Eaton Vance Risk Managed Diversified Equity Income
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment
Company Act File Number: 811-22044
Eaton Vance Risk-Managed Diversified Equity Income Fund
(Exact Name of registrant as Specified in Charter)
Two
International Place Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Maureen A. Gemma
Two International
Place Boston, Massachusetts 02110
(Name and Address of Agent for Services)
(617) 482-8260
(registrants
Telephone Number)
December 31
Date of Fiscal Year
End
December 31, 2009
Date of Reporting
Period
Eaton Vance
investment Managers
EATON VANCE RISK MANAGED DIVERSIFIED EQUITY INCOME FUND |
IMPORTANT
NOTICES REGARDING DISTRIBUTIONS,
DELIVERY OF SHAREHOLDER DOCUMENTS,
PORTFOLIO HOLDINGS AND PROXY VOTING
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 quarterly cash
distributions to common shareholders, stated in terms of a fixed
amount per common share.
The Fund intends to pay quarterly cash distributions equal to
$0.45 per share. You should not draw any conclusions about the
Funds 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 Funds 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 Funds
exemptive order. The Funds 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.
Delivery of Shareholder Documents. The Securities
and Exchange Commission (the 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 adviser, may household the
mailing of your documents indefinitely unless you instruct Eaton
Vance, or your financial adviser, 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 adviser.
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 adviser.
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 SECs website at
www.sec.gov.
Form N-Q
may also be reviewed and copied at the SECs 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.
This description is also available on the SECs website at
www.sec.gov.
Please refer to the inside back
cover of this report for an important notice about
the privacy policies adopted by the Eaton Vance
organization.
Eaton Vance Risk-Managed Diversified Equity Income Fund as of December 31, 2009
MANAGEMENTS DISCUSSION OF FUND PERFORMANCE
Economic
and Market Conditions
Walter A. Row, CFA
Eaton Vance
Management
Co-Portfolio Manager
Michael A. Allison, CFA
Eaton Vance
Management
Co-Portfolio Manager
|
|
After an uncertain first quarter of 2009 in which equity markets struggled to climb back from
the historic lows of 2008, stocks staged a broad-based rally that continued through year end. For
2009 overall, the S&P 500 Index was up 26.47%, the NASDAQ Composite Index increased 43.89%, and the
Dow Jones Industrial Average gained 22.74%, the best annual returns for all three benchmarks since
2003.1 |
|
|
As the year began, the economy was mired in the worst recession of the post-war era, primarily a
result of upheavals in the banking sector and a credit drought that led to a severe crisis of
confidence for investors.
Helped by the massive injections of government monetary and fiscal stimulus, the economic and
financial turmoil began to moderate. As of December 31, 2009, the U.S. economy was technically no
longer in recession, after the nations gross domestic product (GDP) returned to a growth mode in
the third quarter of 2009. The banking sector also found restored equilibrium. After one of the
most volatile periods in equity market history, 2009 will be remembered for the sustained rally
that helped replenish many of the investor losses caused by the financial crisis of 2008. |
|
|
Growth outperformed value across all market capitalizations for the year. Mid-cap stocks
outperformed the small- and large-cap segments of the market, although all three groups had
positive returns: the Russell Midcap Index gained 40.48%, while the large-cap Russell 1000 Index
returned 28.43% and the small-cap Russell 2000 Index rose 27.17%.1 |
Past performance is no guarantee of future results. Returns are historical and are calculated
by determining the percentage change in net asset value or market price (as applicable) with
all distributions reinvested. The Funds performance at market price will differ from its
results at NAV. Although market price performance generally reflects investment results over
time, during shorter periods, returns at market price can also be affected by factors such as
changing perceptions about the Fund, market conditions, fluctuations in supply and demand for
the Funds shares, or changes in Fund distributions. The Fund has no current intention to
utilize leverage, but may do so in the future through borrowings and other permitted methods.
Investment return and principal value will fluctuate so that shares, when sold, may be worth
more or less than their original cost. Performance is for the stated time period only; due to
market volatility, the Funds current 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.
Management
Discussion
|
|
The Fund is a closed-end fund and trades on the New York Stock Exchange (NYSE) under the
symbol ETJ. At net asset value (NAV), the Fund underperformed the S&P 500 Index, the CBOE S&P 500
BuyWrite Index and its Lipper peer group average during the 12 months ending December 31,
20091. The Funds market price traded at a 1.52% premium to NAV as of December 31, 2009. |
|
|
|
The Funds equity portfolio emphasized high quality stocks, which underperformed during the
markets rally. Additional hedging expenses associated with the Funds low-volatility structure
also limited the Funds upside market capture. |
|
|
|
The Funds primary investment objective is to
provide current income and gains, with a secondary objective of capital appreciation. The Fund
pursues its investment objectives by investing primarily in a portfolio of common stocks and index
put options. Under normal market conditions, the Fund seeks to generate current earnings in part by
employing an options strategy of writing (selling) put options on individual stocks and index call
options with respect to a portion of its common stock portfolio. In spite of the previously |
|
|
|
|
|
Total Return Performance 12/31/08 12/31/09 |
|
|
NYSE Symbol |
|
ETJ |
|
At Net Asset Value (NAV) |
|
|
5.68 |
% |
At Market Price |
|
|
3.47 |
% |
|
|
|
|
|
S&P 500 Index1 |
|
|
26.47 |
% |
CBOE S&P 500 BuyWrite Index1 |
|
|
25.91 |
% |
Lipper Options Arbitrage/Options Strategies Funds
Average1 |
|
|
27.38 |
% |
|
|
|
|
|
Premium/(Discount) to NAV
(12/31/09) |
|
|
1.52 |
% |
Total Distributions per share |
|
$ |
1.80 |
|
Distribution Rate 2 At NAV |
|
|
10.97 |
% |
At Market Price |
|
|
10.80 |
% |
|
|
|
|
See page 3 for more performance information. |
|
|
|
1 |
|
It is not possible to invest directly in an Index or a Lipper Classification. The
Indices total returns do not reflect commissions or expenses that would have been incurred if an
investor individually purchased or sold the securities represented in the Indices. The Lipper total
return is the average total return, at net asset value, of the funds that are in the same Lipper
Classification as the Fund. |
|
2 |
|
The Distribution Rate is based on the Funds last regular distribution per share
(annualized) in the period divided by the Funds NAV or market price at the end of the period. The
Funds quarterly distributions may be comprised of ordinary income, net realized capital gains and
return of capital. |
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.
1
Eaton Vance Risk-Managed Diversified Equity Income Fund as of December 31, 2009
MANAGEMENTS DISCUSSION OF FUND PERFORMANCE
mentioned losses related to these option strategies during the 12 months ending December
31, 2009, the Fund continued to provide shareholders with attractive quarterly distributions.
|
|
As of December 31, 2009, the Fund maintained a portfolio of dividend-paying stocks, broadly
diversified across the U.S. economy. Among the Funds common stock holdings, its largest sector
weightings on December 31, 2009, were information technology, financials, health care, and energy.
Security selection in the energy sector benefited the Funds performance relative to the S&P 500
Index, as did strong gains in the information technology sector and an underweighted exposure to
utilities. Conversely, Fund performance was negatively affected by the recovery in the consumer
discretionary and financials sectors, as the Funds holdings in these sectors underperformed their
counterparts in the S&P 500 Index. The Fund was more defensively positioned within these
economically sensitiveor cyclicalareas of the market at a time when investors became less
risk averse. The Funds holdings in the health care sector also held back its performance versus
the S&P 500 Index. |
The views expressed throughout this report are those of the portfolio managers and are current only
through the end of the period of the report as stated on the cover. These views are subject to
change at any time based upon market or other conditions, and the investment adviser disclaims any
responsibility to update such views. These views may not be relied on as investment advice and,
because investment decisions for a fund are based on many factors, may not be relied on as an
indication of trading intent on behalf of any Eaton Vance fund. Portfolio information provided in
the report may not be representative of the Funds current or future investments and may change due
to active management.
|
|
As of December 31, 2009, the Fund had written index calls and long index puts on 159% of its equity
holdings, comprising its collared overlay strategy. This strategy weighed on the Funds return, as
the market rallied strongly during the year. |
|
|
|
Eaton Vance Management (EVM) terminated its sub-advisory agreement with Rampart Investment
Management Company, Inc. with respect to the Fund and, effective October 20, 2009, EVM assumed
responsibility for the management of the Funds options strategy. |
2
Eaton Vance Risk-Managed Diversified Equity Income Fund as of December 31, 2009
FUND PERFORMANCE
Fund Performance
|
|
|
|
|
NYSE Symbol |
|
ETJ |
|
Average Annual Total Returns (at market price, New York Stock Exchange) |
|
|
|
|
|
One Year |
|
|
3.47 |
% |
Life of Fund (7/31/07) |
|
|
5.51 |
|
|
|
|
|
|
Average Annual Total Returns (at net asset value) |
|
|
|
|
|
One Year |
|
|
5.68 |
% |
Life of Fund (7/31/07) |
|
|
4.85 |
|
|
|
|
|
|
During the year ended December 31, 2008, the Fund elected to retain a portion of its
realized long-term gains and pay the required federal corporate income tax on such amount. The
total returns presented in the table include the economic benefit to common shareholders of the tax
credit or refund available to them, which equaled their pro rata share of the tax paid by the Fund.
If this benefit were not included in their returns, the returns would have been 4.01% (at market
price) and 3.36% (at net asset value) for the Life of Fund. |
Past performance is no guarantee of
future results. Returns are historical and are calculated by
determining the percentage change in net asset value or market price (as applicable) with all
distributions reinvested. The Funds performance at market price will differ from its results at
NAV. Although market price performance generally reflects investment results over time, during
shorter periods, returns at market price can also be affected by factors such as changing
perceptions about the Fund, market conditions, fluctuations in supply and demand for the Funds
shares, or changes in Fund distributions. The Fund has no current intention to utilize leverage,
but may do so in the future through borrowings and other permitted methods. Investment return and
principal value will fluctuate so that shares, when sold, may be worth more or less than their
original cost. Performance is for the stated time period only; due to market volatility, the Funds
current 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.
Fund Composition
|
|
|
|
|
Top 10 Holdings1 |
|
|
|
|
|
|
By total investments |
|
|
|
|
|
|
|
|
|
JPMorgan Chase & Co. |
|
|
2.6 |
% |
Apple, Inc. |
|
|
2.6 |
|
Microsoft Corp. |
|
|
2.5 |
|
Chevron Corp. |
|
|
2.2 |
|
General Electric Co. |
|
|
1.9 |
|
International Business Machines Corp. |
|
|
1.9 |
|
Cisco Systems, Inc. |
|
|
1.8 |
|
Goldman Sachs Group, Inc. |
|
|
1.8 |
|
Exxon Mobile Corp. |
|
|
1.7 |
|
AT&T, Inc. |
|
|
1.7 |
|
|
|
|
1 |
|
Top 10 Holdings represented 20.7% of
the Funds total investments as of
12/31/09. The Top 10 Holdings are
presented without the offsetting effect of
the Funds written option positions at
12/31/09. Excludes cash equivalents. |
Common Stock Sector Weightings2c
By total investments
|
|
|
2 |
|
Reflects the Funds total
investments as of 12/31/09. Common Stock
Sector Weightings are presented without
the offsetting effect of the Funds
written option positions at 12/31/09.
