service or dealer quotes) are generally valued at amortized cost, which approximates market value. Equity securities (including common shares of closed-end investment companies) listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and asked prices therefore on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and asked prices or, in the case of preferred equity securities that are not listed or traded in the over-the-counter market, by a third party pricing service that will use various techniques that consider factors including, but not limited to, prices or yields of securities with similar characteristics, benchmark yields, broker/dealer quotes, quotes of underlying common stock, issuer spreads, as well as industry and economic events. Precious metals are valued at the New York composite mean quotation reported by Bloomberg at the valuation time. Exchange-traded options are valued at the mean between the bid and asked prices at valuation time as reported by the Options Price Reporting Authority for U.S. listed options or by the relevant exchange or board of trade for non-U.S. listed options. Over-the-counter options (including options on securities, indices and foreign currencies) are valued by a third party pricing service using techniques that consider factors including the value of the underlying instrument, the volatility of the underlying instrument and the period of time until option expiration. Financial futures contracts are valued at the settlement price established by the board of trade or exchange on which they are traded. Forward foreign currency exchange contracts are generally valued at the mean of the average bid and average asked prices that are reported by currency dealers to a third party pricing service at the valuation time. Such third party pricing service valuations are supplied for specific settlement periods and the Fund’s forward foreign currency exchange contracts are valued at an interpolated rate between the closest preceding and subsequent settlement period reported by the third party pricing service. Forward commodity contracts are generally valued based on the price of the underlying futures or forward contract provided by the exchange on which the underlying instruments are traded or if unavailable, based on forward rates

 
25


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
provided by broker/dealers. Interest rate and cross-currency 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. Future cash flows are discounted to their present value using swap rates provided by electronic data services or by broker/dealers. Credit default swaps are normally valued using valuations provided by a third party pricing service. The pricing services employ electronic data processing techniques to determine the present value based on credit spread quotations obtained from broker/dealers and expected default recovery rates determined by the pricing service using proprietary models. 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. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that fairly reflects the security’s value, or the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
 
The Fund may invest in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). Cash Reserves Fund generally values its investment securities utilizing the amortized cost valuation technique in accordance with Rule 2a-7 under the 1940 Act. This technique involves initially valuing a portfolio security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. If amortized cost is determined not to approximate fair value, Cash Reserves Fund may value its investment securities in the same manner as debt obligations described above.
 
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. Withholding taxes on foreign interest have been provided for in accordance with the Fund’s understanding of the applicable countries’ tax rules and rates.
 
D Federal Taxes — The Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary.
 
The Subsidiary is treated as a controlled foreign corporation under the Internal Revenue Code and is not expected to be subject to U.S. federal income tax. The Fund is treated as a U.S. shareholder of the Subsidiary. As a result, the Fund is required to include in gross income for U.S. federal income tax purposes all of the Subsidiary’s income, whether or not such income is distributed by the Subsidiary. If a net loss is realized by the Subsidiary, such loss is not generally available to offset the income earned by the Fund.
 
At October 31, 2011, the Fund, for federal income tax purposes, had a capital loss carryforward of $29,731,156 which will reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus will reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. Such capital loss carryforward will expire on October 31, 2013 ($2,603,915), October 31, 2014 ($1,684,823), October 31, 2016 ($17,966,463), October 31, 2017 ($738,126), October 31, 2018 ($5,165,932) and October 31, 2019 ($1,571,897). In addition, such capital loss carryforward cannot be utilized prior to the utilization of new capital losses, if any, created after October 31, 2011.
 
As of October 31, 2011, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. Each of the Fund’s federal tax returns filed in the 3-year period ended October 31, 2011 remains subject to examination by the Internal Revenue Service.
 
E Expense Reduction — State Street Bank and Trust Company (SSBT) serves as custodian of the Fund. Pursuant to the custodian agreement, SSBT receives a fee reduced by credits, which are determined based on the average daily cash balance the Fund maintains with SSBT. All credit balances, if any, used to reduce the Fund’s custodian fees are reported as a reduction of expenses in the Consolidated Statement of Operations.
 
F Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.

 
26


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
G Unfunded Loan Commitments — The Fund may enter into certain credit agreements all or a portion of which may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. The commitments, if any, are disclosed in the accompanying Consolidated Portfolio of Investments.
 
H Use of Estimates — The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
 
I Indemnifications — Under the Fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Fund) could be deemed to have personal liability for the obligations of the Fund. However, the Fund’s Declaration of Trust contains an express disclaimer of liability on the part of Fund shareholders and the By-laws provide that the Fund shall assume the defense on behalf of any Fund shareholders. Moreover, the By-laws also provide for indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred.
 
J Financial and Commodities Futures Contracts — Upon entering into a financial or commodities futures contract, the Fund is required to deposit with the broker, either in cash or securities, an amount equal to a certain percentage of the purchase price (initial margin). Subsequent payments, known as variation margin, are made or received by the Fund each business day, depending on the daily fluctuations in the value of the underlying security, commodity or currency, and are recorded as unrealized gains or losses by the Fund. Gains (losses) are realized upon the expiration or closing of the financial or commodities futures contracts. Should market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the financial or commodities futures contracts and may realize a loss. Futures contracts have minimal counterparty risk as they are exchange traded and the clearinghouse for the exchange is substituted as the counterparty, guaranteeing counterparty performance.
 
K Forward Foreign Currency Exchange and Forward Commodity Contracts — The Fund may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded as unrealized until such time as the contracts have been closed or offset by another contract with the same broker for the same settlement date and currency. Unrealized and realized gains and losses on forward commodity contracts, which are entered into for the purchase or sale of a specific commodity at a fixed price on a future date, are accounted for as described above. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and, in the case of forward foreign currency exchange contracts, from movements in the value of a foreign currency relative to the U.S. dollar.
 
L Written Options — Upon the writing of a call or a put option, the premium received by the Fund is included in the Consolidated Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written, in accordance with the Fund’s policies on investment valuations discussed above. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. When an index option is exercised, the Fund is required to deliver an amount of cash determined by the excess of the strike price of the option over the value of the index (in the case of a put) or the excess of the value of the index over the strike price of the option (in the case of a call) at contract termination. If a put option on a security is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as a writer of an option, may have no control over whether the underlying securities or other assets may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the securities or other assets underlying the written option. The Fund may also bear the risk of not being able to enter into a closing transaction if a liquid secondary market does not exist.
 
M Purchased Options — Upon the purchase of a call or put option, the premium paid by the Fund is included in the Consolidated Statement of Assets and Liabilities as an investment. The amount of the investment is subsequently marked-to-market to reflect the current market value of the option purchased, in accordance with the Fund’s policies on investment valuations discussed above. As the purchaser of an index option, the Fund has the right to receive a cash payment equal to any depreciation in the value of the index below the strike price of the option (in the case of a put) or equal to any appreciation in the value of the index over the strike price of the option (in the case of a call) as of the valuation date of the option. If an option which the Fund had purchased expires on the stipulated expiration date, the Fund will realize a loss in the amount of the cost of the option. If the Fund enters into a closing sale transaction, the Fund will realize a gain or loss, depending on whether the sales proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option on a security, it will realize a gain or loss from the sale of the underlying security, and the proceeds from such sale will be decreased by the premium originally paid. If the Fund exercises a call option on a security, the cost of the security which the Fund purchases upon exercise will be increased by the premium originally paid. The risk associated with purchasing options is limited to the premium originally paid.
 
N Interest Rate Swaps — Pursuant to interest rate swap agreements, the Fund either makes floating-rate payments based on a benchmark interest rate in exchange for fixed-rate payments or the Fund makes fixed-rate payments in exchange for payments on a floating benchmark interest rate. Payments

 
27


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
received or made are recorded as realized gains or losses. During the term of the outstanding swap agreement, changes in the underlying value of the swap are recorded as unrealized gains or losses. The value of the swap is determined by changes in the relationship between two rates of interest. The Fund is exposed to credit loss in the event of non-performance by the swap counterparty. Risk may also arise from movements in interest rates.
 
O Cross-Currency Swaps — Cross-currency swaps are interest rate swaps in which interest cash flows are exchanged between two parties based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the inception of the trade. Cross-currency swaps also involve the exchange of the notional amounts at the start of the contract at the current spot rate with an agreement to re-exchange such amounts at a later date at either the same exchange rate, a specified rate or the then current spot rate. The entire principal value of a cross-currency swap is subject to the risk that the counterparty to the swap will default on its contractual delivery obligations.
 
P Credit Default Swaps — When the Fund is the buyer of a credit default swap contract, the Fund is entitled to receive the par (or other agreed-upon) value of a referenced debt obligation (or basket of debt obligations) from the counterparty to the contract if a credit event by a third party, such as a U.S. or foreign corporate issuer or sovereign issuer, on the debt obligation occurs. In return, the Fund pays the counterparty a periodic stream of payments over the term of the contract provided that no credit event has occurred. If no credit event occurs, the Fund would have spent the stream of payments and received no proceeds from the contract. When the Fund is the seller of a credit default swap contract, it receives the stream of payments, but is obligated to pay to the buyer of the protection an amount up to the notional amount of the swap and in certain instances take delivery of securities of the reference entity upon the occurrence of a credit event, as defined under the terms of that particular swap agreement. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring, obligation acceleration and repudiation/moratorium. If the Fund is a seller of protection and a credit event occurs, the maximum potential amount of future payments that the Fund could be required to make would be an amount equal to the notional amount of the agreement. This potential amount would be partially offset by any recovery value of the respective referenced obligation, or net amount received from the settlement of a buy protection credit default swap agreement entered into by the Fund for the same referenced obligation. As the seller, the Fund may create economic leverage to its portfolio because, in addition to its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. The interest fee paid or received on the swap contract, which is based on a specified interest rate on a fixed notional amount, is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as realized gain upon receipt or realized loss upon payment. The Fund also records an increase or decrease to unrealized appreciation (depreciation) in an amount equal to the daily valuation. Upfront payments or receipts, if any, are recorded as other assets or other liabilities, respectively, and amortized over the life of the swap contract as realized gains or losses. For financial reporting purposes, unamortized upfront payments, if any, are netted with unrealized appreciation or depreciation on swap contracts to determine the market value of swaps as presented in Notes 7 and 10. The Fund segregates assets in the form of cash or liquid securities in an amount equal to the notional amount of the credit default swaps of which it is the seller. The Fund segregates assets in the form of cash or liquid securities in an amount equal to any unrealized depreciation of the credit default swaps of which it is the buyer, marked to market on a daily basis. These transactions involve certain risks, including the risk that the seller may be unable to fulfill the transaction.
 
Q Repurchase Agreements — A repurchase agreement is the purchase by the Fund of securities from a counterparty in exchange for cash that is coupled with an agreement to resell those securities to the counterparty at a specified date and price. When a repurchase agreement is entered, the Fund typically receives securities with a value that equals or exceeds the repurchase price, including any accrued interest earned on the agreement. The value of such securities will be marked to market daily, and cash or additional securities will be exchanged between the parties as needed. Except in the case of a repurchase agreement entered to settle a short sale, the value of the securities delivered to the Fund will be at least equal to 90% of the repurchase price during the term of the repurchase agreement. The terms of a repurchase agreement entered to settle a short sale may provide that the cash purchase price paid by the Fund is more than the value of purchased securities that effectively collateralize the repurchase price payable by the counterparty. Since in such a transaction the Fund normally will have used the purchased securities to settle the short sale, the Fund will segregate liquid assets equal to the marked to market value of the purchased securities that it is obligated to return to the counterparty under the repurchase agreement. In the event of insolvency of the counterparty to a repurchase agreement, recovery of the repurchase price owed to the Fund may be delayed. Such an insolvency also may result in a loss to the extent that the value of the purchased securities decreases during the delay or that value has otherwise not been maintained at an amount at least equal to the repurchase price.
 
R Securities Sold Short — A short sale is a transaction in which the Fund sells a security it does not own in anticipation of a decline in the market value of that security. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer with an obligation to replace such borrowed security at a later date. Until the security is replaced, the Fund is required to repay the lender any interest, which accrues during the period of the loan. The proceeds received from a short sale are recorded as a liability and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of the open short position on the day of determination. A gain, limited to the price at which the Fund sold the security short, or a loss, potentially unlimited as there is no upward limit on the price of a security, is recorded when the short position is terminated. Interest payable on securities sold short is recorded as an expense.
 
S Consolidated Statement of Cash Flows — The cash amount shown in the Consolidated Statement of Cash Flows of the Fund is the amount included in the Fund’s Consolidated Statement of Assets and Liabilities and represents the cash on hand at its custodian and does not include any short-term investments.

 
28


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
2 Distributions to Shareholders
 
Subject to its Management Distribution Plan, the Fund intends to make monthly distributions to shareholders and to distribute all or substantially all of its net realized capital gains (reduced by available capital loss carryforwards from prior years, if any). 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. The Fund distinguishes between distributions on a tax basis and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions in excess of tax basis earnings and profits be reported in the consolidated financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income. In certain circumstances, a portion of distributions to shareholders may include a return of capital component.
 