Excludes cash equivalents. |
3
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
PORTFOLIO OF INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
Common
Stocks 96.8%
|
|
Security
|
|
Shares
|
|
|
Value
|
|
|
|
|
|
|
Aerospace
& Defense 1.6%
|
|
General Dynamics Corp.
|
|
|
171,495
|
|
|
$
|
11,690,814
|
|
|
|
Lockheed Martin Corp.
|
|
|
100,469
|
|
|
|
7,570,339
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,261,153
|
|
|
|
|
|
|
|
Air
Freight & Logistics 0.7%
|
|
FedEx Corp.
|
|
|
94,527
|
|
|
$
|
7,888,278
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,888,278
|
|
|
|
|
|
|
|
Beverages 1.9%
|
|
Coca-Cola
Co. (The)
|
|
|
105,262
|
|
|
$
|
5,999,934
|
|
|
|
PepsiCo, Inc.
|
|
|
262,939
|
|
|
|
15,986,691
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,986,625
|
|
|
|
|
|
|
|
Biotechnology 1.7%
|
|
Amgen,
Inc.(1)
|
|
|
288,981
|
|
|
$
|
16,347,655
|
|
|
|
Celgene
Corp.(1)
|
|
|
74,351
|
|
|
|
4,139,864
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,487,519
|
|
|
|
|
|
|
|
Capital
Markets 3.0%
|
|
Goldman Sachs Group, Inc.
|
|
|
129,187
|
|
|
$
|
21,811,933
|
|
|
|
Northern Trust Corp.
|
|
|
138,981
|
|
|
|
7,282,604
|
|
|
|
State Street Corp.
|
|
|
153,073
|
|
|
|
6,664,799
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,759,336
|
|
|
|
|
|
|
|
Chemicals 0.6%
|
|
Monsanto Co.
|
|
|
86,646
|
|
|
$
|
7,083,310
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,083,310
|
|
|
|
|
|
|
|
Commercial
Banks 2.5%
|
|
PNC Financial Services Group, Inc.
|
|
|
127,421
|
|
|
$
|
6,726,555
|
|
|
|
U.S. Bancorp
|
|
|
265,571
|
|
|
|
5,978,003
|
|
|
|
Wells Fargo & Co.
|
|
|
629,401
|
|
|
|
16,987,533
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,692,091
|
|
|
|
|
|
|
|
Commercial
Services & Supplies 1.0%
|
|
Waste Management, Inc.
|
|
|
345,152
|
|
|
$
|
11,669,589
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,669,589
|
|
|
|
|
|
|
Communications
Equipment 2.6%
|
|
Cisco Systems,
Inc.(1)
|
|
|
934,816
|
|
|
$
|
22,379,495
|
|
|
|
QUALCOMM, Inc.
|
|
|
193,736
|
|
|
|
8,962,227
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31,341,722
|
|
|
|
|
|
|
|
Computers
& Peripherals 6.1%
|
|
Apple,
Inc.(1)
|
|
|
151,219
|
|
|
$
|
31,886,038
|
|
|
|
Hewlett-Packard Co.
|
|
|
338,676
|
|
|
|
17,445,201
|
|
|
|
International Business Machines Corp.
|
|
|
177,072
|
|
|
|
23,178,725
|
|
|
|
|
|
|
|
|
|
|
|
$
|
72,509,964
|
|
|
|
|
|
|
|
Consumer
Finance 0.6%
|
|
American Express Co.
|
|
|
161,985
|
|
|
$
|
6,563,632
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,563,632
|
|
|
|
|
|
|
|
Diversified
Financial Services 4.3%
|
|
Bank of America Corp.
|
|
|
1,230,419
|
|
|
$
|
18,530,110
|
|
|
|
JPMorgan Chase & Co.
|
|
|
770,079
|
|
|
|
32,089,192
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,619,302
|
|
|
|
|
|
|
|
Diversified
Telecommunication Services 2.8%
|
|
AT&T, Inc.
|
|
|
727,793
|
|
|
$
|
20,400,038
|
|
|
|
Verizon Communications, Inc.
|
|
|
370,188
|
|
|
|
12,264,328
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,664,366
|
|
|
|
|
|
|
|
Electric
Utilities 1.8%
|
|
American Electric Power Co., Inc.
|
|
|
266,955
|
|
|
$
|
9,287,364
|
|
|
|
FirstEnergy Corp.
|
|
|
249,177
|
|
|
|
11,574,272
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,861,636
|
|
|
|
|
|
|
|
Electrical
Equipment 1.0%
|
|
Emerson Electric Co.
|
|
|
275,263
|
|
|
$
|
11,726,204
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,726,204
|
|
|
|
|
|
|
|
Electronic
Equipment, Instruments & Components 1.2%
|
|
Corning, Inc.
|
|
|
735,230
|
|
|
$
|
14,197,291
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,197,291
|
|
|
|
|
|
|
See
notes to financial statements
4
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
PORTFOLIO OF
INVESTMENTS CONTD
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Shares
|
|
|
Value
|
|
|
|
|
|
|
Energy
Equipment & Services 1.6%
|
|
Diamond Offshore Drilling, Inc.
|
|
|
97,873
|
|
|
$
|
9,632,661
|
|
|
|
Schlumberger, Ltd.
|
|
|
141,677
|
|
|
|
9,221,756
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,854,417
|
|
|
|
|
|
|
|
Food
& Staples Retailing 1.8%
|
|
CVS Caremark Corp.
|
|
|
227,075
|
|
|
$
|
7,314,086
|
|
|
|
Wal-Mart Stores, Inc.
|
|
|
268,713
|
|
|
|
14,362,710
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,676,796
|
|
|
|
|
|
|
|
Food
Products 1.6%
|
|
Kellogg Co.
|
|
|
104,940
|
|
|
$
|
5,582,808
|
|
|
|
Nestle SA
|
|
|
221,699
|
|
|
|
10,759,849
|
|
|
|
Nestle SA ADR
|
|
|
57,115
|
|
|
|
2,761,510
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,104,167
|
|
|
|
|
|
|
|
Health
Care Equipment & Supplies 3.3%
|
|
Baxter International, Inc.
|
|
|
185,196
|
|
|
$
|
10,867,301
|
|
|
|
Boston Scientific
Corp.(1)
|
|
|
877,032
|
|
|
|
7,893,288
|
|
|
|
Covidien PLC
|
|
|
281,417
|
|
|
|
13,477,060
|
|
|
|
Zimmer Holdings,
Inc.(1)
|
|
|
107,594
|
|
|
|
6,359,882
|
|
|
|
|
|
|
|
|
|
|
|
$
|
38,597,531
|
|
|
|
|
|
|
|
Health
Care Providers & Services 0.6%
|
|
Fresenius Medical Care AG & Co. KGaA ADR
|
|
|
125,721
|
|
|
$
|
6,664,470
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,664,470
|
|
|
|
|
|
|
|
Hotels,
Restaurants & Leisure 1.6%
|
|
Carnival
Corp.(1)
|
|
|
193,524
|
|
|
$
|
6,132,776
|
|
|
|
McDonalds Corp.
|
|
|
214,575
|
|
|
|
13,398,063
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,530,839
|
|
|
|
|
|
|
|
Household
Products 3.3%
|
|
Colgate-Palmolive Co.
|
|
|
242,067
|
|
|
$
|
19,885,804
|
|
|
|
Procter & Gamble Co.
|
|
|
317,052
|
|
|
|
19,222,863
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,108,667
|
|
|
|
|
|
|
|
Industrial
Conglomerates 2.0%
|
|
General Electric Co.
|
|
|
1,536,023
|
|
|
$
|
23,240,028
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,240,028
|
|
|
|
|
|
|
Insurance 2.4%
|
|
Lincoln National Corp.
|
|
|
246,211
|
|
|
$
|
6,125,730
|
|
|
|
MetLife, Inc.
|
|
|
264,771
|
|
|
|
9,359,655
|
|
|
|
Prudential Financial, Inc.
|
|
|
257,266
|
|
|
|
12,801,556
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,286,941
|
|
|
|
|
|
|
|
Internet
& Catalog Retail 1.2%
|
|
Amazon.com,
Inc.(1)
|
|
|
107,351
|
|
|
$
|
14,440,857
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,440,857
|
|
|
|
|
|
|
|
Internet
Software & Services 0.9%
|
|
Google, Inc.,
Class A(1)
|
|
|
17,236
|
|
|
$
|
10,685,975
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,685,975
|
|
|
|
|
|
|
|
IT
Services 1.8%
|
|
MasterCard, Inc., Class A
|
|
|
51,050
|
|
|
$
|
13,067,779
|
|
|
|
Western Union Co.
|
|
|
438,011
|
|
|
|
8,256,507
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,324,286
|
|
|
|
|
|
|
|
Machinery 3.1%
|
|
Danaher Corp.
|
|
|
170,115
|
|
|
$
|
12,792,648
|
|
|
|
Deere & Co.
|
|
|
171,369
|
|
|
|
9,269,349
|
|
|
|
Illinois Tool Works, Inc.
|
|
|
181,403
|
|
|
|
8,705,530
|
|
|
|
PACCAR, Inc.
|
|
|
170,360
|
|
|
|
6,178,957
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,946,484
|
|
|
|
|
|
|
|
Media 0.6%
|
|
Walt Disney Co. (The)
|
|
|
219,157
|
|
|
$
|
7,067,813
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,067,813
|
|
|
|
|
|
|
|
Metals
& Mining 3.2%
|
|
BHP Billiton, Ltd. ADR
|
|
|
87,060
|
|
|
$
|
6,667,055
|
|
|
|
Freeport-McMoRan Copper & Gold,
Inc.(1)
|
|
|
79,705
|
|
|
|
6,399,514
|
|
|
|
Goldcorp, Inc.
|
|
|
474,017
|
|
|
|
18,647,829
|
|
|
|
United States Steel Corp.
|
|
|
108,090
|
|
|
|
5,957,921
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,672,319
|
|
|
|
|
|
|
|
Multi-Utilities 1.5%
|
|
PG&E Corp.
|
|
|
194,404
|
|
|
$
|
8,680,139
|
|
|
|
Public Service Enterprise Group, Inc.
|
|
|
263,396
|
|
|
|
8,757,917
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,438,056
|
|
|
|
|
|
|
See
notes to financial statements
5
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
PORTFOLIO OF
INVESTMENTS CONTD
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Shares
|
|
|
Value
|
|
|
|
|
|
|
Multiline
Retail 0.8%
|
|
Target Corp.