The tax character of distributions declared for the years ended October 31, 2011 and October 31, 2010 was as follows:
 
                     
    Year Ended October 31,    
   
    2011   2010    
 
 
Distributions declared from:
                   
Ordinary income
  $ 21,908,451     $ 20,397,524      
                     
 
 
 
During the year ended October 31, 2011, accumulated net realized loss was increased by $2,060,310, accumulated distributions in excess of net investment income was decreased by $1,757,834 and paid-in capital was increased by $302,476 due to differences between book and tax accounting, primarily for foreign currency gain (loss), swap contracts, mixed straddles, paydown gain (loss), investment in the Subsidiary, defaulted bond interest and premium amortization. These reclassifications had no effect on the net assets or net asset value per share of the Fund.
 
As of October 31, 2011, the components of distributable earnings (accumulated losses) and unrealized appreciation (depreciation) on a tax basis were as follows:
 
             
             
 
 
Undistributed ordinary income
  $ 3,250,672      
Capital loss carryforward
  $ (29,731,156 )    
Net unrealized appreciation
  $ 9,344,621      
             
 
 
 
The differences between components of distributable earnings (accumulated losses) on a tax basis and the amounts reflected in the Consolidated Statement of Assets and Liabilities are primarily due to wash sales, foreign currency transactions, futures contracts, swap contracts, mixed straddle amounts, premium amortization and tax accounting for straddle transactions.
 
3 Investment Adviser Fee and Other Transactions with Affiliates
 
The investment adviser fee is earned by EVM as compensation for investment advisory services rendered to the Fund and the Subsidiary. Pursuant to the investment advisory agreement and subsequent fee reduction agreement between the Fund and EVM and the investment advisory agreement between the Subsidiary and EVM, the Fund and Subsidiary each pay EVM a fee at an annual rate of 0.75% of its respective average daily total leveraged assets (excluding its interest in the Subsidiary in the case of the Fund), subject to the limitation described below, and is payable monthly. Total leveraged assets as referred to herein represent net assets plus liabilities or obligations attributable to investment leverage and the notional value of long and short forward currency contracts, futures contracts and swaps held by the Fund. The notional value of a contract for purposes of calculating total leveraged assets is the stated dollar value of the underlying reference instrument at the time the derivative position is entered into and remains constant throughout the life of the derivative contract. However, the derivative contracts are marked to market daily and any unrealized appreciation or depreciation is reflected in the Fund’s net assets. When the Fund holds both long and short forward currency contracts in the same foreign currency, the offsetting positions are netted for purposes of determining total leveraged assets. When the Fund holds other long and short positions in foreign obligations denominated in the same currency, total leveraged assets are calculated by excluding the smaller of the long or short position.
 
The advisory agreements provide that if investment leverage exceeds 40% of the Fund’s total leveraged assets, EVM will not receive a management fee on total leveraged assets in excess of this amount. As of October 31, 2011, the Fund’s investment leverage was 49% of its total leveraged 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. For the year ended October 31, 2011, the Fund’s investment adviser fee amounted to $4,291,298 or 0.51% of the Fund’s average daily total leveraged assets and 1.25% of the Fund’s average daily net assets. EVM also serves as administrator of the Fund, but receives no compensation.

 
29


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
In addition, EVM has contractually agreed to reimburse the Fund for fees and other expenses at an annual rate of 0.20% of the Fund’s average daily total leveraged assets during the first five full years of the Fund’s operations, 0.15% of the Fund’s average daily total leveraged assets in year six, 0.10% in year seven and 0.05% in year eight. The Fund concluded its first six full years of operations on February 28, 2011. Pursuant to this agreement, EVM waived $666,146 of its investment adviser fee for the year ended October 31, 2011.
 
During the year ended October 31, 2011, EVM reimbursed the Fund $352 for a trading error. The effect of the loss incurred and the reimbursement by EVM of such amount had no impact on total return.
 
Except for Trustees of the Fund who are not members of EVM’s organization, officers and Trustees 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, 2011, no significant amounts have been deferred. Certain officers and Trustees of the Fund are officers of EVM.
 
4 Purchases and Sales of Investments
 
Purchases and sales of investments, other than short-term obligations and including maturities, paydowns, principal repayments on Senior Loans and securities sold short, for the year ended October 31, 2011 were as follows:
 
                     
    Purchases   Sales    
 
 
Investments (non-U.S. Government)
  $ 121,050,004     $ 109,558,021      
U.S. Government and Agency Securities
    22,780,645       28,188,065      
                     
 
 
    $ 143,830,649     $ 137,746,086      
                     
 
 
 
5 Common Shares of Beneficial Interest
 
The Fund may issue common shares pursuant to its dividend reinvestment plan. There were no transactions in common shares for the years ended October 31, 2011 and October 31, 2010.
 
6 Federal Income Tax Basis of Investments
 
The cost and unrealized appreciation (depreciation) of investments of the Fund at October 31, 2011, as determined on a federal income tax basis, were as follows:
 
             
Aggregate cost
  $ 428,571,170      
             
 
 
Gross unrealized appreciation
  $ 16,141,395      
Gross unrealized depreciation
    (7,499,646 )    
             
 
 
Net unrealized appreciation
  $ 8,641,749      
             
 
 
 
7 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 commodity contracts, 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.

 
30


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
A summary of obligations under these financial instruments at October 31, 2011 is as follows:
 
                         
Forward Commodity Contracts*
                Net
   
                Unrealized
   
Settlement Date   Deliver   In Exchange For   Counterparty   Depreciation    
 
 
4/26/12
  Gold
1,387 Troy Ounces
  United States Dollar
1,991,233
  Citigroup Global Markets   $ (394,615 )    
                         
 
 
                $ (394,615 )    
                         
 
 
 
* Non-deliverable contract that is settled with the counterparty in cash.
 
                         
Forward Foreign Currency Exchange Contracts
Sales
                Net Unrealized
   
                Appreciation
   
Settlement Date   Deliver   In Exchange For   Counterparty   (Depreciation)    
 
 
11/7/11
  Croatian Kuna
1,629,200
  Polish Zloty
952,526
  Deutsche Bank   $ (1,255 )    
11/7/11
  Japanese Yen
170,225,000
  United States Dollar
2,218,320
  Goldman Sachs, Inc.     40,776      
11/9/11
  New Taiwan Dollar
22,634,000
  United States Dollar
780,482
  Bank of America     24,108      
11/9/11
  Romanian Leu
898,000
  Euro
207,366
  Standard Bank     775      
11/10/11
  New Taiwan Dollar
11,780,000
  United States Dollar
407,401
  Bank of America     13,753      
11/10/11
  New Taiwan Dollar
12,587,000
  United States Dollar
435,386
  Barclays Bank PLC     14,770      
11/10/11
  New Taiwan Dollar
11,780,000
  United States Dollar
407,401
  Credit Suisse     13,753      
11/16/11
  South African Rand
38,346,930
  United States Dollar
5,167,353
  Credit Suisse     345,122      
11/17/11
  Croatian Kuna
2,303,668
  Euro
306,869
  Barclays Bank PLC     (32 )    
11/21/11
  New Taiwan Dollar
24,754,000
  United States Dollar
840,543
  Citigroup Global Markets     13,621      
11/21/11
  New Taiwan Dollar
20,491,000
  United States Dollar
695,789
  Credit Suisse     11,275      
11/21/11
  New Taiwan Dollar
22,964,000
  United States Dollar
801,005
  Deutsche Bank     33,878      
11/21/11
  New Taiwan Dollar
24,755,000
  United States Dollar
840,435
  Standard Chartered Bank     13,479      
11/22/11
  Euro
16,821,692
  United States Dollar
23,045,717
  Nomura International PLC     (225,747 )    
11/30/11
  British Pound Sterling
409,074
  United States Dollar
667,803
  JPMorgan Chase Bank     10,236      
11/30/11
  Euro
10,645,328
  United States Dollar
15,399,850
  Citigroup Global Markets     674,083      

 
31


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                         
Forward Foreign Currency Exchange Contracts (continued)
Sales
                Net Unrealized
   
                Appreciation
   
Settlement Date   Deliver   In Exchange For   Counterparty   (Depreciation)    
 
 
11/30/11
  Indian Rupee
30,539,000
  United States Dollar
615,706
  Standard Chartered Bank   $ (7,204 )    
11/30/11
  New Taiwan Dollar
19,313,000
  United States Dollar
637,856
  Credit Suisse     (7,132 )    
11/30/11
  New Taiwan Dollar
14,920,000
  United States Dollar
517,427
  Deutsche Bank     19,150      
11/30/11
  New Taiwan Dollar
19,313,000
  United States Dollar
637,540
  Goldman Sachs, Inc.     (7,448 )    
11/30/11
  New Taiwan Dollar
15,000,000
  United States Dollar
495,001
  Standard Chartered Bank     (5,948 )    
11/30/11
  New Taiwan Dollar
17,372,000
  United States Dollar
573,428
  Standard Chartered Bank     (6,737 )    
12/1/11
  Malaysian Ringgit
2,239,000
  United States Dollar
747,055
  Citigroup Global Markets     20,424      
12/1/11
  Malaysian Ringgit
1,902,000
  United States Dollar
634,762
  Deutsche Bank     17,498      
12/1/11
  Malaysian Ringgit
2,239,000
  United States Dollar
747,080
  HSBC Bank USA     20,449      
12/5/11
  Euro
3,619,800
  United States Dollar
5,121,854
  Standard Chartered Bank     114,735      
12/5/11
  Euro
3,033,200
  United States Dollar
4,291,978
  State Street Bank and Trust Co.     96,278      
12/5/11
  New Taiwan Dollar
15,356,000
  United States Dollar
504,882
  Barclays Bank PLC     (7,997 )    
12/5/11
  New Taiwan Dollar
17,734,000
  United States Dollar
582,972
  Standard Chartered Bank     (9,331 )    
12/8/11
  Euro
940,000
  United States Dollar
1,304,170
  Bank of America     3,927      
12/8/11
  Euro
2,000,000
  United States Dollar
2,782,956
  Nomura International PLC     16,482      
12/15/11
  South African Rand
24,093,821
  United States Dollar
3,245,790
  Standard Bank     228,893      
12/19/11
  Croatian Kuna
3,021,500
  Euro
401,336
  Deutsche Bank     362      
12/19/11
  New Taiwan Dollar
14,847,000
  United States Dollar
493,929
  Bank of America     (2,276 )    
12/19/11
  New Taiwan Dollar
16,698,000
  United States Dollar
555,286
  Bank of America     (2,782 )    
12/19/11
  New Taiwan Dollar
16,232,000
  United States Dollar
540,184
  Barclays Bank PLC     (2,309 )    
12/19/11
  New Taiwan Dollar
14,896,000
  United States Dollar
495,460
  Barclays Bank PLC     (2,383 )    
12/19/11
  New Taiwan Dollar
14,847,000
  United States Dollar
494,011
  Standard Chartered Bank     (2,194 )    
12/19/11
  New Taiwan Dollar
15,607,000
  United States Dollar
519,005
  Standard Chartered Bank     (2,600 )    

 
32


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                         
Forward Foreign Currency Exchange Contracts (continued)
Sales
                Net Unrealized
   
                Appreciation
   
Settlement Date   Deliver   In Exchange For   Counterparty   (Depreciation)    
 
 
12/22/11
  South African Rand
11,284,418
  United States Dollar
1,456,674
  Goldman Sachs, Inc.   $ 45,147      
12/30/11
  British Pound Sterling
385,840
  United States Dollar
600,886
  Goldman Sachs, Inc.     (19,122 )    
12/30/11
  South African Rand
1,478,933
  United States Dollar
189,500
  Standard Chartered Bank     4,722      
1/6/12
  Malaysian Ringgit
1,593,000
  United States Dollar
518,774
  Nomura International PLC     2,539      
1/6/12
  Malaysian Ringgit
1,407,000
  United States Dollar
458,202
  Standard Chartered Bank     2,242      
1/17/12
  Israeli Shekel
9,111,651
  United States Dollar
2,458,290
  JPMorgan Chase Bank     (49,555 )    
1/20/12
  Sri Lankan Rupee
91,000,000
  United States Dollar
808,530
  Standard Chartered Bank     (6,068 )    
1/23/12
  Croatian Kuna
2,415,000
  Euro
319,698
  Barclays Bank PLC     652      
1/30/12
  Russian Ruble
19,905,000
  United States Dollar
648,129
  Barclays Bank PLC     1,114      
1/30/12
  Russian Ruble
5,714,000
  United States Dollar
185,866
  Citigroup Global Markets     132      
1/30/12
  Russian Ruble
4,381,000
  United States Dollar
142,564
  Standard Chartered Bank     159      
1/31/12
  British Pound Sterling
406,705
  United States Dollar
654,450
  JPMorgan Chase Bank     1,137      
3/9/12
  Sri Lankan Rupee
30,490,000
  United States Dollar
271,263
  Standard Chartered Bank     362      
3/16/12
  Sri Lankan Rupee
36,270,000
  United States Dollar
320,690
  Standard Chartered Bank     (1,233 )    
3/23/12
  Sri Lankan Rupee
67,120,000
  United States Dollar
595,299
  HSBC Bank USA     176      
3/26/12
  Croatian Kuna
2,460,700
  Euro
323,589
  Deutsche Bank     463      
4/3/12
  Brazilian Real
1,607,000
  United States Dollar
954,843
  Deutsche Bank     46,830      
4/3/12
  Brazilian Real
1,607,000
  United States Dollar
955,410
  Nomura International PLC     47,398      
4/3/12
  Brazilian Real
886,600
  United States Dollar
534,257
  Standard Bank     33,297      
4/3/12
  Brazilian Real
1,990,000
  United States Dollar
1,185,936
  Standard Chartered Bank     61,515      
4/25/12
  Croatian Kuna
3,811,000
  Euro
500,263
  Deutsche Bank     1,458      
4/27/12
  Russian Ruble
6,095,000
  United States Dollar
195,760
  Barclays Bank PLC     316      
4/27/12
  Russian Ruble
11,235,000
  United States Dollar
360,848
  Credit Suisse     583      