|
|
|
197,825
|
|
|
$
|
9,568,795
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,568,795
|
|
|
|
|
|
|
|
Oil,
Gas & Consumable Fuels 10.0%
|
|
Anadarko Petroleum Corp.
|
|
|
312,086
|
|
|
$
|
19,480,408
|
|
|
|
Chevron Corp.
|
|
|
342,162
|
|
|
|
26,343,052
|
|
|
|
Exxon Mobil Corp.
|
|
|
310,694
|
|
|
|
21,186,224
|
|
|
|
Hess Corp.
|
|
|
247,100
|
|
|
|
14,949,550
|
|
|
|
Occidental Petroleum Corp.
|
|
|
192,778
|
|
|
|
15,682,490
|
|
|
|
Total SA ADR
|
|
|
187,429
|
|
|
|
12,002,953
|
|
|
|
XTO Energy, Inc.
|
|
|
192,114
|
|
|
|
8,939,065
|
|
|
|
|
|
|
|
|
|
|
|
$
|
118,583,742
|
|
|
|
|
|
|
|
Personal
Products 0.5%
|
|
Avon Products, Inc.
|
|
|
197,344
|
|
|
$
|
6,216,336
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,216,336
|
|
|
|
|
|
|
|
Pharmaceuticals 6.4%
|
|
Abbott Laboratories
|
|
|
328,682
|
|
|
$
|
17,745,541
|
|
|
|
Bristol-Myers Squibb Co.
|
|
|
416,789
|
|
|
|
10,523,922
|
|
|
|
Johnson & Johnson
|
|
|
163,214
|
|
|
|
10,512,614
|
|
|
|
Merck & Co., Inc.
|
|
|
319,044
|
|
|
|
11,657,868
|
|
|
|
Pfizer, Inc.
|
|
|
1,079,619
|
|
|
|
19,638,269
|
|
|
|
Teva Pharmaceutical Industries, Ltd. ADR
|
|
|
123,715
|
|
|
|
6,950,309
|
|
|
|
|
|
|
|
|
|
|
|
$
|
77,028,523
|
|
|
|
|
|
|
|
Real
Estate Investment Trusts (REITs) 0.6%
|
|
AvalonBay Communities, Inc.
|
|
|
45,391
|
|
|
$
|
3,727,055
|
|
|
|
Boston Properties, Inc.
|
|
|
57,671
|
|
|
|
3,867,994
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,595,049
|
|
|
|
|
|
|
|
Road
& Rail 0.7%
|
|
CSX Corp.
|
|
|
162,921
|
|
|
$
|
7,900,039
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,900,039
|
|
|
|
|
|
|
|
Semiconductors
& Semiconductor Equipment 2.8%
|
|
ASML Holding NV ADR
|
|
|
345,537
|
|
|
$
|
11,779,356
|
|
|
|
Intel Corp.
|
|
|
434,879
|
|
|
|
8,871,532
|
|
|
|
NVIDIA
Corp.(1)
|
|
|
688,858
|
|
|
|
12,867,867
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,518,755
|
|
|
|
|
|
|
Software 4.0%
|
|
Microsoft Corp.
|
|
|
1,006,172
|
|
|
$
|
30,678,184
|
|
|
|
Oracle Corp.
|
|
|
665,959
|
|
|
|
16,342,634
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,020,818
|
|
|
|
|
|
|
|
Specialty
Retail 4.5%
|
|
Best Buy Co., Inc.
|
|
|
271,104
|
|
|
$
|
10,697,764
|
|
|
|
Gap, Inc. (The)
|
|
|
296,719
|
|
|
|
6,216,263
|
|
|
|
Home Depot, Inc.
|
|
|
532,774
|
|
|
|
15,413,152
|
|
|
|
Staples, Inc.
|
|
|
489,945
|
|
|
|
12,047,748
|
|
|
|
TJX Companies, Inc. (The)
|
|
|
246,310
|
|
|
|
9,002,630
|
|
|
|
|
|
|
|
|
|
|
|
$
|
53,377,557
|
|
|
|
|
|
|
|
Textiles,
Apparel & Luxury Goods 1.1%
|
|
NIKE, Inc., Class B
|
|
|
190,937
|
|
|
$
|
12,615,208
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,615,208
|
|
|
|
|
|
|
|
Tobacco 1.0%
|
|
Philip Morris International, Inc.
|
|
|
237,437
|
|
|
$
|
11,442,089
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,442,089
|
|
|
|
|
|
|
|
Wireless
Telecommunication Services 0.5%
|
|
American Tower Corp.,
Class A(1)
|
|
|
144,208
|
|
|
$
|
6,231,228
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,231,228
|
|
|
|
|
|
|
|
|
Total
Common Stocks
|
|
|
(identified
cost $991,278,527)
|
|
$
|
1,146,049,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Options
Purchased 2.5%
|
|
|
|
Number of
|
|
|
Strike
|
|
|
Expiration
|
|
|
|
|
|
|
Description
|
|
Contracts
|
|
|
Price
|
|
|
Date
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500 Index
|
|
|
6,189
|
|
|
$
|
975
|
|
|
|
3/20/10
|
|
|
$
|
5,879,550
|
|
|
|
S&P 500 Index
|
|
|
2,359
|
|
|
|
1,025
|
|
|
|
6/19/10
|
|
|
|
9,282,665
|
|
|
|
S&P 500 Index
|
|
|
3,035
|
|
|
|
1,050
|
|
|
|
6/19/10
|
|
|
|
14,112,750
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Put Options Purchased
|
|
|
|
|
|
|
(identified
cost $82,030,087)
|
|
$
|
29,274,965
|
|
|
|
|
|
See
notes to financial statements
6
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
PORTFOLIO OF
INVESTMENTS CONTD
|
|
|
|
|
|
|
|
|
|
|
Short-Term
Investments 3.0%
|
|
|
|
Interest
|
|
|
|
|
|
|
Description
|
|
(000s
omitted)
|
|
|
Value
|
|
|
|
|
|
Cash Management Portfolio,
0.00%(2)
|
|
$
|
35,640
|
|
|
$
|
35,639,728
|
|
|
|
|
|
|
|
|
Total
Short-Term Investments
|
|
|
(identified
cost $35,639,728)
|
|
$
|
35,639,728
|
|
|
|
|
|
|
|
|
Total
Investments 102.3%
|
|
|
(identified
cost $1,108,948,342)
|
|
$
|
1,210,964,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered Call
Options Written (1.2)%
|
|
|
|
Number of
|
|
|
Strike
|
|
|
Expiration
|
|
|
|
|
|
|
Description
|
|
Contracts
|
|
|
Price
|
|
|
Date
|
|
|
Value
|
|
|
|
|
|
S&P 500 Index
|
|
|
4,910
|
|
|
$
|
1,105
|
|
|
|
1/16/10
|
|
|
$
|
(11,175,160
|
)
|
|
|
S&P 500 Index
|
|
|
1,660
|
|
|
|
1,115
|
|
|
|
1/16/10
|
|
|
|
(2,679,240
|
)
|
|
|
S&P 500 Index
|
|
|
496
|
|
|
|
1,125
|
|
|
|
1/16/10
|
|
|
|
(505,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Covered Call Options Written
|
|
|
|
|
|
|
(premiums
received $13,135,333)
|
|
$
|
(14,360,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets, Less Liabilities (1.1)%
|
|
$
|
(13,450,470
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets 100.0%
|
|
$
|
1,183,153,706
|
|
|
|
|
|
The percentage shown for each investment category in the
Portfolio of Investments is based on net assets.
ADR - American Depositary Receipt
|
|
|
(1)
|
|
Non-income producing security. |
|
(2)
|
|
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 December 31, 2009. |
See
notes to financial statements
7
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
FINANCIAL STATEMENTS
Statement
of Assets and Liabilities
|
|
|
|
|
|
|
As of
December 31, 2009
|
|
|
|
|
|
|
Assets
|
|
Unaffiliated investments, at value
(identified cost, $1,073,308,614)
|
|
$
|
1,175,324,768
|
|
|
|
Affiliated investment, at value
(identified cost, $35,639,728)
|
|
|
35,639,728
|
|
|
|
Dividends receivable
|
|
|
1,468,211
|
|
|
|
Tax reclaims receivable
|
|
|
260,049
|
|
|
|
|
|
Total assets
|
|
$
|
1,212,692,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
Written options outstanding, at value
(premiums received, $13,135,333)
|
|
$
|
14,360,320
|
|
|
|
Payable for investments purchased
|
|
|
13,923,417
|
|
|
|
Payable to affiliates:
|
|
|
|
|
|
|
Investment adviser fee
|
|
|
996,783
|
|
|
|
Trustees fees
|
|
|
11,725
|
|
|
|
Accrued expenses
|
|
|
246,805
|
|
|
|
|
|
Total liabilities
|
|
$
|
29,539,050
|
|
|
|
|
|
Net Assets
|
|
$
|
1,183,153,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources
of Net Assets
|
|
Common shares, $0.01 par value, unlimited number of shares
authorized, 72,082,170 shares issued and outstanding
|
|
$
|
720,822
|
|
|
|
Additional paid-in capital
|
|
|
1,334,427,092
|
|
|
|
Accumulated net realized loss
|
|
|
(252,755,757
|
)
|
|
|
Accumulated distributions in excess of net investment income
|
|
|
(38,647
|
)
|
|
|
Net unrealized appreciation
|
|
|
100,800,196
|
|
|
|
|
|
Net Assets
|
|
$
|
1,183,153,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value
|
|
($1,183,153,706
¸
72,082,170 common shares issued and outstanding)
|
|
$
|
16.41
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
Ended
|
|
|
|
|
|
December 31,
2009
|
|
|
|
|
|
|
Investment
Income
|
|
Dividends (net of foreign taxes, $423,366)
|
|
$
|
23,887,867
|
|
|
|
Interest income allocated from affiliated investment
|
|
|
156,354
|
|
|
|
Expenses allocated from affiliated investment
|
|
|
(123,539
|
)
|
|
|
|
|
Total investment income
|
|
$
|
23,920,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
Investment adviser fee
|
|
$
|
11,531,349
|
|
|
|
Trustees fees and expenses
|
|
|
50,895
|
|
|
|
Custodian fee
|
|
|
319,842
|
|
|
|
Transfer and dividend disbursing agent fees
|
|
|
18,471
|
|
|
|
Legal and accounting services
|
|
|
81,184
|
|
|
|
Printing and postage
|
|
|
310,961
|
|
|
|
Miscellaneous
|
|
|
110,173
|
|
|
|
|
|
Total expenses
|
|
$
|
12,422,875
|
|
|
|
|
|
Deduct
|
|
|
|
|
|
|
Reduction of custodian fee
|
|
$
|
36
|
|
|
|
|
|
Total expense reductions
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expenses
|
|
$
|
12,422,839
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
11,497,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
and Unrealized Gain (Loss)
|
|
Net realized gain (loss)
|
|
|
|
|
|
|
Investment transactions
|
|
$
|
(85,623,411
|
)
|
|
|
Investment transactions allocated from affiliated investment
|
|
|
(76,994
|
)
|
|
|
Written options
|
|
|
(4,798,974
|
)
|
|
|
Foreign currency transactions
|
|
|
(86,241
|
)
|
|
|
|
|
Net realized loss
|
|
$
|
(90,585,620
|
)
|
|
|
|
|
Change in unrealized appreciation (depreciation)
|
|
|
|
|
|
|
Investments
|
|
$
|
153,109,062
|
|
|
|
Written options
|
|
|
(10,558,630
|
)
|
|
|
Foreign currency
|
|
|
15,123
|
|
|
|
|
|
Net change in unrealized appreciation (depreciation)
|
|
$
|
142,565,555
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain
|
|
$
|
51,979,935
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets from operations
|
|
$
|
63,477,778
|
|
|
|
|
|
See
notes to financial statements
8
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
FINANCIAL
STATEMENTS CONTD
Statements
of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
in Net Assets
|
|
December 31,
2009
|
|
|
December 31,
2008
|
|
|
|
|
From operations
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
11,497,843
|
|
|
$
|
11,170,928
|
|
|
|
Net realized gain (loss) from investment transactions, written
options and foreign currency transactions
|
|
|
(90,585,620
|
)
|
|
|
56,847,726
|
|
|
|
Net change in unrealized appreciation (depreciation) from
investments, written options and foreign currency
|
|
|
142,565,555
|
|
|
|
(129,152,667
|
)
|
|
|
|
|
Net increase (decrease) in net assets from operations
|
|
$
|
63,477,778
|
|
|
$
|
(61,134,013
|
)
|
|
|
|
|
Distributions to shareholders
|
|
|
|
|
|
|
|
|
|
|
From net investment income
|
|
$
|
(11,504,808
|
)
|
|
$
|
(11,532,334
|
)
|
|
|
From net realized gain
|
|
|
(604,782
|
)
|
|
|
(114,987,293
|
)
|
|
|
Tax return of capital
|
|
|
(116,236,664
|
)
|
|
|
|
|
|
|
|
|
Total distributions
|
|
$
|
(128,346,254
|
)
|
|
$
|
(126,519,627
|
)
|
|
|
|
|
Capital share transactions
|
|
|
|
|
|
|
|
|
|
|
Reinvestment of distributions
|
|
$
|
20,545,492
|
|
|
$
|
10,956,109
|
|
|
|
Offering costs
|
|
|
|
|
|
|
75,643
|
|
|
|
|
|
Net increase in net assets from capital share transactions
|
|
$
|
20,545,492
|
|
|
$
|
11,031,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets
|
|
$
|
(44,322,984
|
)
|
|
$
|
(176,621,888
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets
|
|
At beginning of year
|
|
$
|
1,227,476,690
|
|
|
$
|
1,404,098,578
|
|
|
|
|
|
At end of year
|
|
$
|
1,183,153,706
|
|
|
$
|
1,227,476,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
undistributed
(distributions in excess of)
net investment income
included in net assets
|
|
At end of year
|
|
$
|
(38,647
|
)
|
|
$
|
147,930
|
|
|
|
|
|
See
notes to financial statements
9
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
FINANCIAL
STATEMENTS CONTD
Financial
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
December 31,
2007(1)
|
|
|
|
|
Net asset value Beginning of period
|
|
$
|
17.340
|
|
|
$
|
20.000
|
|
|
$
|
19.100
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) From Operations
|
|
Net investment
income(3)
|
|
$
|
0.161
|
|
|
$
|
0.159
|
|
|
$
|
0.106
|
|
|
|
Net realized and unrealized gain (loss)
|
|
|
0.709
|
|
|
|
(1.020
|
)(4)
|
|
|
1.265
|
|
|
|
|
|
Total income (loss) from operations
|
|
$
|
0.870
|
|
|
$
|
(0.861
|
)
|
|
$
|
1.371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
Distributions
|
|
From net investment income
|
|
$
|
(0.161
|
)
|
|
$
|
(0.164
|
)
|
|
$
|
(0.096
|
)
|
|
|
From net realized gain
|
|
|
(0.010
|
)
|
|
|
(1.636
|
)
|
|
|
(0.354
|
)
|
|
|
Tax return of capital
|
|
|
(1.629
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions
|
|
$
|
(1.800
|
)
|
|
$
|
(1.800
|
)
|
|
$
|
(0.450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs charged to paid-in
capital(3)
|
|
$
|
|
|
|
$
|
0.001
|
|
|
$
|
(0.021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value End of period
|
|
$
|
16.410
|
|
|
$
|
17.340
|
|
|
$
|
20.000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value End of period
|
|
$
|
16.660
|
|
|
$
|
17.980
|
|
|
$
|
18.700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return on Net Asset
Value(5)
|
|
|
5.68
|
%
|
|
|
(1.17
|
)%(6)
|
|
|
7.38
|
%(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return on Market
Value(5)
|
|
|
3.47
|
%
|
|
|
9.60
|
%(6)
|
|
|
0.40
|
%(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental
Data
|
|
Net assets, end of period (000s omitted)
|
|
$
|
1,183,154
|
|
|
$
|
1,227,477
|
|
|
$
|
1,404,099
|
|
|
|
Ratios (as a percentage of average daily net assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses(9)
|
|
|
1.08
|
%
|
|
|
1.06
|
%
|
|
|
1.08
|
%(10)
|
|
|
Net investment income
|
|
|
0.99
|
%
|
|
|
0.85
|
%
|
|
|
1.29
|
%(10)
|
|
|
Portfolio Turnover
|
|
|
59
|
%
|
|
|
100
|
%
|
|
|
30
|
%(8)
|
|
|
|
|
|
|
|
(1)
|
|
For the period from the start of business, July 31, 2007,
to December 31, 2007. |
|
(2)
|
|
Net asset value at beginning of period reflects the deduction of
the sales load of $0.90 per share paid by the shareholder from
the $20.00 offering price. |
|
(3)
|
|
Computed using average shares outstanding. |
|
(4)
|
|
Includes per share federal corporate income tax on long-term
capital gains retained by the Fund of $(0.612). |
|
(5)
|
|
Returns are historical and are calculated by determining the
percentage change in net asset value or market value with all
distributions reinvested. During the year ended
December 31, 2008, the Fund elected to retain a portion of
its realized long-term gains and pay the required federal
corporate income tax on such amount. The total returns for the
year ended December 31, 2008, presented in the table,
include the economic benefit to common shareholders of the tax
credit or refund available to them, which equaled their pro rata
share of the tax paid by the Fund. If this benefit were not
included in the returns, the Total Investment Return on Net
Asset Value would have been (4.54%) and the Total Investment
Return on Market Value would have been 5.87%. |
|
(6)
|
|
During the year ended December 31, 2008, the Fund realized
a gain on the disposal of an investment security which did not
meet investment guidelines. The gain was less than $0.001 per
share and had no effect on total return for the year ended
December 31, 2008. |
|
(7)
|
|
Total investment return on net asset value is calculated
assuming a purchase at the offering price of $20.00 less the
sales load of $0.90 per share paid by the shareholder on the
first day and a sale at the net asset value on the last day of
the period reported with all distributions reinvested. Total
investment return on market value is calculated assuming a
purchase at the offering price of $20.00 less the sales load of
$0.90 per share paid by the shareholder on the first day and a
sale at the current market price on the last day of the period
reported with all distributions reinvested. |
|
(8)
|
|
Not annualized. |
|
(9)
|
|
Excludes the effect of custody fee credits, if any, of less than
0.005%. |
|
(10)
|
|
Annualized. |
See
notes to financial statements
10
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
NOTES TO FINANCIAL STATEMENTS
1 Significant
Accounting Policies
Eaton Vance Risk-Managed Diversified Equity Income Fund (the
Fund) is a Massachusetts business trust registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as a
diversified, closed-end management investment company. The
Funds primary investment objective is to provide current
income and gains, with a secondary objective of capital
appreciation. The Fund pursues its investment objectives by
investing primarily in a portfolio of common stocks and index
put options. Under normal market conditions, the Fund seeks to
generate current earnings in part by employing an options
strategy of writing put options on individual stocks and index
call options with respect to a portion of its common stock
portfolio.
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
source of authoritative accounting principles applied in the
preparation of the Funds financial statements is the
Financial Accounting Standards Board (FASB) Accounting Standards
Codification (the Codification), which superseded existing
non-Securities and Exchange Commission accounting and reporting
standards for interim and annual reporting periods ending after
September 15, 2009. The adoption of the Codification for
the current reporting period did not impact the Funds
application of generally accepted accounting principles.
A Investment
Valuation Equity securities (including common
shares of closed-end investment companies) listed on a U.S.
securities exchange generally are valued at the last sale 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. Exchange-traded options
are valued at the last sale price for the day of valuation as
quoted on any exchange on which the option is listed or, in the
absence of sales on such date, at the mean between the closing
bid and asked prices therefore as reported by the Options Price
Reporting Authority.
Over-the-counter
options are valued by a third party pricing service using
techniques that consider factors including the value of the
underlying instrument, the volatility of the underlying
instrument and the time until option expiration. Short-term debt
securities with a remaining maturity of sixty days or less are
generally valued at amortized cost, which approximates market
value. Foreign securities and currencies are valued in U.S.
dollars, based on foreign currency exchange rate quotations
supplied by a third party pricing service. The pricing service
uses a proprietary model to determine the exchange rate. Inputs
to the model include reported trades and implied bid/ask
spreads. The daily valuation of exchange-traded foreign
securities generally is determined as of the close of trading on
the principal exchange on which such securities trade. Events
occurring after the close of trading on foreign exchanges may
result in adjustments to the valuation of foreign securities to
more accurately reflect their fair value as of the close of
regular trading on the New York Stock Exchange. When valuing
foreign equity securities that meet certain criteria, the
Trustees have approved the use of a fair value service that
values such securities to reflect market trading that occurs
after the close of the applicable foreign markets of comparable
securities or other instruments that have a strong correlation
to the fair-valued securities. Investments for which valuations
or market quotations are not readily available or are deemed
unreliable are valued at fair value using methods determined in
good faith by or at the direction of the Trustees of the Fund in
a manner that most fairly reflects the securitys 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 all 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 securitys 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 companys or entitys 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 Cash Management Portfolio (Cash
Management), an affiliated investment company managed by Boston
Management and Research (BMR), a subsidiary of Eaton Vance
Management (EVM). Cash Management generally values its
investment securities utilizing the amortized cost valuation
technique permitted by
Rule 2a-7
under the 1940 Act, pursuant to which Cash Management must
comply with certain conditions. 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
11
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
NOTES TO FINANCIAL
STATEMENTS CONTD
not to approximate fair value, Cash Management may value its
investment securities based on available market quotations
provided by a third party pricing service.
B Investment
Transactions Investment transactions for
financial statement purposes are accounted for on a trade date
basis. Realized gains and losses on investments sold are
determined on the basis of identified cost.