 
33


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                         
Forward Foreign Currency Exchange Contracts (continued)
Sales
                Net Unrealized
   
                Appreciation
   
Settlement Date   Deliver   In Exchange For   Counterparty   (Depreciation)    
 
 
4/27/12
  Russian Ruble
12,670,000
  United States Dollar
406,854
  Standard Chartered Bank   $ 574      
4/27/12
  Sri Lankan Rupee
61,000,000
  United States Dollar
538,869
  Standard Chartered Bank     792      
5/11/12
  Sri Lankan Rupee
200,370,000
  United States Dollar
1,777,906
  Standard Chartered Bank     13,009      
5/30/12
  Croatian Kuna
1,166,000
  Euro
152,339
  Credit Suisse     119      
7/13/12
  Sri Lankan Rupee
230,890,000
  United States Dollar
2,048,713
  Standard Chartered Bank     25,060      
7/30/12
  Russian Ruble
6,014,000
  United States Dollar
190,467
  Citigroup Global Markets     332      
7/30/12
  Russian Ruble
10,695,000
  United States Dollar
338,717
  Credit Suisse     590      
7/30/12
  Russian Ruble
13,291,000
  United States Dollar
420,964
  Nomura International PLC     764      
10/29/12
  Russian Ruble
11,310,000
  United States Dollar
353,189
  Deutsche Bank     417      
10/29/12
  Russian Ruble
13,033,000
  United States Dollar
406,900
  HSBC Bank USA     386      
10/29/12
  Russian Ruble
5,657,000
  United States Dollar
176,616
  Standard Chartered Bank     167      
                         
 
 
                $ 1,670,926      
                         
 
 
                         
                         
Purchases
                Net Unrealized
   
                Appreciation
   
Settlement Date   In Exchange For   Deliver   Counterparty   (Depreciation)    
 
 
11/1/11
  New Turkish Lira
3,408,300
  United States Dollar
1,950,761
  BNP Paribas SA   $ (23,426 )    
11/1/11
  Uganda Schilling
421,341,000
  United States Dollar
160,611
  Citigroup Global Markets     2,383      
11/1/11
  Uganda Schilling
162,754,200
  United States Dollar
62,215
  Standard Chartered Bank     746      
11/2/11
  New Turkish Lira
952,500
  United States Dollar
541,894
  Credit Suisse     (3,392 )    
11/3/11
  Swedish Krona
4,145,000
  Euro
453,551
  Nomura International PLC     8,379      
11/3/11
  Swedish Krona
6,303,400
  Euro
681,773
  Standard Chartered Bank     23,746      
11/7/11
  Polish Zloty
484,872
  Euro
109,772
  Bank of America     493      

 
34


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                         
Forward Foreign Currency Exchange Contracts (continued)
Purchases
                Net Unrealized
   
                Appreciation
   
Settlement Date   In Exchange For   Deliver   Counterparty   (Depreciation)    
 
 
11/8/11
  Indonesian Rupiah
4,450,870,000
  United States Dollar
522,709
  Bank of America   $ (20,150 )    
11/8/11
  Indonesian Rupiah
4,009,087,000
  United States Dollar
470,605
  Barclays Bank PLC     (17,929 )    
11/8/11
  Indonesian Rupiah
4,009,087,000
  United States Dollar
470,688
  BNP Paribas SA     (18,011 )    
11/8/11
  Indonesian Rupiah
4,454,086,000
  United States Dollar
523,087
  Citigroup Global Markets     (20,164 )    
11/8/11
  Indonesian Rupiah
4,450,870,000
  United States Dollar
522,709
  Credit Suisse     (20,150 )    
11/9/11
  Singapore Dollar
2,630,000
  United States Dollar
2,177,873
  Goldman Sachs, Inc.     (81,926 )    
11/14/11
  Malaysian Ringgit
6,852,000
  United States Dollar
2,167,531
  Credit Suisse     61,834      
11/14/11
  Malaysian Ringgit
6,862,000
  United States Dollar
2,170,695
  State Street Bank and Trust Co.     61,925      
11/14/11
  South Korean Won
470,000,000
  United States Dollar
425,802
  Credit Suisse     (2,881 )    
11/14/11
  South Korean Won
434,000,000
  United States Dollar
367,066
  Credit Suisse     23,461      
11/14/11
  South Korean Won
434,000,000
  United States Dollar
367,066
  Standard Chartered Bank     23,461      
11/14/11
  South Korean Won
430,000,000
  United States Dollar
363,698
  State Street Bank and Trust Co.     23,229      
11/15/11
  Indonesian Rupiah
445,000,000
  United States Dollar
51,672
  Citigroup Global Markets     (1,452 )    
11/15/11
  Indonesian Rupiah
2,124,076,000
  United States Dollar
247,302
  Credit Suisse     (7,590 )    
11/15/11
  Indonesian Rupiah
200,000,000
  United States Dollar
23,253
  Deutsche Bank     (682 )    
11/15/11
  Indonesian Rupiah
2,385,924,000
  United States Dollar
277,853
  Nomura International PLC     (8,590 )    
11/15/11
  South Korean Won
515,003,000
  United States Dollar
439,873
  BNP Paribas SA     23,434      
11/15/11
  South Korean Won
555,857,000
  United States Dollar
475,608
  Goldman Sachs, Inc.     24,453      
11/15/11
  South Korean Won
514,709,000
  United States Dollar
439,528
  HSBC Bank USA     23,515      
11/15/11
  South Korean Won
629,431,000
  United States Dollar
537,585
  Standard Chartered Bank     28,664      
11/17/11
  Hong Kong Dollar
60,538,000
  United States Dollar
7,783,935
  Standard Chartered Bank     9,144      
11/17/11
  Yuan Renminbi
3,876,000
  United States Dollar
602,331
  Barclays Bank PLC     3,637      
11/21/11
  Indian Rupee
145,080,000
  United States Dollar
2,882,174
  Bank of America     83,494      

 
35


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                         
Forward Foreign Currency Exchange Contracts (continued)
Purchases
                Net Unrealized
   
                Appreciation
   
Settlement Date   In Exchange For   Deliver   Counterparty   (Depreciation)    
 
 
11/21/11
  Polish Zloty
3,602,931
  Euro
836,131
  Standard Chartered Bank   $ (26,242 )    
11/21/11
  Swedish Krona
30,990,000
  Euro
3,382,578
  Nomura International PLC     70,506      
11/23/11
  Euro
5,909,446
  United States Dollar
8,199,534
  Nomura International PLC     (24,371 )    
11/25/11
  Indonesian Rupiah
7,265,000,000
  United States Dollar
817,670
  BNP Paribas SA     1,618      
11/25/11
  Indonesian Rupiah
7,044,000,000
  United States Dollar
792,351
  Citigroup Global Markets     2,015      
11/25/11
  Indonesian Rupiah
7,222,000,000
  United States Dollar
812,831
  Credit Suisse     1,609      
11/25/11
  Indonesian Rupiah
7,222,000,000
  United States Dollar
812,831
  Standard Chartered Bank     1,609      
11/28/11
  Yuan Renminbi
3,863,930
  United States Dollar
595,000
  Barclays Bank PLC     13,140      
11/28/11
  Yuan Renminbi
3,865,418
  United States Dollar
595,000
  JPMorgan Chase Bank     13,374      
11/28/11
  Yuan Renminbi
7,729,050
  United States Dollar
1,190,000
  Standard Chartered Bank     26,467      
11/30/11
  British Pound Sterling
115,275
  United States Dollar
181,273
  Deutsche Bank     4,027      
11/30/11
  Euro
536,952
  United States Dollar
760,477
  JPMorgan Chase Bank     (17,706 )    
11/30/11
  Euro
3,305,145
  United States Dollar
4,508,932
  State Street Bank and Trust Co.     63,102      
11/30/11
  Indian Rupee
11,422,000
  United States Dollar
228,761
  BNP Paribas SA     4,216      
11/30/11
  Indian Rupee
10,219,000
  United States Dollar
204,626
  Citigroup Global Markets     3,813      
11/30/11
  Indian Rupee
12,158,000
  United States Dollar
243,453
  Goldman Sachs, Inc.     4,536      
11/30/11
  New Taiwan Dollar
33,428,000
  United States Dollar
1,120,993
  Nomura International PLC     (4,612 )    
11/30/11
  Norwegian Krone
15,407,300
  Euro
2,000,623
  Nomura International PLC     (4,794 )    
12/1/11
  Norwegian Krone
1,745,000
  Euro
226,978
  Credit Suisse     (1,097 )    
12/1/11
  South Korean Won
1,986,300,000
  United States Dollar
1,753,056
  Credit Suisse     27,198      
12/1/11
  South Korean Won
1,986,300,000
  United States Dollar
1,754,140
  Goldman Sachs, Inc.     26,114      
12/1/11
  South Korean Won
1,647,600,000
  United States Dollar
1,455,027
  Nomura International PLC     21,661      
12/7/11
  Philippine Peso
20,770,000
  United States Dollar
492,565
  Deutsche Bank     (4,477 )    

 
36


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                         
Forward Foreign Currency Exchange Contracts (continued)
Purchases
                Net Unrealized
   
                Appreciation
   
Settlement Date   In Exchange For   Deliver   Counterparty   (Depreciation)    
 
 
12/8/11
  Mexican Peso
69,998,872
  United States Dollar
5,311,193
  Standard Chartered Bank   $ (75,788 )    
12/12/11
  Singapore Dollar
2,687,000
  United States Dollar
2,126,969
  Standard Chartered Bank     14,412      
12/13/11
  Indian Rupee
28,065,000
  United States Dollar
567,562
  Goldman Sachs, Inc.     3,648      
12/13/11
  Indian Rupee
37,319,000
  United States Dollar
754,631
  Nomura International PLC     4,927      
12/13/11
  Indian Rupee
36,722,000
  United States Dollar
742,860
  State Street Bank and Trust Co.     4,548      
12/22/11
  Indonesian Rupiah
325,849,000
  United States Dollar
36,085
  Bank of America     552      
12/22/11
  Indonesian Rupiah
353,151,000
  United States Dollar
39,109
  Barclays Bank PLC     599      
12/22/11
  Indonesian Rupiah
331,000,000
  United States Dollar
36,851
  Citigroup Global Markets     365      
12/22/11
  Indonesian Rupiah
2,434,000,000
  United States Dollar
263,677
  HSBC Bank USA     9,995      
12/30/11
  New Turkish Lira
246,000
  South African Rand
1,078,956
  Credit Suisse     2,493      
1/12/12
  Ghanaian Cedi
1,067,600
  United States Dollar
654,167
  Standard Bank     2,430      
1/30/12
  Yuan Renminbi
3,560,000
  United States Dollar
551,271
  Bank of America     8,332      
1/30/12
  Yuan Renminbi
12,255,100
  United States Dollar
1,899,927
  Barclays Bank PLC     26,476      
4/25/12
  Zambian Kwacha
472,666,210
  United States Dollar
87,856
  Standard Bank     1,948      
4/26/12
  Uganda Schilling
772,052,000
  United States Dollar
253,132
  Barclays Bank PLC     22,135      
4/26/12
  Uganda Schilling
454,981,000
  United States Dollar
148,930
  Citigroup Global Markets     13,289      
5/29/12
  Yuan Renminbi
15,676,465
  United States Dollar
2,452,206
  JPMorgan Chase Bank     10,096      
6/4/12
  Yuan Renminbi
4,540,000
  United States Dollar
709,264
  Barclays Bank PLC     85      
6/15/12
  Yuan Renminbi
30,114,000
  United States Dollar
4,680,448
  Barclays Bank PLC     24,761      
10/29/12
  Uganda Schilling
454,244,000
  United States Dollar
145,614
  Citigroup Global Markets     (874 )    
10/29/12
  Uganda Schilling
457,198,000
  United States Dollar
144,886
  Standard Chartered Bank     795      
10/31/12
  Uganda Schilling
250,079,000
  United States Dollar
80,879
  Standard Bank     (1,324 )    
                         
 
 
                $ 475,261      
                         
 
 

 
37


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                                     
Futures Contracts
                    Net Unrealized
   
            Aggregate
      Appreciation
   
Expiration Month/Year   Contracts   Position   Cost   Value   (Depreciation)    
 
 
12/11
  28
Euro-Bobl
  Long   $ 4,731,104     $ 4,739,892     $ 8,788      
12/11
  16
Euro-Bobl
  Short     (2,704,082 )     (2,708,510 )     (4,428 )    
12/11
  42
Euro-Bund
  Long     7,917,797       7,872,894       (44,903 )    
12/11
  18
Euro-Buxl
  Long     2,969,441       2,999,253       29,812      
12/11
  4
Japan 10-Year Bond
  Short     (7,304,681 )     (7,268,355 )     36,326      
12/11
  47
U.S. 5-Year Treasury Note
  Short     (5,750,891 )     (5,762,641 )     (11,750 )    
1/12
  22
Platinum
  Long     1,715,435       1,768,360       52,925      
                                     
 
 
                            $ 66,770      
                                     
 
 
 
Euro-Bobl: Medium-term debt securities issued by the Federal Republic of Germany with a term to maturity of 4.5 to 5 years.
 
Euro-Bund: Long-term debt securities issued by the Federal Republic of Germany with a term to maturity of 8.5 to 10.5 years.
 
Euro-Buxl: Long-term debt securities issued by the Federal Republic of Germany with a term to maturity of 24 to 35 years.
 
Japan 10-Year Bond: Japanese Government Bonds (JGB) having a maturity of 7 years or more but less than 11 years.
 
                                         
Interest Rate Swaps
    Notional
  Fund
              Net Unrealized
   
    Amount
  Pays/Receives
  Floating
  Annual
  Termination
  Appreciation
   
Counterparty   (000’s omitted)   Floating Rate   Rate Index   Fixed Rate   Date   (Depreciation)    
 
 
Bank of America
  ILS 2,650   Receives   3-month ILS TELBOR     4.20 %     11/19/14     $ (51,026 )    
Bank of America
  ILS 2,600   Receives   3-month ILS TELBOR     4.54       1/6/15       (58,900 )    
Bank of America
  ZAR 5,852   Receives   3-month ZAR JIBAR     6.86       11/17/15       (16,784 )    
Bank of America
  ZAR 6,082   Receives   3-month ZAR JIBAR     7.18       12/15/15       (25,423 )    
Bank of America
  ZAR 2,773   Receives   3-month ZAR JIBAR     7.26       11/16/20       2,872      
Bank of America
  ZAR 5,850   Receives   3-month ZAR JIBAR     7.42       11/17/20       (2,014 )    
Bank of America
  ZAR 4,072   Receives   3-month ZAR JIBAR     7.31       11/19/20       2,728      
Barclays Bank PLC
  ILS 1,311   Receives   3-month ILS TELBOR     5.15       3/5/20       (33,449 )    
Barclays Bank PLC
  ILS 1,334   Receives   3-month ILS TELBOR     5.16       3/8/20       (34,249 )    
Citigroup Global Markets
  ZAR 2,659   Receives   3-month ZAR JIBAR     7.29       11/19/20       2,243      
Deutsche Bank
  ZAR 2,073   Receives   3-month ZAR JIBAR     6.71       11/19/15       (4,357 )    
Deutsche Bank
  ZAR 3,825   Receives   3-month ZAR JIBAR     7.26       11/16/20       3,961      
Deutsche Bank
  ZAR 2,467   Receives   3-month ZAR JIBAR     7.27       11/19/20       2,510      
                                         
 
 
                                $ (211,888 )    
                                         
 
 
 
ILS - Israeli Shekel
ZAR - South African Rand
 

 
38


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                                                                 
Credit Default Swaps — Sell Protection
                    Current
               
                    Market
      Upfront
       
        Notional
  Contract
      Annual
      Payments
  Net
   
        Amount*
  Annual
  Termination
  Fixed
  Market
  Received
  Unrealized
   
Reference Entity   Counterparty   (000’s omitted)   Fixed Rate**   Date   Rate***   Value   (Paid)   Depreciation    
 
 
Argentina
  Bank of America   $ 430       5.00 %(1)     6/20/13       7.01 %   $ (10,861 )   $ (4,637 )   $ (15,498 )    
Argentina
  Bank of America     437       5.00 (1)     6/20/13       7.01       (11,055 )     (6,227 )     (17,282 )    
Argentina
  Bank of America     442       5.00 (1)     6/20/13       7.01       (11,160 )     (6,492 )     (17,652 )    
Argentina
  Bank of America     859       5.00 (1)     6/20/13       7.01       (21,719 )     (9,007 )     (30,726 )    
Argentina
  Bank of America     2,608       5.00 (1)     6/20/13       7.01       (65,919 )     (11,984 )     (77,903 )    
Argentina
  Credit Suisse     435       5.00 (1)     6/20/13       7.01       (10,994 )     (2,000 )     (12,994 )    
Argentina
  Credit Suisse     384       5.00 (1)     6/20/13       7.01       (9,706 )     (4,155 )     (13,861 )    
Argentina
  Credit Suisse     446       5.00 (1)     6/20/13       7.01       (11,273 )     (3,426 )     (14,699 )    
Argentina
  Credit Suisse     442       5.00 (1)     6/20/13       7.01       (11,172 )     (4,783 )     (15,955 )    
Argentina
  Deutsche Bank     279       5.00 (1)     6/20/13       7.01       (7,057 )     (3,020 )     (10,077 )    
Argentina
  Deutsche Bank     440       5.00 (1)     6/20/13       7.01       (11,121 )     (4,428 )     (15,549 )    
Argentina
  Deutsche Bank     442       5.00 (1)     6/20/13       7.01       (11,172 )     (4,783 )     (15,955 )    
Argentina
  Deutsche Bank     442       5.00 (1)     6/20/13       7.01       (11,160 )     (6,492 )     (17,652 )    
Iceland
  JPMorgan Chase Bank     2,600       1.75       3/20/18       2.94       (160,515 )           (160,515 )    
Iceland
  JPMorgan Chase Bank     1,000       2.10       3/20/23       2.94       (63,719 )           (63,719 )    
Iceland
  JPMorgan Chase Bank     1,000       2.45       3/20/23       2.94       (35,665 )           (35,665 )    
South Africa
  Bank of America     55       1.00 (1)     12/20/15       1.43       (884 )     387       (497 )    
South Africa
  Bank of America     200       1.00 (1)     12/20/15       1.43       (3,207 )     1,334       (1,873 )    
South Africa
  Barclays Bank PLC     80       1.00 (1)     12/20/15       1.43       (1,283 )     621       (662 )    
South Africa
  Barclays Bank PLC     145       1.00 (1)     12/20/15       1.43       (2,325 )     1,135       (1,190 )    
South Africa
  Credit Suisse     85       1.00 (1)     12/20/15       1.43       (1,363 )     725       (638 )    
South Africa
  Credit Suisse     200       1.00 (1)     12/20/15       1.43       (3,207 )     1,568       (1,639 )    
South Africa
  Deutsche Bank     155       1.00 (1)     12/20/15       1.43       (2,485 )     1,214       (1,271 )    
South Africa
  Goldman Sachs, Inc.     90       1.00 (1)     12/20/15       1.43       (1,443 )     768       (675 )    
South Africa
  Goldman Sachs, Inc.     205       1.00 (1)     12/20/15       1.43       (3,287 )     1,685       (1,602 )    
                                                                 
 
 
                                        $ (483,752 )   $ (61,997 )   $ (545,749 )    
                                                                 
 
 
 
                                                         
Credit Default Swaps — Buy Protection
                        Upfront
       
        Notional
  Contract
          Payments
  Net Unrealized
   
        Amount
  Annual
  Termination
  Market
  Received
  Appreciation
   
Reference Entity   Counterparty   (000’s omitted)   Fixed Rate**   Date   Value   (Paid)   (Depreciation)    
 
 
Austria
  Barclays Bank PLC   $ 2,200       0.44 %     12/20/13     $ 16,651     $     $ 16,651      
Austria
  Barclays Bank PLC     1,000       1.42       3/20/14       (14,759 )           (14,759 )    
Brazil
  Bank of America     1,000       1.00 (1)     6/20/20       42,813       (31,659 )     11,154      
Brazil
  Bank of America     625       1.00 (1)     6/20/20       26,763       (24,974 )     1,789      
Brazil
  Bank of America     680       1.00 (1)     12/20/20       31,544       (23,156 )     8,388      
Brazil
  Bank of America     300       1.00 (1)     12/20/20       13,917       (9,993 )     3,924      
Brazil
  Bank of America     100       1.00 (1)     12/20/20       4,640       (3,187 )     1,453      
Brazil
  Barclays Bank PLC     2,300       1.65       9/20/19       (21,188 )           (21,188 )    
Brazil
  Barclays Bank PLC     630       1.00 (1)     12/20/20       29,225       (21,954 )     7,271      
Brazil
  Citigroup Global Markets     100       1.00 (1)     12/20/20       4,639       (3,224 )     1,415      

 
39


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                                                         
Credit Default Swaps — Buy Protection (continued)
                        Upfront
       
        Notional
  Contract
          Payments
  Net Unrealized
   
        Amount
  Annual
  Termination
  Market
  Received
  Appreciation
   
Reference Entity   Counterparty   (000’s omitted)   Fixed Rate**   Date   Value   (Paid)   (Depreciation)    
 
 
Brazil
  Credit Suisse   $ 775       1.00 %(1)     6/20/20     $ 33,186     $ (36,594 )   $ (3,408 )    
Brazil
  Deutsche Bank     170       1.00 (1)     12/20/20       7,885       (6,113 )     1,772      
Brazil
  HSBC Bank USA     775       1.00 (1)     6/20/20       33,186       (35,067 )     (1,881 )    
Brazil
  HSBC Bank USA     130       1.00 (1)     12/20/20       6,030       (4,191 )     1,839      
Brazil
  Standard Chartered Bank     130       1.00 (1)     12/20/20       6,030       (4,191 )     1,839      
China
  Barclays Bank PLC     863       1.00 (1)     12/20/16       11,041       (18,783 )     (7,742 )    
China
  Credit Suisse     500       1.00 (1)     12/20/16       6,399       (10,766 )     (4,367 )    
China
  Deutshe Bank     316       1.00 (1)     12/20/16       4,044       (6,063 )     (2,019 )    
China
  Deutshe Bank     369       1.00 (1)     12/20/16       4,722       (8,032 )     (3,310 )    
Colombia
  Bank of America     410       1.00 (1)     9/20/21       21,618       (18,205 )     3,413      
Colombia
  Goldman Sachs, Inc.     310       1.00 (1)     9/20/21       16,345       (13,523 )     2,822      
Colombia
  HSBC Bank USA     900       1.00 (1)     9/20/21       47,453       (38,381 )     9,072      
Colombia
  Morgan Stanley     460       1.00 (1)     9/20/21       24,253       (20,425 )     3,828      
Egypt
  Bank of America     350       1.00 (1)     6/20/15       32,910       (15,776 )     17,134      
Egypt
  Bank of America     1,400       1.00 (1)     9/20/15       142,169       (52,113 )     90,056      
Egypt
  Barclays Bank PLC     105       1.00 (1)     6/20/15       9,872       (3,111 )     6,761      
Egypt
  Citigroup Global Markets     300       1.00 (1)     6/20/20       66,258       (28,726 )     37,532      
Egypt
  Citigroup Global Markets     300       1.00 (1)     6/20/20       66,258       (30,175 )     36,083      
Egypt
  Deutsche Bank     300       1.00 (1)     6/20/15       28,208       (13,781 )     14,427      
Egypt
  Deutsche Bank     200       1.00 (1)     6/20/15       18,806       (8,896 )     9,910      
Egypt
  Deutsche Bank     350       1.00 (1)     6/20/20       77,301       (33,673 )     43,628      
Egypt
  Deutsche Bank     300       1.00 (1)     6/20/20       66,257       (25,542 )     40,715      
Egypt
  Deutsche Bank     300       1.00 (1)     6/20/20       66,258       (28,902 )     37,356      
Egypt
  JPMorgan Chase Bank     350       1.00 (1)     6/20/15       32,910       (15,776 )     17,134      
Guatemala
  Citigroup Global Markets     1,286       1.00 (1)     9/20/20       109,689       (87,774 )     21,915      
Italy
  Credit Suisse     6,800       0.20       12/20/16       1,190,711             1,190,711      
Lebanon
  Barclays Bank PLC     500       1.00 (1)     12/20/14       38,691       (24,149 )     14,542      
Lebanon
  Barclays Bank PLC     300       1.00 (1)     3/20/15       25,452       (14,338 )     11,114      
Lebanon
  Barclays Bank PLC     100       1.00 (1)     3/20/15       8,484       (4,865 )     3,619      
Lebanon
  Barclays Bank PLC     100       1.00 (1)     3/20/15       8,485       (5,565 )     2,920      
Lebanon
  Citigroup Global Markets     1,200       3.30       9/20/14       6,348             6,348      
Lebanon
  Citigroup Global Markets     1,000       1.00 (1)     12/20/14       77,381       (49,026 )     28,355      
Lebanon
  Citigroup Global Markets     500       1.00 (1)     12/20/14       38,691       (24,149 )     14,542      
Lebanon
  Citigroup Global Markets     350       1.00 (1)     12/20/14       27,085       (16,565 )     10,520      
Lebanon
  Citigroup Global Markets     300       1.00 (1)     3/20/15       25,452       (12,773 )     12,679      
Lebanon
  Credit Suisse     800       1.00 (1)     3/20/15       67,872       (38,214 )     29,658      
Lebanon
  Credit Suisse     200       1.00 (1)     3/20/15       16,968       (9,609 )     7,359      
Lebanon
  Credit Suisse     100       1.00 (1)     6/20/15       9,231       (4,805 )     4,426      
Lebanon
  Deutsche Bank     200       1.00 (1)     3/20/15       16,968       (8,870 )     8,098      
Lebanon
  Deutsche Bank     100       1.00 (1)     6/20/15       9,231       (4,805 )     4,426      
Philippines
  Barclays Bank PLC     1,100       1.85       12/20/14       (25,448 )           (25,448 )    
Philippines
  Barclays Bank PLC     655       1.00 (1)     3/20/15       4,524       (12,884 )     (8,360 )    
Philippines
  Citigroup Global Markets     800       1.84       12/20/14       (18,251 )           (18,251 )    
Philippines
  JPMorgan Chase Bank     656       1.00 (1)     3/20/15       4,531       (12,905 )     (8,374 )    