C Income
Dividend income is recorded on the ex-dividend date for
dividends received in cash
and/or
securities. However, if the ex-dividend date has passed, certain
dividends from foreign securities are recorded as the Fund is
informed of the ex-dividend date. Withholding taxes on foreign
dividends and capital gains have been provided for in accordance
with the Funds understanding of the applicable
countries tax rules and rates. Interest income is recorded
on the basis of interest accrued, adjusted for amortization of
premium or accretion of discount.
D Federal
Taxes The Funds 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.
At December 31, 2009, the Fund, for federal income tax
purposes, had a capital loss carryforward of $253,207,118 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 December 31, 2017.
Additionally, at December 31, 2009, the Fund had a net
capital loss of $41,909,179 attributable to security
transactions incurred after October 31, 2009. This net
capital loss is treated as arising on the first day of the
Funds taxable year ending December 31, 2010.
As of December 31, 2009, the Fund had no uncertain tax
positions that would require financial statement recognition,
de-recognition, or disclosure. Each of the Funds federal
tax returns filed since the start of business on July 31,
2007 to December 31, 2009 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 Funds custodian fees are reported
as a reduction of expenses in the Statement of Operations.
F Organization
and Offering Costs Costs incurred by the Fund
in connection with its organization are expensed. Costs incurred
by the Fund in connection with the offering of its common shares
are recorded as a reduction of additional paid-in capital.
G 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.
H Use
of Estimates The preparation of the 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 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 Funds 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
Funds 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 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 Funds 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.
12
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
NOTES TO FINANCIAL
STATEMENTS CONTD
J Written
Options Upon the writing of a call or a put
option, the premium received by the Fund is included in the
Statement of Assets and Liabilities as a liability. The amount
of the liability is subsequently
marked-to-market
to reflect the current market value of the option written, in
accordance with the Funds 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. 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.
K Purchased
Options Upon the purchase of a call or put
option, the premium paid by the Fund is included in the
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 Funds policies on investment
valuations discussed above. 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, 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, 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.
2 Distributions
to Shareholders
Subject to its Managed Distribution Plan, the Fund intends to
make quarterly distributions from its cash available for
distribution, which consists of the Funds dividends and
interest income after payment of Fund expenses, net option
premiums and net realized and unrealized gains on stock
investments. The Fund intends to distribute all or substantially
all of its net realized capital gains, if any. 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 financial statements as
a return of capital. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in
capital. For tax purposes, distributions from short-term capital
gains are considered to be from ordinary income. Distributions
in any year may include a substantial return of capital
component.
The tax character of distributions declared for the years ended
December 31, 2009 and December 31, 2008 was
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
Distributions declared from:
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
11,504,808
|
|
|
$
|
33,724,663
|
|
|
|
Long-term capital gains
|
|
$
|
604,782
|
|
|
$
|
92,794,964
|
|
|
|
Tax return of capital
|
|
$
|
116,236,664
|
|
|
$
|
|
|
|
|
During the year ended December 31, 2009, accumulated net
realized loss was decreased by $179,612 and accumulated
undistributed net investment income was decreased by $179,612
due to differences between book and tax accounting, primarily
for distributions from real estate investment trusts and foreign
currency gain (loss). These reclassifications had no effect on
the net assets or net asset value per share of the Fund.
As of December 31, 2009, the components of distributable
earnings (accumulated losses) and unrealized appreciation
(depreciation) on a tax basis were as follows:
|
|
|
|
|
|
|
Capital loss carryforward and post October losses
|
|
$
|
(295,116,297
|
)
|
|
|
Net unrealized appreciation
|
|
$
|
143,122,089
|
|
|
|
The differences between components of distributable earnings
(accumulated losses) on a tax basis and the amounts reflected in
the Statement of Assets and Liabilities are primarily due to
investments in partnerships, written option contracts and wash
sales.
3 Investment
Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by EVM as compensation for
management and investment advisory services rendered to the
Fund. The fee is computed at an annual rate of 1.00% of the
Funds average daily gross assets and is payable monthly.
Gross assets as referred to herein represent net assets plus
obligations attributable to investment leverage, if any. The
portion of the adviser fee payable by Cash Management on the
Funds investment of cash therein is credited against the
Funds investment adviser fee. For the year ended
December 31, 2009, the Funds investment adviser fee
totaled $11,648,818 of which $117,469 was allocated from Cash
Management and $11,531,349 was paid or accrued directly by the
Fund. Prior to October 20, 2009, EVM delegated the
investment
13
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
NOTES TO FINANCIAL
STATEMENTS CONTD
management of the Funds options strategy to Rampart
Investment Management Company, Inc. (Rampart) pursuant to a
sub-advisory
agreement. EVM paid Rampart a portion of its advisory fee for
sub-advisory
services provided to the Fund. EVM terminated its
sub-advisory
agreement with Rampart with respect to the Fund and, effective
October 20, 2009, EVM assumed the investment management of
the Funds options strategy. EVM also serves as
administrator of the Fund, but receives no compensation.
Except for Trustees of the Fund who are not members of
EVMs 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
December 31, 2009, no significant amounts have been
deferred. Certain officers and Trustees of the Fund are officers
of EVM.
4 Purchases
and Sales of Investments
Purchases and sales of investments, other than short-term
obligations, aggregated $614,422,959 and $686,006,084
respectively, for the year ended December 31, 2009.
5 Common
Shares of Beneficial Interest
Common shares issued pursuant to the Funds dividend
reinvestment plan for the years ended December 31, 2009 and
December 31, 2008 were 1,276,345 and 600,825, respectively.
6 Federal
Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) of
investments of the Fund at December 31, 2009, as determined
on a federal income tax basis, were as follows:
|
|
|
|
|
|
|
Aggregate cost
|
|
$
|
1,067,851,436
|
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
214,593,084
|
|
|
|
Gross unrealized depreciation
|
|
|
(71,480,024
|
)
|
|
|
|
|
Net unrealized appreciation
|
|
$
|
143,113,060
|
|
|
|
|
|
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 written options and may
involve, to a varying degree, elements of risk in excess of the
amounts recognized for financial statement purposes. The
notional or contractual amounts of these instruments represent
the investment the Fund has in particular classes of financial
instruments and do not necessarily represent the amounts
potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all
related and offsetting transactions are considered. A summary of
written call options at December 31, 2009 is included in
the Portfolio of Investments.
Written call options activity for the year ended
December 31, 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Premiums
|
|
|
|
|
|
Contracts
|
|
|
Received
|
|
|
|
|
Outstanding, beginning of year
|
|
|
9,834
|
|
|
$
|
11,956,243
|
|
|
|
Options written
|
|
|
89,566
|
|
|
|
182,566,560
|
|
|
|
Options terminated in closing purchase transactions
|
|
|
(89,030
|
)
|
|
|
(175,425,102
|
)
|
|
|
Options expired
|
|
|
(3,304
|
)
|
|
|
(5,962,368
|
)
|
|
|
|
|
Outstanding, end of year
|
|
|
7,066
|
|
|
$
|
13,135,333
|
|
|
|
|
|
All of the assets of the Fund are subject to segregation to
satisfy the requirements of the escrow agent.
At December 31, 2009, the Fund had sufficient cash
and/or
securities to cover commitments under these contracts.
The Fund adopted FASB Statement of Financial Accounting
Standards No. 161 (FAS 161), Disclosures about
Derivative Instruments and Hedging Activities, (currently
FASB Accounting Standards Codification (ASC)
815-10),
effective January 1, 2009. Such standard requires enhanced
disclosures about an entitys derivative and hedging
activities, including qualitative disclosures about the
objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit-risk
related contingent features in derivative instruments. The
disclosure below includes additional information as a result of
implementing FAS 161.
The Fund is subject to equity price risk in the normal course of
pursuing its investment objectives. The Fund generally intends
to purchase index put options below the current value of the
index to reduce the Funds exposure to market risk and
volatility. In buying index put options, the Fund in effect,
acquires protection against decline in the value of the
applicable index below the exercise price in exchange for the
option premium paid. The Fund generally intends to write index
call options above the current value of the index to generate
premium income. In writing index call options, the Fund in
effect, sells potential appreciation in the value of the
applicable index above the exercise price in exchange for the
option premium received. The Fund retains the risk of loss,
minus the premium received, should the price of the underlying
index decline. The Fund is not subject to counterparty credit
risk with respect to its written options as the Fund, not the
counterparty, is obligated to perform under such derivatives.
14
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
NOTES TO FINANCIAL
STATEMENTS CONTD
The fair value of derivative instruments (not considered to be
hedging instruments for accounting disclosure purposes) and
whose primary underlying risk exposure is equity price risk at
December 31, 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
|
|
Derivative
|
|
Asset
Derivatives(1)
|
|
|
Liability
Derivatives(2)
|
|
|
|
|
Purchased Options
|
|
$
|
29,274,965
|
|
|
$
|
|
|
|
|
Written Options
|
|
|
|
|
|
|
(14,360,320
|
)
|
|
|
|
|
|
(1)
|
|
Statement of Assets and Liabilities location: Investments, at
value. |
|
(2)
|
|
Statement of Assets and Liabilities location: Written options
outstanding, at value. |
The effect of derivative instruments (not considered to be
hedging instruments for accounting disclosure purposes) on the
Statement of Operations and whose primary underlying risk
exposure is equity price risk for the year ended
December 31, 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Realized Gain
|
|
|
Appreciation
|
|
|
|
|
|
(Loss) on
|
|
|
(Depreciation)
on
|
|
|
|
|
|
Derivatives
|
|
|
Derivatives
|
|
|
|
|
|
Recognized in
|
|
|
Recognized in
|
|
|
|
Derivative
|
|
Income(1)
|
|
|
Income(2)
|
|
|
|
|
Purchased Options
|
|
$
|
55,848,559
|
|
|
$
|
(192,100,561
|
)
|
|
|
Written Options
|
|
|
(4,798,974
|
)
|
|
|
(10,558,630
|
)
|
|
|
|
|
|
(1)
|
|
Statement of Operations location: Net realized gain
(loss) Investment transactions and Written options,
respectively. |
|
(2)
|
|
Statement of Operations location: Change in unrealized
appreciation (depreciation) Investments and Written
options, respectively. |
The average number of purchased options contracts outstanding
during the year ended December 31, 2009, which is
indicative of the volume of this derivative type, was 10,572.
8 Fair
Value Measurements
Under generally accepted accounting principles for fair value
measurements, a
three-tier
hierarchy to prioritize the assumptions, referred to as inputs,
is used in valuation techniques to measure fair value. The
three-tier
hierarchy of inputs is summarized in the three broad levels
listed below.
|
|
|
|
|
Level 1 quoted prices in active markets for
identical investments
|
|
|
|
Level 2 other significant observable inputs
(including quoted prices for similar investments, interest
rates, prepayment speeds, credit risk, etc.)
|
|
|
|
Level 3 significant unobservable inputs
(including a funds own assumptions in determining the fair
value of investments)
|
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities.