 
40


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                                                         
Credit Default Swaps — Buy Protection (continued)
                        Upfront
       
        Notional
  Contract
          Payments
  Net Unrealized
   
        Amount
  Annual
  Termination
  Market
  Received
  Appreciation
   
Reference Entity   Counterparty   (000’s omitted)   Fixed Rate**   Date   Value   (Paid)   (Depreciation)    
 
 
South Africa
  Bank of America   $ 1,200       1.00 %(1)     12/20/19     $ 67,001     $ (45,294 )   $ 21,707      
South Africa
  Bank of America     200       1.00 (1)     12/20/20       12,959       (7,040 )     5,919      
South Africa
  Bank of America     55       1.00 (1)     12/20/20       3,564       (2,124 )     1,440      
South Africa
  Barclays Bank PLC     1,200       1.00 (1)     12/20/19       67,005       (52,359 )     14,646      
South Africa
  Barclays Bank PLC     500       1.00 (1)     3/20/20       29,060       (16,753 )     12,307      
South Africa
  Barclays Bank PLC     145       1.00 (1)     12/20/20       9,395       (5,085 )     4,310      
South Africa
  Barclays Bank PLC     80       1.00 (1)     12/20/20       5,184       (2,974 )     2,210      
South Africa
  Citigroup Global Markets     655       1.00 (1)     12/20/19       36,573       (32,492 )     4,081      
South Africa
  Citigroup Global Markets     400       1.00 (1)     3/20/20       23,247       (21,589 )     1,658      
South Africa
  Citigroup Global Markets     200       1.00 (1)     3/20/20       11,623       (10,458 )     1,165      
South Africa
  Credit Suisse     400       1.00 (1)     3/20/20       23,247       (14,698 )     8,549      
South Africa
  Credit Suisse     200       1.00 (1)     3/20/20       11,623       (8,940 )     2,683      
South Africa
  Credit Suisse     200       1.00 (1)     12/20/20       12,959       (7,485 )     5,474      
South Africa
  Credit Suisse     85       1.00 (1)     12/20/20       5,506       (3,342 )     2,164      
South Africa
  Deutsche Bank     155       1.00 (1)     12/20/20       10,041       (5,664 )     4,377      
South Africa
  Goldman Sachs, Inc.     205       1.00 (1)     12/20/20       13,281       (7,643 )     5,638      
South Africa
  Goldman Sachs, Inc.     90       1.00 (1)     12/20/20       5,831       (3,410 )     2,421      
South Africa
  JPMorgan Chase Bank     600       1.00 (1)     12/20/19       33,503       (31,037 )     2,466      
South Africa
  JPMorgan Chase Bank     310       1.00 (1)     12/20/19       17,309       (19,245 )     (1,936 )    
South Africa
  JPMorgan Chase Bank     400       1.00 (1)     3/20/20       23,247       (14,956 )     8,291      
South Africa
  JPMorgan Chase Bank     300       1.00 (1)     3/20/20       17,436       (10,830 )     6,606      
South Africa
  JPMorgan Chase Bank     200       1.00 (1)     3/20/20       11,624       (10,334 )     1,290      
Spain
  Barclays Bank PLC     300       1.00 (1)     3/20/20       43,598       (3,020 )     40,578      
Spain
  Barclays Bank PLC     1,080       1.00 (1)     12/20/20       165,055       (102,342 )     62,713      
Spain
  Citigroup Global Markets     1,200       1.00 (1)     3/20/20       174,393       (56,807 )     117,586      
Spain
  Citigroup Global Markets     800       1.00 (1)     3/20/20       116,262       (18,390 )     97,872      
Spain
  Deutsche Bank     1,200       1.00 (1)     3/20/20       174,393       (56,807 )     117,586      
Spain
  Deutsche Bank     500       1.00 (1)     3/20/20       72,664       (10,854 )     61,810      
Spain
  Deutsche Bank     500       1.00 (1)     6/20/20       73,946       (30,591 )     43,355      
Spain
  Deutsche Bank     845       1.00 (1)     12/20/20       129,140       (80,073 )     49,067      
Thailand
  Barclays Bank PLC     1,900       0.97       9/20/19       103,661             103,661      
Thailand
  Citigroup Global Markets     1,600       0.86       12/20/14       15,208             15,208      
Thailand
  Citigroup Global Markets     900       0.95       9/20/19       50,360             50,360      
Thailand
  JPMorgan Chase Bank     800       0.87       12/20/14       7,350             7,350      
Uruguay
  Citigroup Global Markets     300       1.00 (1)     6/20/20       17,548       (19,774 )     (2,226 )    
Uruguay
  Deutsche Bank     600       1.00 (1)     6/20/20       35,098       (38,622 )     (3,524 )    
Banco de Sabadell, S.A. 
  JPMorgan Chase Bank     470       3.00 (1)     3/20/15       116,422       (2,081 )     114,341      
Citibank Corp. 
  Bank of America     683       1.00 (1)     9/20/20       50,915       (38,410 )     12,505      
Citibank Corp. 
  JPMorgan Chase Bank     683       1.00 (1)     9/20/20       50,916       (40,655 )     10,261      
Erste Group Bank AG
  Barclays Bank PLC     470       1.00 (1)     3/20/15       51,942       (22,575 )     29,367      
ING Verzekeringen N.V. 
  JPMorgan Chase Bank     470       1.00 (1)     3/20/15       30,168       (10,154 )     20,014      
OAO Gazprom
  Bank of America     700       1.00 (1)     6/20/20       95,815       (83,331 )     12,484      
OAO Gazprom
  Deutsche Bank     200       1.00 (1)     9/20/20       28,136       (21,950 )     6,186      
Rabobank Nederland N.V. 
  JPMorgan Chase Bank     470       1.00 (1)     3/20/15       8,694       (296 )     8,398      

 
41


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
                                                         
Credit Default Swaps — Buy Protection (continued)
                        Upfront
       
        Notional
  Contract
          Payments
  Net Unrealized
   
        Amount
  Annual
  Termination
  Market
  Received
  Appreciation
   
Reference Entity   Counterparty   (000’s omitted)   Fixed Rate**   Date   Value   (Paid)   (Depreciation)    
 
 
Raiffeisen Zentralbank
  Barclays Bank PLC   $ 470       1.00 %(1)     3/20/15     $ 46,561     $ (30,478 )   $ 16,083      
iTraxx Europe Senior
Financials 5-Year Index
  Goldman Sachs, Inc.     EUR  1,260       1.00 (1)     12/20/16       100,490       (147,471 )     (46,981 )    
iTraxx Europe Subordinated
Financials 5-Year Index
  Goldman Sachs, Inc.     EUR    840       5.00 (1)     12/20/16       (49,654 )     (4,862 )     (54,516 )    
                                                         
 
 
                                $ 4,766,038     $ (2,079,543 )   $ 2,686,495      
                                                         
 
 
 
*     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 October 31, 2011, such maximum potential amount for all open credit default swaps in which the Fund is the seller was $13,901,000.
**   The contract annual fixed rate represents the fixed rate of interest received by the Fund (as a seller of protection) or paid by the Fund (as a buyer of protection) annually on the notional amount of the credit default swap contract.
***  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.
 
EUR - Euro
 
                                             
Cross-Currency Swaps
    Notional
  Notional
                   
    Amount on
  Amount on
                   
    Fixed Rate
  Floating Rate
                   
    (Currency
  (Currency
              Net
   
    Received)
  Delivered)
          Termination
  Unrealized
   
Counterparty   (000’s omitted)   (000’s omitted)   Floating Rate   Fixed Rate   Date   Appreciation    
 
 
Citigroup Global Markets
  TRY 1,163   $ 729     3 Month
USD-LIBOR-BBA
    8.23 %     2/25/21     $ 2,655      
Credit Suisse
  TRY 512     288     3 Month
USD-LIBOR-BBA
    6.90       8/18/21       5,960      
Deutsche Bank
  TRY 4,266     2,680     3 Month
USD-LIBOR-BBA
    8.20       2/24/21       7,483      
Deutsche Bank
  TRY 679     381     3 Month
USD-LIBOR-BBA
    7.00       8/18/21       4,978      
                                             
 
 
                                    $ 21,076      
                                             
 
 
 
TRY - New Turkish Lira
 
The Fund pays interest on the currency received and receives interest on the currency delivered. At the termination date, the notional amount of the currency received will be exchanged for the notional amount of the currency delivered.
 
At October 31, 2011, the Fund had sufficient cash and/or securities to cover commitments under these contracts.

 
42


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
In the normal course of pursuing its investment objectives and its use of derivatives, the Fund is subject to the following risks:
 
Commodity Risk: The Fund invests in commodities-linked derivative investments, including commodity futures contracts and options thereon and forward commodity contracts, that provide exposure to the investment returns of certain commodities. Commodities-linked derivative investments are used to enhance return.
 
Credit Risk: The Fund enters into credit default swap contracts to manage its credit risk, to gain a particular exposure to a credit risk, or to enhance return.
 
Foreign Exchange Risk: The Fund engages in forward foreign currency exchange contracts, currency options and cross-currency swaps to enhance return or to hedge against fluctuations in currency exchange rates. It also enters into forward foreign currency exchange contracts to hedge the currency risks of investments it anticipates purchasing and/or as a substitute for the purchase or sale of securities or currencies.
 
Interest Rate Risk: The Fund utilizes various interest rate derivatives including futures, interest rate swaps, and cross-currency swaps to enhance return, to change the overall duration of the portfolio, or to hedge against fluctuations in securities prices due to interest rates.
 
The Fund enters into swap contracts, over-the-counter options, forward commodity contracts and forward foreign currency exchange contracts that may contain provisions whereby the counterparty may terminate the contract under certain conditions, including but not limited to a decline in the Fund’s net assets below a certain level over a certain period of time, which would trigger a payment by the Fund for those derivatives in a liability position. At October 31, 2011, the fair value of derivatives with credit-related contingent features in a net liability position was $2,166,105. The aggregate fair value of assets pledged as collateral by the Fund for such liability was $3,380,789 at October 31, 2011.
 
The non-exchange traded derivatives in which the Fund invests, including swap contracts, over-the-counter options, forward commodity contracts and forward foreign currency exchange contracts, are subject to the risk that the counterparty to the contract fails to perform its obligations under the contract. At October 31, 2011, the maximum amount of loss the Fund would incur due to counterparty risk was $6,146,912, with the highest amount from any one counterparty being $1,764,701. Such maximum amount would be reduced by any unamortized upfront payments received by the Fund. Such amount would be increased by any unamortized upfront payments made by the Fund. To mitigate this risk, the Fund has entered into master netting agreements with substantially all its derivative counterparties, which allows it and a counterparty to aggregate amounts owed by each of them for derivative transactions under the agreement into a single net amount payable by either the Fund or the counterparty. At October 31, 2011, the maximum amount of loss the Fund would incur due to counterparty risk would be reduced by approximately $1,934,000 due to master netting agreements. Counterparties may be required to pledge collateral in the form of cash, U.S. Government securities or highly-rated bonds for the benefit of the Fund if the net amount due from the counterparty with respect to a derivative contract exceeds a certain threshold. The amount of collateral posted by the counterparties with respect to such contracts would also reduce the amount of any loss incurred.
 