At December 31, 2009, the inputs used in valuing the
Funds investments, which are carried at value, were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
|
|
|
Asset
Description
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
Total
|
|
|
|
|
Common Stocks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Discretionary
|
|
$
|
116,601,069
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
116,601,069
|
|
|
|
Consumer Staples
|
|
|
108,774,831
|
|
|
|
10,759,849
|
|
|
|
|
|
|
|
119,534,680
|
|
|
|
Energy
|
|
|
137,438,159
|
|
|
|
|
|
|
|
|
|
|
|
137,438,159
|
|
|
|
Financials
|
|
|
158,516,351
|
|
|
|
|
|
|
|
|
|
|
|
158,516,351
|
|
|
|
Health Care
|
|
|
142,778,043
|
|
|
|
|
|
|
|
|
|
|
|
142,778,043
|
|
|
|
Industrials
|
|
|
118,631,775
|
|
|
|
|
|
|
|
|
|
|
|
118,631,775
|
|
|
|
Information Technology
|
|
|
230,598,811
|
|
|
|
|
|
|
|
|
|
|
|
230,598,811
|
|
|
|
Materials
|
|
|
44,755,629
|
|
|
|
|
|
|
|
|
|
|
|
44,755,629
|
|
|
|
Telecommunication Services
|
|
|
38,895,594
|
|
|
|
|
|
|
|
|
|
|
|
38,895,594
|
|
|
|
Utilities
|
|
|
38,299,692
|
|
|
|
|
|
|
|
|
|
|
|
38,299,692
|
|
|
|
|
|
Total Common Stocks
|
|
$
|
1,135,289,954
|
|
|
$
|
10,759,849
|
*
|
|
$
|
|
|
|
$
|
1,146,049,803
|
|
|
|
|
|
Put Options Purchased
|
|
$
|
29,274,965
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
29,274,965
|
|
|
|
Short-Term Investments
|
|
|
35,639,728
|
|
|
|
|
|
|
|
|
|
|
|
35,639,728
|
|
|
|
|
|
Total Investments
|
|
$
|
1,200,204,647
|
|
|
$
|
10,759,849
|
|
|
$
|
|
|
|
$
|
1,210,964,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered Call Options Written
|
|
$
|
(14,360,320
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(14,360,320
|
)
|
|
|
|
|
Total
|
|
$
|
(14,360,320
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(14,360,320
|
)
|
|
|
|
|
|
|
|
*
|
|
Includes foreign equity securities whose values were adjusted to
reflect market trading that occurred after the close of trading
in their applicable markets. |
The Fund held no investments or other financial instruments as
of December 31, 2008 whose fair value was determined using
Level 3 inputs.
9 Review
for Subsequent Events
In connection with the preparation of the financial statements
of the Fund as of and for the year ended December 31, 2009,
events and transactions subsequent to December 31, 2009
through February 16, 2010, the date the financial
statements were issued, have been evaluated by the Funds
management for possible adjustment
and/or
disclosure. Management has not identified any subsequent events
requiring financial statement disclosure as of the date these
financial statements were issued.
15
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Trustees
and Shareholders of Eaton Vance
Risk-Managed Diversified Equity Income Fund:
We have audited the accompanying statement of assets and
liabilities of Eaton Vance Risk-Managed Diversified Equity
Income Fund (the Fund), including the portfolio of
investments, as of December 31, 2009, and the related
statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the two
years in the period then ended and for the period from the start
of business, July 31, 2007, to December 31, 2007.
These financial statements and financial highlights are the
responsibility of the Funds management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. The Fund is not required to have, nor were we
engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Funds 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 owned as of
December 31, 2009, by correspondence with the custodian and
brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Eaton Vance Risk-Managed
Diversified Equity Income Fund as of December 31, 2009, the
results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the two years in
the period then ended and for the period from the start of
business, July 31, 2007, to December 31, 2007, in
conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 16, 2010
16
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2009
FEDERAL TAX
INFORMATION (Unaudited)
The
Form 1099-DIV
you received in January 2010 showed the tax status of all
distributions paid to your account in calendar year 2009.
Shareholders are advised to consult their own tax adviser with
respect to the tax consequences of their investment in the Fund.
As required by the Internal Revenue Code regulations,
shareholders must be notified within 60 days of the
Funds fiscal year end regarding the status of qualified
dividend income for individuals, the dividends received
deduction for corporations and capital gain dividends.
Qualified Dividend Income. The Fund designates
$23,655,240 or up to the maximum amount of such dividends
allowable pursuant to the Internal Revenue Code, as qualified
dividend income eligible for the reduced tax rate of 15%.
Dividends Received Deduction. Corporate shareholders
are generally entitled to take the dividends received deduction
on the portion of the Funds dividend distribution that
qualifies under tax law. For the Funds fiscal year 2009
ordinary income dividends, 100% qualifies for the corporate
dividends received deduction.
Capital Gain Dividends. The Fund designates $604,782
as a capital gain dividend.
17
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
DIVIDEND REINVESTMENT PLAN
The Fund offers a dividend reinvestment plan (the Plan) pursuant
to which shareholders automatically have distributions
reinvested in common shares (the Shares) of the Fund unless they
elect otherwise through their investment dealer. On the
distribution payment date, if the net asset value 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 net
asset value per Share or 95% of the market price. Otherwise,
Shares generally will be purchased on the open market by the
Plan 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 your shares be re-registered in
your name with the Funds transfer agent, American Stock
Transfer & Trust Company (AST), or you will not
be able to participate.
The Plan Agents service fee for handling distributions
will be paid by the Fund. Each participant 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 Plan 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 Plan Agent to have
the Plan Agent sell part or all of his or her Shares and remit
the proceeds, the Plan 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 Plan Agent.
Any inquiries regarding the Plan can be directed to the Plan
Agent, AST, at 1-866-439-6787.
18
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
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 Risk-Managed Diversified Equity 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 diversified, closed-end management investment company and
has no employees.
Number of
Shareholders
As of December 31, 2009, our records indicate that there
are 40 registered shareholders and approximately 52,806
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 our
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 ETJ.
19
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
BOARD OF TRUSTEES ANNUAL
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
Overview
of the Contract Review Process
The Investment Company Act of 1940, as amended (the 1940
Act), provides, in substance, that each investment
advisory agreement between a fund and its investment adviser
will continue in effect from year to year only if its
continuance is approved at least annually by the funds
board of trustees, including by a vote of a majority of the
trustees who are not interested persons of the fund
(Independent Trustees), cast in person at a meeting
called for the purpose of considering such approval.
At a meeting of the Boards of Trustees (each a
Board) of the Eaton Vance group of mutual funds (the
Eaton Vance Funds) held on April 27, 2009, the
Board, including a majority of the Independent Trustees, voted
to approve continuation of existing advisory and
sub-advisory
agreements for the Eaton Vance Funds for an additional
one-year
period. In voting its approval, the Board relied upon the
affirmative recommendation of the Contract Review Committee of
the Board (formerly the Special Committee), which is a committee
comprised exclusively of Independent Trustees. Prior to making
its recommendation, the Contract Review Committee reviewed
information furnished for a series of meetings of the Contract
Review Committee held in February, March and April 2009.
Such information included, among other things, the following:
Information
about Fees, Performance and Expenses
|
|
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An independent report comparing the advisory and related fees
paid by each fund with fees paid by comparable funds;
|
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An independent report comparing each funds total expense
ratio and its components to comparable funds;
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|
An independent report comparing the investment performance of
each fund to the investment performance of comparable funds over
various time periods;
|
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Data regarding investment performance in comparison to relevant
peer groups of funds and appropriate indices;
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Comparative information concerning fees charged by each adviser
for managing other mutual funds and institutional accounts using
investment strategies and techniques similar to those used in
managing the fund;
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Profitability analyses for each adviser with respect to each
fund;
|
Information
about Portfolio Management
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Descriptions of the investment management services provided to
each fund, including the investment strategies and processes
employed, and any changes in portfolio management processes and
personnel;
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Information concerning the allocation of brokerage and the
benefits received by each adviser as a result of brokerage
allocation, including information concerning the acquisition of
research through soft dollar benefits received in
connection with the funds brokerage, and the
implementation of a soft dollar reimbursement program
established with respect to the funds;
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Data relating to portfolio turnover rates of each fund;
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The procedures and processes used to determine the fair value of
fund assets and actions taken to monitor and test the
effectiveness of such procedures and processes;
|
Information
about each Adviser
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Reports detailing the financial results and condition of each
adviser;
|
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Descriptions of the qualifications, education and experience of
the individual investment professionals whose responsibilities
include portfolio management and investment research for the
funds, and information relating to their compensation and
responsibilities with respect to managing other mutual funds and
investment accounts;
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|
Copies of the Codes of Ethics of each adviser and its
affiliates, together with information relating to compliance
with and the administration of such codes;
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Copies of or descriptions of each advisers proxy voting
policies and procedures;
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Information concerning the resources devoted to compliance
efforts undertaken by each adviser and its affiliates on behalf
of the funds (including descriptions of various compliance
programs) and their record of compliance with investment
policies and restrictions, including policies with respect to
market-timing, late trading and selective portfolio disclosure,
and with policies on personal securities transactions;
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Descriptions of the business continuity and disaster recovery
plans of each adviser and its affiliates;
|
Other
Relevant Information
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Information concerning the nature, cost and character of the
administrative and other non-investment management services
provided by Eaton Vance Management and its affiliates;
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Information concerning management of the relationship with the
custodian, subcustodians and fund accountants by each adviser or
the funds administrator; and
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|
The terms of each advisory agreement.
|
20
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
BOARD OF TRUSTEES ANNUAL
APPROVAL OF THE INVESTMENT ADVISORY
AGREEMENT CONTD
In addition to the information identified above, the Contract
Review Committee considered information provided from time to
time by each adviser throughout the year at meetings of the
Board and its committees. Over the course of the twelve-month
period ended April 30, 2009, the Board met eighteen times
and the Contract Review Committee, the Audit Committee, the
Governance Committee, the Portfolio Management Committee and the
Compliance Reports and Regulatory Matters Committee, each of
which is a Committee comprised solely of Independent Trustees,
met seven, five, six, six and six times, respectively. At such
meetings, the Trustees received, among other things,
presentations by the portfolio managers and other investment
professionals of each adviser relating to the investment
performance of each fund and the investment strategies used in
pursuing the funds investment objective.
For funds that invest through one or more underlying portfolios,
the Board considered similar information about the portfolio(s)
when considering the approval of advisory agreements. In
addition, in cases where the funds investment adviser has
engaged a
sub-adviser,
the Board considered similar information about the
sub-adviser
when considering the approval of any
sub-advisory
agreement.