The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) by risk exposure at October 31, 2011 was as follows:
 
                                     
    Fair Value
        Foreign
  Interest
       
Consolidated Statement of Assets and Liabilities Caption   Credit   Exchange   Rate   Commodity    
 
 
Securities of unaffiliated issuers, at value
  $     $ 118,075     $     $ 1,400      
Net unrealized appreciation*
                74,926       52,925      
Receivable for open forward foreign currency exchange contracts
          2,903,168                  
Receivable for open swap contracts; Premium paid/received on open swap contracts
    4,895,338             35,390            
                                     
 
 
Total Asset Derivatives
  $ 4,895,338     $ 3,021,243     $ 110,316     $ 54,325      
                                     
 
 
Net unrealized appreciation*
  $     $     $ (61,081 )   $      
Payable for open forward commodity contracts
                      (394,615 )    
Payable for open forward foreign currency exchange contracts
          (756,981 )                
Payable for open swap contracts; Premium paid/received on open swap contracts
    (613,052 )           (226,202 )          
                                     
 
 
Total Liability Derivatives
  $ (613,052 )   $ (756,981 )   $ (287,283 )   $ (394,615 )    
                                     
 
 
 
* Amount represents cumulative unrealized appreciation or (depreciation) on futures contracts in the Futures Contracts table above. Only the current day’s variation margin on open futures contracts is reported within the Consolidated Statement of Assets and Liabilities as Receivable or Payable for variation margin, as applicable.

 
43


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Consolidated Statement of Operations by risk exposure for the year ended October 31, 2011 was as follows:
 
                                     
        Foreign
  Interest
       
Consolidated Statement of Operations Caption   Credit   Exchange   Rate   Commodity    
 
 
Net realized gain (loss) —
                                   
Futures contracts
  $     $     $ 328,281     $ (880,018 )    
Swap contracts
    (582,311 )           (48,731 )          
Forward commodity contracts
                      (484,498 )    
Foreign currency and forward foreign currency exchange contract transactions
          (3,284,516 )                
                                     
 
 
Total
  $ (582,311 )   $ (3,284,516 )   $ 279,550     $ (1,364,516 )    
                                     
 
 
Change in unrealized appreciation (depreciation) —
                                   
Investments
  $     $ (211,799 )   $     $ (33,350 )    
Futures contracts
                204,018       52,925      
Swap contracts
    2,627,931             (52,328 )          
Forward commodity contracts
                      (394,615 )    
Foreign currency and forward foreign currency exchange contracts
          3,871,908                  
                                     
 
 
Total
  $ 2,627,931     $ 3,660,109     $ 151,690     $ (375,040 )    
                                     
 
 
 
The average notional amounts of futures contracts, forward commodity contracts, forward foreign currency exchange contracts and swap contracts outstanding during the year ended October 31, 2011, which are indicative of the volume of these derivative types, were approximately $23,809,000, $2,425,000, $231,627,000 and $209,851,000, respectively.
 
The average principal amount of purchased currency options contracts and average number of purchased commodity options contracts outstanding during the year ended October 31, 2011, which are indicative of the volume of these derivative types, were approximately $16,535,000 and 5 contracts, respectively.
 
8 Credit Agreement
 
The Fund has entered into a Credit Agreement (the Agreement) with a bank to borrow up to a limit of $150 million ($125 million prior to February 4, 2011) pursuant to a 364-day revolving line of credit. Borrowings under the Agreement are secured by the assets of the Fund. Interest is charged at a rate above the London Interbank Offered Rate (LIBOR) and is payable monthly. Under the terms of the Agreement, the Fund pays a commitment fee of 0.15% on the borrowing limit. Included in interest expense is $48,935 of amortization of previously paid up-front fees related to the period from November 1, 2010 through February 3, 2011. In connection with the renewal of the Agreement on February 4, 2011, the Fund was not required to pay up-front fees. The Fund is required to maintain certain net asset levels during the term of the Agreement. At October 31, 2011, the Fund had borrowings outstanding under the Agreement of $98,000,000 at an interest rate of 1.14%. The carrying amount of the borrowings at October 31, 2011 approximated its fair value. For the year ended October 31, 2011, the average borrowings under the Agreement and the average interest rate were $109,498,630 and 1.18%, respectively.
 
9 Risks Associated with Foreign Investments and Currencies
 
Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Certain foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities and currencies also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitation on the removal of funds or other assets of the Fund, political or financial instability or diplomatic and other developments which could affect such investments. Foreign securities markets, while growing in volume and sophistication, are generally not as developed as those in the United States, and securities of some foreign issuers (particularly those located in developing countries) may be less liquid and more volatile than securities of comparable U.S. companies. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker/dealers and issuers than in the United States.

 
44


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
10 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, 2011, the hierarchy of inputs used in valuing the Fund’s investments and open derivative instruments, which are carried at value, were as follows:
 
                                     
Asset Description   Level 1   Level 2   Level 3   Total    
 
 
Senior Floating-Rate Interests
  $     $ 141,451,567     $ 342,757     $ 141,794,324      
Collateralized Mortgage Obligations
          18,038,365             18,038,365      
Commercial Mortgage-Backed Securities
          8,819,138             8,819,138      
Mortgage Pass-Throughs
          129,560,525             129,560,525      
Asset-Backed Securities
          327,521             327,521      
Corporate Bonds & Notes
          1,322,125             1,322,125      
Foreign Corporate Bonds & Notes
          2,622,544             2,622,544      
Foreign Government Bonds
          52,741,011             52,741,011      
Common Stocks
    2,329       1,277,661       3,065,347       4,345,337      
Warrants
                0       0      
Precious Metals
    7,193,080                   7,193,080      
Currency Options Purchased
          118,075             118,075      
Put Options Purchased
    1,400                   1,400      
Short-Term Investments —
                                   
Foreign Government Securities
          45,603,370             45,603,370      
U.S. Treasury Obligations
          4,686,082             4,686,082      
Repurchase Agreements
          12,638,662             12,638,662      
Other Securities
          7,401,360             7,401,360      
                                     
 
 
Total Investments
  $ 7,196,809     $ 426,608,006     $ 3,408,104     $ 437,212,919      
                                     
 
 
Forward Foreign Currency Exchange Contracts
  $     $ 2,903,168     $     $ 2,903,168      
Futures Contracts
    127,851                   127,851      
Swap Contracts
          4,930,728             4,930,728      
                                     
 
 
Total
  $ 7,324,660     $ 434,441,902     $ 3,408,104     $ 445,174,666      
                                     
 
 
                                     
Liability Description
                                   
                                     
 
 
Securities Sold Short
  $     $ (12,027,329 )   $     $ (12,027,329 )    
Forward Commodity Contracts
          (394,615 )           (394,615 )    
Forward Foreign Currency Exchange Contracts
          (756,981 )           (756,981 )    
Futures Contracts
    (61,081 )                 (61,081 )    
Swap Contracts
          (839,254 )           (839,254 )    
                                     
 
 
Total
  $ (61,081 )   $ (14,018,179 )   $     $ (14,079,260 )    
                                     
 
 

 
45


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notes to Consolidated Financial Statements — continued

 
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
 
                                     
    Investment
               
    in Senior
  Investment
           
    Floating-Rate
  in Common
  Investment
       
    Interests   Stocks   in Warrants   Total    
 
 
Balance as of October 31, 2010
  $ 504,027     $ 496,034     $     $ 1,000,061      
Realized gains (losses)
    (406,215 )     25,314             (380,901 )    
Change in net unrealized appreciation (depreciation)*
    320,263       1,816,379             2,136,642      
Cost of purchases**
    1,473,070       144,983       0       1,618,053      
Proceeds from sales**
    (1,548,472 )     (65,851 )           (1,614,323 )    
Accrued discount (premium)
    84                   84      
Transfers to Level 3***
          648,488             648,488      
Transfers from Level 3***
                           
Balance as of October 31, 2011
  $ 342,757     $ 3,065,347     $ 0     $ 3,408,104      
                                     
 
 
Change in net unrealized appreciation (depreciation) on investments still held as of October 31, 2011*
  $ (20,832 )   $ 1,816,379     $     $ 1,795,547      
                                     
 
 
 
*     Amount is included in the related amount on investments in the Consolidated Statement of Operations.
**   Cost of purchases may include securities received in corporate actions; Proceeds from sales may include securities delivered in corporate actions.
***  Transfers are reflected at the value of the securities at the beginning of the period. Transfers from Level 2 to Level 3 were due to a reduction in the availability of significant observable inputs in determining the fair value of investments.
 
At October 31, 2011, the value of investments transferred between Level 1 and Level 2, if any, during the year then ended was not significant.

 
46


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Report of Independent Registered Public Accounting Firm

 
 
To the Trustees and Shareholders of Eaton Vance Short Duration Diversified Income Fund:
 
We have audited the accompanying consolidated statement of assets and liabilities of Eaton Vance Short Duration Diversified Income Fund and subsidiary (the “Fund”), including the consolidated portfolio of investments, as of October 31, 2011, and the related consolidated statements of operations and cash flows for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the five years in the period then ended. These consolidated financial statements and consolidated financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial highlights based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and consolidated financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities and senior loans owned as of October 31, 2011, by correspondence with the custodian, brokers and selling or agent banks; where replies were not received from brokers and selling or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such consolidated financial statements and consolidated financial highlights referred to above present fairly, in all material respects, the financial position of Eaton Vance Short Duration Diversified Income Fund and subsidiary as of October 31, 2011, the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
 
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2011

 
47


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Federal Tax Information (Unaudited)

 
 
The Form 1099-DIV you receive in January 2012 will show the tax status of all distributions paid to your account in calendar year 2011. Shareholders are advised to consult their own tax adviser with respect to the tax consequences of their investment in the Fund.

 
48


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Notice to Shareholders

 
 
Effective May 20, 2011 the Fund’s investment policies were changed to expand the “Authorized Foreign Currencies” in which the Fund may invest to include Australian dollars. The Fund may invest without limit in foreign investments denominated in U.S. dollars and may invest up to 15% of net assets in foreign investments denominated in Authorized Foreign Currencies, which include euros, British pounds, Swiss francs, Canadian dollars, and Australian dollars.

 
49


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Dividend Reinvestment Plan

 
The Fund offers a dividend reinvestment plan (Plan) pursuant to which shareholders may elect to have distributions automatically reinvested in common shares (Shares) of the Fund. You may elect to participate in the Plan by completing the Dividend Reinvestment Plan Application Form. If you do not participate, you will receive all distributions in cash paid by check mailed directly to you by American Stock Transfer & Trust Company (AST) as dividend paying agent. On the distribution payment date, if the NAV per Share is equal to or less than the market price per Share plus estimated brokerage commissions, then new Shares will be issued. The number of Shares shall be determined by the greater of the NAV per Share or 95% of the market price. Otherwise, Shares generally will be purchased on the open market by AST, the Plan agent (Agent). Distributions subject to income tax (if any) are taxable whether or not Shares are reinvested.
 
If your Shares are in the name of a brokerage firm, bank, or other nominee, you can ask the firm or nominee to participate in the Plan on your behalf. If the nominee does not offer the Plan, you will need to request that the Fund’s transfer agent re-register your Shares in your name or you will not be able to participate.
 
The Agent’s service fee for handling distributions will be paid by the Fund. Plan participants will be charged their pro rata share of brokerage commissions on all open-market purchases.
 
Plan participants may withdraw from the Plan at any time by writing to the Agent at the address noted on the following page. If you withdraw, you will receive Shares in your name for all Shares credited to your account under the Plan. If a participant elects by written notice to the Agent to sell part or all of his or her Shares and remit the proceeds, the Agent is authorized to deduct a $5.00 fee plus brokerage commissions from the proceeds.
 
If you wish to participate in the Plan and your Shares are held in your own name, you may complete the form on the following page and deliver it to the Agent. Any inquiries regarding the Plan can be directed to the Agent at 1-866-439-6787.

 
50


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Application for Participation in Dividend Reinvestment Plan

 
 
 
This form is for shareholders who hold their common shares in their own names. If your common shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it will participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank, or nominee is unable to participate on your behalf, you should request that your common shares be re-registered in your own name which will enable your participation in the Plan.
 
The following authorization and appointment is given with the understanding that I may terminate it at any time by terminating my participation in the Plan as provided in the terms and conditions of the Plan.
 
Please print exact name on account:
Shareholder signature                                   Date
Shareholder signature                                   Date
 
Please sign exactly as your common shares are registered. All persons whose names appear on the share certificate must sign.
 
YOU SHOULD NOT RETURN THIS FORM IF YOU WISH TO RECEIVE YOUR DISTRIBUTIONS IN CASH. THIS IS NOT A PROXY.
 
This authorization form, when signed, should be mailed to the following address:
 
Eaton Vance Short Duration Diversified Income Fund
c/o American Stock Transfer & Trust Company
P.O. Box 922
Wall Street Station
New York, NY 10269-0560
 
Number of Employees
The Fund is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a closed-end management investment company and has no employees.
 