The Contract Review Committee was assisted throughout the
contract review process by Goodwin Procter LLP, legal counsel
for the Independent Trustees. The members of the Contract Review
Committee relied upon the advice of such counsel and their own
business judgment in determining the material factors to be
considered in evaluating each advisory and
sub-advisory
agreement and the weight to be given to each such factor. The
conclusions reached with respect to each advisory and
sub-advisory
agreement were based on a comprehensive evaluation of all the
information provided and not any single factor. Moreover, each
member of the Contract Review Committee may have placed varying
emphasis on particular factors in reaching conclusions with
respect to each advisory and
sub-advisory
agreement.
Results
of the Process
Based on its consideration of the foregoing, and such other
information as it deemed relevant, including the factors and
conclusions described below, the Contract Review Committee
concluded that the continuance of the investment advisory
agreement between Eaton Vance Risk-Managed Diversified Equity
Income Fund (the Fund) and Eaton Vance Management
(the Adviser) and the
sub-advisory
agreement with Rampart Investment Management Company, Inc.
(Rampart or the
Sub-adviser),
including their fee structures, are in the interests of
shareholders and, therefore, the Contract Review Committee
recommended to the Board approval of each agreement. The Board
accepted the recommendation of the Contract Review Committee as
well as the factors considered and conclusions reached by the
Contract Review Committee with respect to each agreement.
Accordingly, the Board, including a majority of the Independent
Trustees, voted to approve continuation of the investment
advisory and
sub-advisory
agreements for the Fund.
Nature,
Extent and Quality of Services
In considering whether to approve the investment advisory and
sub-advisory
agreements of the Fund, the Board evaluated the nature, extent
and quality of services provided to the Fund by the Adviser and
Sub-adviser.
The Board considered the Advisers and
Sub-advisers
management capabilities and investment process with respect to
the types of investments held by the Fund, including the
education, experience and number of its investment professionals
and other personnel who provide portfolio management, investment
research, and similar services to the Fund and whose
responsibilities include supervising the
Sub-adviser
and coordinating activities in implementing the Funds
investment strategy. In particular, the Board evaluated the
abilities and experience of such investment personnel in
analyzing factors such as tax efficiency and special
considerations relevant to investing in stocks and selling call
options on various indexes. With respect to Rampart, the Board
considered Ramparts business reputation and its options
strategy and its past experience in implementing this strategy.
The Board also reviewed the compliance programs of the Adviser,
Sub-adviser
and relevant affiliates thereof. Among other matters, the Board
considered compliance and reporting matters relating to personal
trading by investment personnel, selective disclosure of
portfolio holdings, late trading, frequent trading, portfolio
valuation, business continuity and the allocation of investment
opportunities. The Board also evaluated the responses of the
Adviser and its affiliates to requests from regulatory
authorities such as the Securities and Exchange Commission and
the Financial Industry Regulatory Authority.
The Board considered shareholder and other administrative
services provided or managed by Eaton Vance Management and its
affiliates, including transfer agency and accounting services.
The Board evaluated the benefits to shareholders of investing in
a fund that is a part of a large family of funds.
The Board considered the Advisers recommendations for
Board action and other steps taken in response to the
unprecedented dislocations experienced in the capital markets
over recent periods, including sustained periods of high
volatility, credit disruption and government intervention. In
particular, the Board considered the Advisers efforts and
expertise with respect to each of the following matters as they
relate to the Fund
and/or other
funds within the Eaton Vance family of funds:
(i) negotiating and maintaining the
21
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
BOARD OF TRUSTEES ANNUAL
APPROVAL OF THE INVESTMENT ADVISORY
AGREEMENT CONTD
availability of bank loan facilities and other sources of credit
used for investment purposes or to satisfy liquidity needs;
(ii) establishing the fair value of securities and other
instruments held in investment portfolios during periods of
market volatility and issuer-specific disruptions; and
(iii) the ongoing monitoring of investment management
processes and risk controls.
After consideration of the foregoing factors, among others, the
Board concluded that the nature, extent and quality of services
provided by the Adviser and
Sub-adviser,
taken as a whole, are appropriate and consistent with the terms
of the investment advisory agreement and
sub-advisory
agreement, respectively.
Fund Performance
The Board compared the Funds investment performance to a
relevant universe of similarly managed funds identified by an
independent data provider and appropriate benchmark indices. The
Board reviewed comparative performance data for the
one-year
period ended September 30, 2008 for the Fund. The Board
concluded that the performance of the Fund was satisfactory.
Management
Fees and Expenses
The Board reviewed contractual investment advisory fee rates,
including any administrative fee rates, payable by the Fund
(referred to collectively as management fees). As
part of its review, the Board considered the Funds
management fees and total expense ratio for the year ended
September 30, 2008, as compared to a group of similarly
managed funds selected by an independent data provider.
After reviewing the foregoing information, and in light of the
nature, extent and quality of the services provided by the
Adviser, the Board concluded that the management fees charged to
the Fund for advisory and related services and the total expense
ratio of the Fund are reasonable.
Profitability
The Board reviewed the level of profits realized by the Adviser
and relevant affiliates in providing investment advisory and
administrative services to the Fund and to all Eaton Vance Funds
as a group. The Board considered the level of profits realized
with and without regard to revenue sharing or other payments by
the Adviser and its affiliates to third parties in respect of
distribution services. The Board also considered other direct or
indirect benefits received by the Adviser and its affiliates in
connection with its relationship with the Fund, including the
benefits of research services that may be available to the
Adviser as a result of securities transactions effected for the
Fund and other investment advisory clients. The Board also
concluded that, in light of its role as a
sub-adviser
not affiliated with the Adviser, the
Sub-advisers
profitability in managing the Fund was not a material factor.
The Board concluded that, in light of the foregoing factors and
the nature, extent and quality of the services rendered, the
profits realized by the Adviser and its affiliates are
reasonable.
Economies
of Scale
In reviewing management fees and profitability, the Board also
considered the extent to which the Adviser and its affiliates,
on the one hand, and the Fund, on the other hand, can expect to
realize benefits from economies of scale as the assets of the
Fund increase. The Board acknowledged the difficulty in
accurately measuring the benefits resulting from the economies
of scale with respect to the management of any specific fund or
group of funds. The Board also considered the fact that the Fund
is not continuously offered and concluded that, in light of the
level of the Advisers profits with respect to the Fund,
the implementation of breakpoints in the advisory fee schedule
is not appropriate at this time. Based upon the foregoing, the
Board concluded that the benefits from economies of scale are
currently being shared equitably by the Adviser and its
affiliates and the Fund.
22
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
MANAGEMENT AND ORGANIZATION
Fund Management. The Trustees of Eaton Vance
Risk-Managed Diversified Equity Income Fund (the Fund) are
responsible for the overall management and supervision of the
Funds 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 the Funds principal underwriter and 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.
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Term of
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Number of
Portfolios
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Position
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Office and
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in Fund
Complex
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Name and
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with the
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Length of
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Principal
Occupation(s)
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Overseen By
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Date of
Birth
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Fund
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Service
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During Past Five
Years
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Trustee(1)
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Other
Directorships Held
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Interested
Trustee
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Thomas E. Faust Jr.
5/31/58
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Class I
Trustee and Vice
President
|
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Until 2011. 3 years. Trustee and Vice President since 2007.
|
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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 178 registered investment companies and 4 private
companies 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.
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178
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Director of EVC
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Noninterested
Trustee(s)
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Benjamin C. Esty
1/2/63
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Class I
Trustee
|
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Until 2011. 3 years. Trustee since 2007.
|
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Roy and Elizabeth Simmons Professor of Business Administration
and Finance Unit Head, Harvard University Graduate School of
Business Administration.
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178
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None
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Allen R. Freedman
4/3/40
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Class I
Trustee
|
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Until 2011. 3 years. Trustee since 2007.
|
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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).
Formerly, Chairman and a Director of Indus International, Inc.
(provider of enterprise management software to the power
generating industry)
(2005-2007).
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178
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Director of Assurant, Inc. (insurance provider) and Stonemor
Partners L.P. (owner and operator of cemeteries)
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William H. Park
9/19/47
|
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Class II
Trustee
|
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Until 2012. 3 years. Trustee since 2007.
|
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Vice Chairman, Commercial Industrial Finance Corp. (specialty
finance company) (since 2006). Formerly, President and Chief
Executive Officer, Prizm Capital Management, LLC (investment
management firm)
(2002-2005).
|
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178
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None
|
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Ronald A. Pearlman
7/10/40
|
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Class II
Trustee
|
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Until 2012. 3 years. Trustee since 2007.
|
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Professor of Law, Georgetown University Law Center.
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178
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None
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Helen Frame Peters
3/22/48
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Class II
Trustee
|
|
Until 2012. 3 years. Trustee since 2008.
|
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Professor of Finance, Carroll School of Management, Boston
College (since 2003), Adjunct Professor of Finance, Peking
University, Beijing, China (since 2005).
|
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178
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Director of BJs Wholesale Club, Inc. (wholesale club
retailer)
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Heidi L. Steiger
7/8/53
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Class III
Trustee
|
|
Until 2010. 3 years. Trustee since 2007.
|
|
Managing Partner, Topridge Associates LLC (global wealth
management firm) (since 2008); Senior Adviser (since 2008),
President
(2005-2008),
Lowenhaupt Global Advisors, LLC (global wealth management firm).
Formerly, President and Contributing Editor, Worth Magazine
(2004-2005).
Formerly Executive Vice President and Global Head of Private
Asset Management (and various other positions), Neuberger Berman
(investment firm)
(1986-2004).
|
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178
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Director of Nuclear Electric Insurance Ltd. (nuclear insurance
provider), Aviva USA (insurance provider) and CIFG (family of
financial guaranty companies) and Advisory Director, Berkshire
Capital Securities LLC (private investment banking firm)
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23
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
MANAGEMENT AND
ORGANIZATION CONTD
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Term of
|
|
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|
Number of
Portfolios
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|
|
|
|
|
Position
|
|
Office and
|
|
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|
in Fund
Complex
|
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Name and
|
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with the
|
|
Length of
|
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Principal
Occupation(s)
|
|
Overseen By
|
|
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|
Date of
Birth
|
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Fund
|
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Service
|
|
During Past Five
Years
|
|
Trustee(1)
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Other
Directorships Held
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Noninterested
Trustee(s) (continued)
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Lynn A. Stout
9/14/57
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Class III
Trustee
|
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Until 2010. 3 years. Trustee since 2007.
|
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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.
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178
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None
|
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|
|
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Ralph F. Verni
1/26/43
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Chairman of the
Board and Class III
Trustee
|
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Until 2010. 3 years. Chairman of the Board and Trustee since
2007.
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Consultant and private investor.
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178
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None
|
Principal Officers
who are not Trustees
|
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|
|
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Term of
|
|
|
|
|
Position
|
|
Office and
|
|
|
Name and
|
|
with the
|
|
Length of
|
|
Principal
Occupation(s)
|
Date of
Birth
|
|
Fund
|
|
Service
|
|
During Past Five
Years
|
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Duncan W. Richardson
10/26/57
|
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President
|
|
Since 2007
|
|
Director of EVC and Executive Vice President and Chief Equity
Investment Officer of EVC, EVM and BMR. Officer of 82 registered
investment companies managed by EVM or BMR.