Number of Shareholders
As of October 31, 2011, Fund records indicate that there are 36 registered shareholders and approximately 12,710 shareholders owning the Fund shares in street name, such as through brokers, banks, and financial intermediaries.
 
If you are a street name shareholder and wish to receive Fund reports directly, which contain important information about the Fund, please write or call:
 
Eaton Vance Distributors, Inc.
Two International Place
Boston, MA 02110
1-800-262-1122
 
New York Stock Exchange symbol
 
The New York Stock Exchange symbol is EVG.

 
51


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Management and Organization

 
 
Fund Management. The Trustees of Eaton Vance Short Duration Diversified Income Fund (the Fund) are responsible for the overall management and supervision of the Fund’s affairs. The Trustees and officers of the Fund are listed below. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. The “Noninterested Trustees” consist of those Trustees who are not “interested persons” of the Fund, as that term is defined under the 1940 Act. The business address of each Trustee and officer is Two International Place, Boston, Massachusetts 02110. As used below, “EVC” refers to Eaton Vance Corp., “EV” refers to Eaton Vance, Inc., “EVM” refers to Eaton Vance Management, “BMR” refers to Boston Management and Research and “EVD” refers to Eaton Vance Distributors, Inc. EVC and EV are the corporate parent and trustee, respectively, of EVM and BMR. EVD is a wholly-owned subsidiary of EVC. Each officer affiliated with Eaton Vance may hold a position with other Eaton Vance affiliates that is comparable to his or her position with EVM listed below. Each Trustee oversees 179 portfolios in the Eaton Vance Complex (including all master and feeder funds in a master feeder structure). Each officer serves as an officer of certain other Eaton Vance funds. Each Trustee serves for a three year term. Each officer serves until his or her successor is elected.
 
             
    Position(s)
  Term of
   
    with the
  Office;
  Principal Occupation(s) and Directorships
Name and Year of Birth   Fund   Length of Service   During Past Five Years and Other Relevant Experience
 
 
 
Interested Trustee
             
Thomas E. Faust Jr.
1958
  Class I Trustee   Until 2012. 3 years.
Trustee since 2008.
  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 179 registered investment companies and 1 private investment company managed by EVM or BMR. Mr. Faust is an interested person because of his positions with EVM, BMR, EVD, EVC and EV, which are affiliates of the Fund.
Directorships in the Last Five Years.(1) Director of EVC.
 
Noninterested Trustees
             
Scott E. Eston
1956
  Class I Trustee   Until 2012. 1 year.
Trustee since 2011.
  Private investor. Formerly held various positions at Grantham, Mayo, Van Otterloo and Co., L.L.C. (investment management firm) (1997-2009), including Chief Operating Officer (2002-2009), Chief Financial Officer (1997-2009) and Chairman of the Executive Committee (2002-2008); President and Principal Executive Officer, GMO Trust (open-end registered investment company) (2006-2009). Former Partner, Coopers and Lybrand L.L.P. (now PricewaterhouseCoopers) (public accounting firm) (1987-1997).
Directorships in the Last Five Years. None.
             
Benjamin C. Esty
1963
  Class I Trustee   Until 2012. 3 years.
Trustee since 2005.
  Roy and Elizabeth Simmons Professor of Business Administration and Finance Unit Head, Harvard University Graduate School of Business Administration.
Directorships in the Last Five Years.(1) None.
             
Allen R. Freedman
1940
  Class I Trustee   Until 2012. 3 years.
Trustee since 2007.
  Private Investor. Former Chairman (2002-2004) and a Director (1983-2004) of Systems & Computer Technology Corp. (provider of software to higher education). Formerly, a Director of Loring Ward International (fund distributor) (2005-2007). Former Chairman and a Director of Indus International, Inc. (provider of enterprise management software to the power generating industry) (2005-2007). Former Chief Executive Officer of Assurant, Inc. (insurance provider) (1979-2000).
Directorships in the Last Five Years.(1) Director of Stonemor Partners, L.P. (owner and operator of cemeteries). Formerly, Director of Assurant, Inc. (insurance provider) (1979-2011).
             
William H. Park
1947
  Class II Trustee   Until 2013. 3 years.
Trustee since 2004.
  Consultant and private investor. Formerly, Chief Financial Officer, Aveon Group L.P. (investment management firm) (2010-2011). Formerly, Vice Chairman, Commercial Industrial Finance Corp. (specialty finance company) (2006-2010). Formerly, President and Chief Executive Officer, Prizm Capital Management, LLC (investment management firm) (2002-2005). Formerly, Executive Vice President and Chief Financial Officer, United Asset Management Corporation (investment management firm) (1982-2001). Formerly, Senior Manager, Price Waterhouse (now PricewaterhouseCoopers) (an independent registered public accounting firm) (1972-1981).
Directorships in the Last Five Years.(1) None.

 
52


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
Management and Organization — continued

 
             
    Position(s)
  Term of
   
    with the
  Office;
  Principal Occupation(s) and Directorships
Name and Year of Birth   Fund   Length of Service   During Past Five Years and Other Relevant Experience
 
 
Noninterested Trustees (continued)
             
Ronald A. Pearlman
1940
  Class II Trustee   Until 2013. 3 years.
Trustee since 2004.
  Professor of Law, Georgetown University Law Center. Formerly, Deputy Assistant Secretary (Tax Policy) and Assistant Secretary (Tax Policy), U.S. Department of the Treasury (1983-1985). Formerly, Chief of Staff, Joint Committee on Taxation, U.S. Congress (1988-1990).
Directorships in the Last Five Years.(1) None.
             
Helen Frame Peters
1948
  Class III Trustee   Until 2014. 3 years.
Trustee since 2008.
  Professor of Finance, Carroll School of Management, Boston College. Formerly, Dean, Carroll School of Management, Boston College (2000-2002). Formerly, Chief Investment Officer, Fixed Income, Scudder Kemper Investments (investment management firm) (1998-1999). Formerly, Chief Investment Officer, Equity and Fixed Income, Colonial Management Associates (investment management firm) (1991-1998).
Directorships in the Last Five Years.(1) Formerly, Director of BJ’s Wholesale Club, Inc. (wholesale club retailer) (2004-2011). Formerly, Trustee of SPDR Index Shares Funds and SPDR Series Trust (exchange traded funds) (2000-2009). Formerly, Director of Federal Home Loan Bank of Boston (a bank for banks) (2007-2009).
             
Lynn A. Stout
1957
  Class III Trustee   Until 2014. 3 years.
Trustee since 2005.
  Paul Hastings Professor of Corporate and Securities Law (since 2006) and Professor of Law (2001-2006), University of California at Los Angeles School of Law.
Directorships in the Last Five Years.(1) None.
             
Harriett Tee Taggart
1948
  Class II Trustee   Until 2013. 2 years.
Trustee since 2011.
  Managing Director, Taggart Associates (a professional practice firm). Formerly, Partner and Senior Vice President, Wellington Management Company, LLP (investment management firm) (1983-2006).
Directorships in the Last Five Years. Director of Albemarle Corporation (chemicals manufacturer) (since 2007) and The Hanover Group (specialty property and casualty insurance company) (since 2009). Formerly, Director of Lubrizol Corporation (specialty chemicals) (2007-2011).
             
Ralph F. Verni
1943
  Chairman of the Board and
Class III Trustee
  Until 2014. 3 years. Trustee since 2005. Chairman of the Board since 2007.   Consultant and private investor. Formerly, Chief Investment Officer (1982-1992), Chief Financial Officer (1988-1990) and Director (1982-1992), New England Life. Formerly, Chairperson, New England Mutual Funds (1982-1992). Formerly, President and Chief Executive Officer, State Street Management & Research (1992-2000). Formerly, Chairperson, State Street Research Mutual Funds (1992-2000). Formerly, Director, W.P. Carey, LLC (1998-2004) and First Pioneer Farm Credit Corp. (2002-2006).
Directorships in the Last Five Years.(1) None.
Principal Officers who are not Trustees
 
             
    Position(s)
       
    with the
  Length of
  Principal Occupation(s)
Name and Year of Birth   Fund   Service   During Past Five Years
 
 
Payson F. Swaffield
1956
  President   Since 2007   Chief Income Investment Officer of EVC. Vice President of EVM and BMR.
Barbara E. Campbell
1957
  Treasurer   Since 2005   Vice President of EVM and BMR.
Maureen A. Gemma
1960
  Vice President, Secretary and Chief Legal Officer   Vice President since 2011, Secretary since 2007 and Chief Legal Officer since 2008   Vice President of EVM and BMR.
Paul M. O’Neil
1953
  Chief Compliance Officer   Since 2004   Vice President of EVM and BMR.
 
(1) During their respective tenures, the Trustees (except Mr. Eston and Ms. Taggart) also served as trustees of one or more of the following Eaton Vance funds (which operated in the years noted): Eaton Vance Credit Opportunities Fund (launched in 2005 and terminated in 2010); Eaton Vance Insured Florida Plus Municipal Bond Fund (launched in 2002 and terminated in 2009); and Eaton Vance National Municipal Income Trust (launched in 1998 and terminated in 2009).

 
53


 

 
Eaton Vance
Short Duration Diversified Income Fund
 
October 31, 2011
 
 
IMPORTANT NOTICES

Principal Officers who are not Trustees (continued)
 
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy Policy”) with respect to nonpublic personal information about its customers:
 
•  Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions.
 
•  None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker/dealers.
 
•  Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information.
 
•  We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com.
 
Our pledge of privacy applies to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.
 
Delivery of Shareholder Documents. The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called “householding” and it helps eliminate duplicate mailings to shareholders. Eaton Vance, or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-262-1122, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will be effective within 30 days of receipt by Eaton Vance or your financial advisor.
 
Portfolio Holdings. Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-262-1122 or in the EDGAR database on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC’s public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).
 
Proxy Voting. From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-262-1122 and by accessing the SEC’s website at www.sec.gov.
 
Additional Notice to Shareholders. The Fund may purchase shares of its common stock in the open market when they trade at a discount to net asset value or at other times if the Fund determines such purchases are advisable. There can be no assurance that the Fund will take such action or that such purchases would reduce the discount.
 
Closed-End Fund Information. The Eaton Vance closed-end funds make certain quarterly fund performance data and information about portfolio characteristics (such as top holdings and asset allocation) available on the Eaton Vance website after the end of each calendar quarter-end. Certain month end fund performance data for the funds, including total returns, are posted to the website shortly after the end of each calendar month. Portfolio holdings for the most recent calendar quarter-end are also posted to the website approximately 30 days following the end of the quarter. This information is available at www.eatonvance.com on the fund information pages under “Individual Investors – Closed-End Funds”.

 
54


 

Principal Officers who are not Trustees (continued)
 
 
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Principal Officers who are not Trustees (continued)
 
 
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Principal Officers who are not Trustees (continued)
 
 
Investment Adviser and Administrator
Eaton Vance Management
Two International Place
Boston, MA 02110
 
Custodian
State Street Bank and Trust Company
200 Clarendon Street
Boston, MA 02116
 
Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Principal Officers who are not Trustees (continued)
 
 
 
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
 
Fund Offices
Two International Place
Boston, MA 02110


 

Principal Officers who are not Trustees (continued)
 
 
(EATON VANCE INVESTMENT MANAGERS LOGO)
 
2319-12/11 CE-SDDISRC


 

Item 2. Code of Ethics
The registrant has adopted a code of ethics applicable to its Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-262-1122.
Item 3. Audit Committee Financial Expert
The registrant’s Board has designated William H. Park, an independent trustee, as its audit committee financial expert. Mr. Park is a certified public accountant who is a consultant and private investor. Previously, he served as the Chief Financial Officer of Aveon Group, L.P. (an investment management firm), as the Vice Chairman of Commercial Industrial Finance Corp. (specialty finance company), as President and Chief Executive Officer of Prizm Capital Management, LLC (investment management firm), as Executive Vice President and Chief Financial Officer of United Asset Management Corporation (an institutional investment management firm) and as a Senior Manager at Price Waterhouse (now PricewaterhouseCoopers) (an independent registered public accounting firm).
Item 4. Principal Accountant Fees and Services
(a) —(d)
The following table presents the aggregate fees billed to the registrant for the registrant’s fiscal years ended October 31, 2010 and October 31, 2011 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   10/31/10     10/31/11  
 
Audit Fees
  $ 84,460     $ 85,200  
Audit-Related Fees(1)
  $ 0     $ 0  
Tax Fees(2)
  $ 20,900     $ 27,610  
All Other Fees(3)
  $ 1,400     $ 1,200  
 
Total
  $ 106,760     $ 114,010  
 
     
(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 registrant’s principal accountant other than audit, audit-related, and tax services.
(e)(1) The registrant’s audit committee has adopted policies and procedures relating to the pre-approval of services provided by the registrant’s principal accountant (the “Pre-Approval Policies”). The Pre-Approval Policies establish a framework intended to assist the audit committee in the proper discharge of its pre-approval responsibilities. As a general matter, the Pre-Approval Policies (i) specify certain types of audit, audit-related, tax, and other services determined to be pre-approved by the audit committee; and (ii) delineate specific procedures governing the mechanics of the pre-approval process, including the approval and monitoring of audit and non-audit service fees. Unless a service is specifically pre-approved under the Pre-Approval Policies, it must be separately pre-approved by the audit committee.

 


 

The Pre-Approval Policies and the types of audit and non-audit services pre-approved therein must be reviewed and ratified by the registrant’s audit committee at least annually. The registrant’s audit committee maintains full responsibility for the appointment, compensation, and oversight of the work of the registrant’s principal accountant.
(e)(2) No services described in paragraphs (b)-(d) above were approved by the registrant’s audit committee pursuant to the “de minimis exception” set forth in Rule 2-01 (c)(7)(i)(C) of Regulation S-X.
(f) Not applicable.
(g) The following table presents (i) the aggregate non-audit fees (i.e., fees for audit-related, tax, and other services) billed to the registrant by D&T for the registrant’s fiscal years ended October 31, 2010 and October 31, 2011; 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   10/31/10     10/31/11  
 
Registrant
  $ 22,300     $ 28,810  
 
               
Eaton Vance(1)
  $ 278,901     $ 226,431  
 
(1)   The investment adviser to the registrant, as well as any of its affiliates that provide ongoing services to the registrant, are subsidiaries of Eaton Vance Corp.
(h) The registrant’s audit committee has considered whether the provision by the registrant’s principal accountant of non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants
The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities and Exchange Act of 1934, as amended. William H. Park (Chair), Scott E. Eston, Helen Frame Peters, Lynn A. Stout and Ralph F. Verni are the members of the registrant’s audit committee.
Item 6. Schedule of Investments
Please see schedule of investments contained in the Report to Stockholders included under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
The Board of Trustees of the Trust has adopted a proxy voting policy and procedure (the “Fund Policy”), pursuant to which the Trustees have delegated proxy voting responsibility to the Fund’s investment adviser and adopted the investment adviser’s proxy voting policies and procedures (the “Policies”) which are described below. The Trustees will review the Fund’s proxy voting records from

 


 

time to time and will annually consider approving the Policies for the upcoming year. In the event that a conflict of interest arises between the Fund’s shareholders and the investment adviser, the administrator, or any of their affiliates or any affiliate of the Fund, the investment adviser will generally refrain from voting the proxies related to the companies giving rise to such conflict until it consults with the Board’s Special Committee except as contemplated under the Fund Policy. The Board’s Special Committee will instruct the investment adviser on the appropriate course of action.
The Policies are designed to promote accountability of a company’s management to its shareholders and to align the interests of management with those shareholders. An independent proxy voting service (“Agent”), currently Institutional Shareholder Services, Inc., has been retained to assist in the voting of proxies through the provision of vote analysis, implementation and recordkeeping and disclosure services. The investment adviser will generally vote proxies through the Agent. The Agent is required to vote all proxies and/or refer them back to the investment adviser pursuant to the Policies. It is generally the policy of the investment adviser to vote in accordance with the recommendation of the Agent. The Agent shall refer to the investment adviser proxies relating to mergers and restructurings, and the disposition of assets, termination, liquidation and mergers contained in mutual fund proxies. The investment adviser will normally vote against anti-takeover measures and other proposals designed to limit the ability of shareholders to act on possible transactions, except in the case of closed-end management investment companies. The investment adviser generally supports management on social and environmental proposals. The investment adviser may abstain from voting from time to time where it determines that the costs associated with voting a proxy outweighs the benefits derived from exercising the right to vote or the economic effect on shareholders interests or the value of the portfolio holding is indeterminable or insignificant.
In addition, the investment adviser will monitor situations that may result in a conflict of interest between the Fund’s shareholders and the investment adviser, the administrator, or any of their affiliates or any affiliate of the Fund by maintaining a list of significant existing and prospective corporate clients. The investment adviser’s personnel responsible for reviewing and voting proxies on behalf of the Fund will report any proxy received or expected to be received from a company included on that list to the personnel of the investment adviser identified in the Policies. If such personnel expects to instruct the Agent to vote such proxies in a manner inconsistent with the guidelines of the Policies or the recommendation of the Agent, the personnel will consult with members of senior management of the investment adviser to determine if a material conflict of interests exists. If it is determined that a material conflict does exist, the investment adviser will seek instruction on how to vote from the Special Committee.
Information on how the Fund voted proxies relating to portfolio securities during the most recent 12 month period ended June 30 is available (1) without charge, upon request, by calling 1-800-262-1122, and (2) on the Securities and Exchange Commission’s website at http://www.sec.gov.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Scott H. Page, Payson F. Swaffield, Mark S. Venezia, Catherine M. McDermott, Andrew Szczurowski and other Eaton Vance Management (“EVM”) investment professionals comprise the investment team responsible for the overall and day-to-day management of the Fund’s investments as well as allocations among the Fund’s three principal investment categories.
Mr. Page has been an Eaton Vance portfolio manager since 1996 and is a Vice President of EVM and Boston Management and Research, an Eaton Vance subsidiary (“BMR”). He is head of Eaton Vance’s Bank Loan Investment Group. Mr. Swaffield is Chief Income Investment Officer of EVM and BMR and has been an Eaton Vance portfolio manager since 1996. Mr. Venezia has been an Eaton Vance portfolio manager since 1990 and is a Vice President of EVM and BMR. He is head of Eaton Vance’s

 


 

Global Bond Department. Ms. McDermott has been with Eaton Vance since 2000 and is a Vice President of EVM and BMR. Mr. Szczurowski became a portfolio manager effective November 1, 2011 and is an Assistant Vice President of EVM and BMR. He has been a member of the MBS group at Eaton Vance since 2007 and an analyst since 2008. Prior to 2007, Mr. Szczurowski was affiliated with Bank of New York Mellon. This information is provided as of the date of filing of this report.
The following table shows, as of the Fund’s most recent fiscal year end, the number of accounts each portfolio manager managed in each of the listed categories and the total assets (in millions of dollars), in the accounts managed within each category. The table also shows the number of accounts with respect to which the advisory fee is based on the performance of the account, if any, and the total assets (in millions of dollars) in those accounts.
                                 
                    Number of    
    Number           Accounts   Total assets of
    of All   Total Assets of   Paying a   Accounts Paying a
    Accounts   All Accounts   Performance Fee   Performance Fee
   Scott H. Page
                               
Registered Investment Companies
    12     $ 18,042.5       0     $ 0  
Other Pooled Investment Vehicles
    6     $ 6,359.5       1     $ 489.5  
Other Accounts
    2     $ 1,307.1       0     $ 0  
   Payson F. Swaffield
                               
Registered Investment Companies
    2     $ 3,349.2       0     $ 0  
Other Pooled Investment Vehicles
    0     $ 0       0     $ 0  
Other Accounts
    0     $ 0       0     $ 0  
   Mark S. Venezia*
                               
Registered Investment Companies
    12     $ 24,001.3       0     $ 0  
Other Pooled Investment Vehicles
    2     $ 475.4       0     $ 0  
Other Accounts
    0     $ 0       0     $ 0  
   Catherine C. McDermott
                               
Registered Investment Companies
    2     $ 991.8       0     $ 0  
Other Pooled Investment Vehicles
    0     $ 0       0     $ 0  
Other Accounts
    0     $ 0       0     $ 0  
   Andrew Szczurowski**
                               
Registered Investment Companies
    0     $ 0       0     $ 0  
Other Pooled Investment Vehicles
    0     $ 0       0     $ 0  
Other Accounts
    0     $ 0       0     $ 0  
 
*   This portfolio manager serves as portfolio manager of one or more registered investment companies that invest in one or more underlying registered investment companies in the Eaton Vance fund family. The underlying investment companies may be managed by this portfolio manager or another portfolio manager(s).
 
**   Mr. Szczurowski became a portfolio manager of the Fund effective November 1, 2011.

 


 

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.
     
    Dollar Range of Equity
Portfolio Manager   Securities Owned in the Fund
Scott H. Page
  None
Payson F. Swaffield
  None
Mark S. Venezia
  None
Catherine M. McDermott
  None
Andrew Szczurowski
  None
Potential for Conflicts of Interest. It is possible that conflicts of interest may arise in connection with a portfolio manager’s management of the Fund’s investments on the one hand and investments of other accounts for which a portfolio manager is responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among the Fund and other accounts he or she advises. In addition, due to differences in the investment strategies or restrictions between the Fund and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to the Fund. In some cases, another account managed by a portfolio manager may compensate the investment adviser based on the performance of the securities held by that account. The existence of such a performance based fee may create additional conflicts of interest for a portfolio manager in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, a portfolio manager will endeavor to exercise his or her discretion in a manner that he or she believes is equitable to all interested persons. EVM has adopted several policies and procedures designed to address these potential conflicts including a code of ethics and policies which govern the investment adviser’s trading practices, including among other things the aggregation and allocation of trades among clients, brokerage allocation, cross trades and best execution.
Compensation Structure for EVM
Compensation of EVM’s portfolio managers and other investment professionals has three primary components: (1) a base salary, (2) an annual cash bonus, and (3) annual stock-based compensation consisting of options to purchase shares of EVC’s nonvoting common stock and/or restricted shares of EVC’s nonvoting common stock. EVM’s investment professionals also receive certain retirement, insurance and other benefits that are broadly available to EVM’s employees. Compensation of EVM’s investment professionals is reviewed primarily on an annual basis. Cash bonuses, stock-based compensation awards, and adjustments in base salary are typically paid or put into effect at or shortly after the October 31st fiscal year end of EVC.
Method to Determine Compensation. EVM compensates its portfolio managers based primarily on the scale and complexity of their portfolio responsibilities and the total return performance of managed funds and accounts versus the benchmark(s) stated in the prospectus, as well as an appropriate peer group (as described below). In addition to rankings within peer groups of funds on the basis of absolute performance, consideration may also be given to relative risk-adjusted performance. Risk-adjusted performance measures include, but are not limited to, the Sharpe Ratio. Performance is normally based on periods ending on the September 30th preceding fiscal year end. Fund performance is normally evaluated primarily versus peer groups of funds as determined by Lipper Inc. and/or

 


 

Morningstar, Inc. When a fund’s peer group as determined by Lipper or Morningstar is deemed by EVM’s management not to provide a fair comparison, performance may instead be evaluated primarily against a custom peer group. In evaluating the performance of a fund and its manager, primary emphasis is normally placed on three-year performance, with secondary consideration of performance over longer and shorter periods. For funds that are tax-managed or otherwise have an objective of after-tax returns, performance is measured net of taxes. For other funds, performance is evaluated on a pre-tax basis. For funds with an investment objective other than total return (such as current income), consideration will also be given to the fund’s success in achieving its objective. For managers responsible for multiple funds and accounts, investment performance is evaluated on an aggregate basis, based on averages or weighted averages among managed funds and accounts. Funds and accounts that have performance-based advisory fees are not accorded disproportionate weightings in measuring aggregate portfolio manager performance.
The compensation of portfolio managers with other job responsibilities (such as heading an investment group or providing analytical support to other portfolios) will include consideration of the scope of such responsibilities and the managers’ performance in meeting them.
EVM seeks to compensate portfolio managers commensurate with their responsibilities and performance, and competitive with other firms within the investment management industry. EVM participates in investment-industry compensation surveys and utilizes survey data as a factor in determining salary, bonus and stock-based compensation levels for portfolio managers and other investment professionals. Salaries, bonuses and stock-based compensation are also influenced by the operating performance of EVM and its parent company. The overall annual cash bonus pool is based on a substantially fixed percentage of pre-bonus operating income. While the salaries of EVM’s portfolio managers are comparatively fixed, cash bonuses and stock-based compensation may fluctuate significantly from year to year, based on changes in manager performance and other factors as described herein. For a high performing portfolio manager, cash bonuses and stock-based compensation may represent a substantial portion of total compensation.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 


 

Item 12. Exhibits
     
(a)(1)
  Registrant’s Code of Ethics — Not applicable (please see Item 2).
(a)(2)(i)
  Treasurer’s Section 302 certification.
(a)(2)(ii)
  President’s Section 302 certification.
(b)
  Combined Section 906 certification.
(c)
  Registrant’s notices to shareholders pursuant to Registrant’s exemptive order granting an exemption from Section 19(b) of the 1940 Act and Rule 19b-1 thereunder regarding distributions paid pursuant to the Registrant’s Managed Distribution Plan.

 


 

Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Eaton Vance Short Duration Diversified Income Fund
         
By:
  /s/ Payson F. Swaffield
 
Payson F. Swaffield
   
 
  President    
 
       
Date:
  December 20, 2011    
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/ Barbara E. Campbell
 
Barbara E. Campbell
   
 
  Treasurer    
 
       
Date:
  December 20, 2011    
 
       
By:
  /s/ Payson F. Swaffield
 
Payson F. Swaffield
   
 
  President    
 
       
Date:
  December 20, 2011