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Michael A. Allison
10/26/64
|
|
Vice President
|
|
Since 2007
|
|
Vice President of EVM and BMR. Officer of 22 registered
investment companies managed by EVM or BMR.
|
|
|
|
|
|
|
|
Walter A. Row, III
7/20/57
|
|
Vice President
|
|
Since 2007
|
|
Vice President of EVM and BMR. Officer of 23 registered
investment companies managed by EVM or BMR.
|
|
|
|
|
|
|
|
Barbara E. Campbell
6/19/57
|
|
Treasurer
|
|
Since 2007
|
|
Vice President of EVM and BMR. Officer of 178 registered
investment companies managed by EVM or BMR.
|
|
|
|
|
|
|
|
Maureen A. Gemma
5/24/60
|
|
Secretary and Chief
Legal Officer
|
|
Secretary since 2007 and Chief Legal Officer since 2008
|
|
Vice President of EVM and BMR. Officer of 178 registered
investment companies managed by EVM or BMR.
|
|
|
|
|
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|
|
Paul M. ONeil
7/11/53
|
|
Chief Compliance
Officer
|
|
Since 2007
|
|
Vice President of EVM and BMR. Officer of 178 registered
investment companies managed by EVM or BMR.
|
|
|
|
(1)
|
|
Includes both master and feeder funds in a master-feeder
structure. |
24
IMPORTANT
NOTICE ABOUT 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:
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|
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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.
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|
|
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 customers account, Eaton
Vance may share information with unaffiliated third parties that
perform various required services such as transfer agents,
custodians and broker/dealers.
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Policies and procedures (including physical, electronic and
procedural safeguards) are in place that are designed to protect
the confidentiality of such information.
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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, Boston
Management and Research, and Eaton Vance Distributors, Inc.
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 customers account (i.e., fund
shares) is held in the name of a third-party financial
adviser/broker-dealer, it is likely that only such
advisers privacy policies apply to the customer. This
notice supersedes all previously issued privacy disclosures.
For more information about Eaton Vances Privacy Policy,
please call
1-800-262-1122.
Investment
Adviser and Administrator of
Eaton Vance
Risk-Managed Diversified Equity Income Fund
Eaton Vance
Management
Two International
Place
Boston, MA 02110
State Street
Bank and Trust Company
200 Clarendon
Street
Boston, MA 02116
American Stock
Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Independent
Registered Public Accounting Firm
Deloitte &
Touche LLP
200 Berkeley Street
Boston, MA
02116-5022
Eaton
Vance Risk-Managed Diversified Equity Income Fund
Two
International Place
Boston, MA
02110
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 registrants Board has designated William H. Park, an independent trustee, as its audit
committee financial expert. Mr. Park is a certified public accountant who is the Vice Chairman of
Commercial
Industrial Finance Corp (specialty finance company). Previously, he served as President
and Chief Executive Officer of Prizm Capital Management, LLC (investment management firm) and as
Executive Vice President and Chief Financial Officer of United Asset Management Corporation (UAM)
(a holding company owning institutional investment management firms).
Item 4. Principal Accountant Fees and Services
(a) (d)
The following table presents the aggregate fees billed to the registrant for the registrants
fiscal years ended December 31, 2008 and December 31, 2009 by the registrants principal
accountant, Deloitte & Touche LLP (D&T), for professional services rendered for the audit of the
registrants annual financial statements and fees billed for other services rendered by the
principal accountant during such period.
|
|
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|
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|
|
|
|
Fiscal Years Ended |
|
12/31/08 |
|
|
12/31/09 |
|
|
Audit Fees |
|
$ |
60,035 |
|
|
$ |
59,000 |
|
|
|
|
|
|
|
|
|
|
Audit-Related Fees(1) |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Tax Fees(2) |
|
|
9,380 |
|
|
|
9,380 |
|
|
|
|
|
|
|
|
|
|
All Other Fees(3) |
|
|
0 |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
69,415 |
|
|
$ |
70,880 |
|
|
|
|
|
|
|
(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 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. |
|
(3) |
|
All other fees consist of the aggregate fees billed for products and services
provided by the principal accountant other than audit, audit-related, and tax services. |
(e)(1) The registrants audit committee has adopted policies and procedures relating to
the pre-approval of services provided by the registrants 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 registrants audit committee at least annually. The registrants
audit committee maintains full responsibility for the appointment, compensation, and oversight of
the work of the registrants principal accountant.
(e)(2) No services described in paragraphs (b)-(d) above were approved by the registrants 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 the registrants principal accountant for the
registrants fiscal
year ended December 31, 2008 and the fiscal year ended December 31, 2009; and (ii) the aggregate
non-audit fees (i.e., fees for audit-related, tax, and other services) billed for services rendered
to the Eaton Vance organization for the registrants principal accountant for the same time
periods, respectively.
|
|
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|
|
|
|
|
|
Fiscal Years Ended |
|
12/31/08 |
|
|
12/31/09 |
|
|
Registrant |
|
$ |
9,380 |
|
|
$ |
11,880 |
|
|
|
|
|
|
|
|
|
|
Eaton Vance1 |
|
$ |
345,473 |
|
|
$ |
288,295 |
|
|
|
|
(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 registrants audit committee has considered whether the provision by the registrants
principal accountant of non-audit services to the registrants 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 accountants 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), Lynn A. Stout, Heidi L. Steiger and Ralph F. Verni are the members of the registrants
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 Funds
investment adviser and adopted the investment advisers proxy voting policies and procedures (the
Policies) which are described below. The Trustees will review the Funds 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 Funds 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 Boards Special Committee except as contemplated under the Fund
Policy. The Boards Special Committee will instruct the investment adviser on the appropriate
course of action.
The Policies are designed to promote accountability of a companys 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 then 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 Funds 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 advisers 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 personal 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
Commissions website at http://www.sec.gov.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Walter A. Row, Michael A. Allison and other Eaton Vance Management (EVM) investment
professionals comprise the investment team responsible for the overall management of the Funds
investments. Mr. Row and Mr. Allison are the portfolio managers responsible for the day-to-day
management of EVMs responsibilities with respect to the Funds investment portfolio. Mr. Row is
a Vice President and Head of Structured Equity Portfolios at EVM. He is a member of EVMs Equity
Strategy Committee and co-manages other Eaton Vance registered investment companies. He joined
Eaton Vances equity group in 1996. Mr. Allison is a Vice President of EVM
and a co-portfolio
manager for other Eaton Vance registered investment companies. He is a member of EVMs Equity
Strategy Committee. He first joined Eaton Vances equity group in 2000.
Effective October 20, 2009, EVM internalized the management of the Funds options strategy,
replacing Rampart Investment Management Company, Inc.
The following tables show, as of the Funds most recent fiscal year end, the number of accounts
each portfolio manager managed in each of the listed categories and the total assets 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
those accounts.
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Number of Accounts |
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Total Assets of |
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|
Number of All |
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|
Total Assets of All |
|
|
Paying a |
|
Accounts Paying a |
|
|
Accounts |
|
|
Accounts* |
|
|
Performance Fee |
|
Performance Fee* |
Walter A. Row |
|
|
|
|
|
|
|
|
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|
|
|
Registered Investment |
|
|
|
|
|
$ |
11,159.4 |
|
|
0 |
|
$0 |
Companies |
|
|
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|
|
|
|
|
|
|
|
|
Other Pooled |
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|
|
|
|
$ |
0 |
|
|
0 |
|
$0 |
Investment Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
Other Accounts |
|
|
|
|
|
$ |
0.4 |
|
|
0 |
|
$0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael A. Allison |
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment |
|
|
8 |
|
|
$ |
17,855.9 |
|
|
0 |
|
$0 |
Companies |
|
|
|
|
|
|
|
|
|
|
|
|
Other Pooled |
|
|
16 |
|
|
$ |
13,820.7 |
|
|
0 |
|
$0 |
Investment Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
Other Accounts |
|
|
1 |
|
|
$ |
0.4 |
|
|
0 |
|
$0 |
|
|
|
* |
|
In millions of dollars. |
The following table shows the dollar range of Fund shares beneficially owned by each portfolio
manager as of the Funds most recent fiscal year end.
|
|
|
|
|
|
|
Dollar Range of |
|
|
|
Equity Securities |
|
Portfolio Manager |
|
Owned in the Fund |
|
Walter A. Row |
|
$ |
100,001-$500,000 |
|
Michael A. Allison |
|
$ |
50,001-$100,000 |
|
Potential for Conflicts of Interest. It is possible that conflicts of interest may arise in
connection with a portfolio managers management of a Funds investments on the one hand and the
investments of other accounts for which the 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 a 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 or sub-adviser based on the performance of
the securities held by that account. The existence of such a performance based fee may create
additional conflicts of interest for the portfolio manager in the allocation of management time,
resources and investment opportunities. Whenever conflicts of interest arise,
the portfolio
manager will endeavor to exercise his or her discretion in a manner that he or she believes is
equitable to all interested persons. EVM and the sub-adviser have adopted several policies and
procedures designed to address these potential conflicts including: a code of ethics; and policies
which govern the investment adviser or sub-advisers 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 EVMs 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 EVCs nonvoting common stock and restricted shares of
EVCs nonvoting common stock. EVMs investment professionals also receive certain retirement,
insurance and other benefits that are broadly available to EVMs employees. Compensation of EVMs
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 benchmarks 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 funds peer group as determined by Lipper or Morningstar is
deemed by EVMs 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 funds 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 EVMs
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 registrants principal executive officer and principal
financial officer that the effectiveness of the registrants 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 Commissions rules and forms and that the information required to be disclosed by
the registrant has been accumulated and communicated to the registrants principal executive
officer and principal financial officer in order to allow timely decisions regarding required
disclosure.
(b) There have been no changes in the registrants 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 registrants internal control over financial
reporting.
Item 12. Exhibits
|
|
|
(a)(1)
|
|
Registrants Code of Ethics Not applicable (please see Item 2). |
|
(a)(2)(i)
|
|
Treasurers Section 302 certification. |
|
(a)(2)(ii)
|
|
Presidents Section 302 certification. |
|
(b)
|
|
Combined Section 906 certification. |
|
(c)
|
|
Registrants notices to shareholders pursuant to Registrants exemptive order granting an
exemption from Section 19(b) of the 1940 Act and Rule 19b-1 thereunder regarding distributions
paid pursuant to the Registrants 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 Risk-Managed Diversified Equity Income Fund
|
|
|
|
|
|
|
By: |
/s/ Duncan W. Richardson
|
|
|
Duncan W. Richardson |
|
|
President |
|
|
Date: February 16, 2010
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: February 16, 2010
|
|
|
|
|
|
|
By: |
/s/ Duncan W. Richardson
|
|
|
Duncan W. Richardson |
|
|
President |
|
|
Date: February 16, 2010