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 | 811-21400 |
|
Eaton Vance Tax-Advantaged Dividend Income Fund |
(Exact name of registrant as specified in charter) |
|
The Eaton Vance Building, 255 State Street, Boston, Massachusetts | | 02109 |
(Address of principal executive offices) | | (Zip code) |
|
Alan R. Dynner
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109 |
(Name and address of agent for service) |
|
Registrant’s telephone number, including area code: | (617) 482-8260 | |
|
Date of fiscal year end: | August 31 | |
|
Date of reporting period: | February 28, 2006 | |
| | | | | | | | |
Item 1. Reports to Stockholders
Semiannual Report February 28, 2006
EATON VANCE
TAX-
ADVANTAGED
DIVIDEND
INCOME
FUND
IMPORTANT NOTICES REGARDING PRIVACY,
DELIVERY OF SHAREHOLDER DOCUMENTS,
PORTFOLIO HOLDINGS AND PROXY VOTING
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy ("Privacy Policy") with respect to nonpublic personal information about its customers:
• Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions.
• None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer's account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker/dealers.
• Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information.
• We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our 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 only applies to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer's account (i.e., fund shares) is held in the name of a third-party financial adviser/ broker-dealer, it is likely that only such adviser's privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures.
For more information about Eaton Vance's Privacy Policy, please call 1-800-262-1122.
Delivery of Shareholder Documents. The Securities and Exchange Commission (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 it's underlying Portfolio (if applicable) will file a schedule of its 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 www.eatonvance.com, by calling Eaton Vance at 1-800-262-1122 or in the EDGAR database on the SEC's website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC's public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).
Proxy Voting. From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds' and Portfolios' Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12 month period ended June 30, without charge, upon request, by calling 1-800-262-1122. This description is also available on the SEC's website at www.sec.gov.
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
Aamer Khan, CFA
Co-Portfolio Manager
Thomas H. Luster, CFA
Co-Portfolio Manager
Michael R. Mach, CFA
Co-Portfolio Manager
Judith A. Saryan, CFA
Co-Portfolio Manager
The Fund
Performance for the Past Six Months
• Based on share price, Eaton Vance Tax-Advantaged Dividend Income Fund (the Fund), a closed-end fund traded on the New York Stock Exchange, had a total return of 11.92% for the six months ended February 28, 2006.(1) This return resulted from an increase in share price to $23.45 on February 28, 2006, from $21.69 on August 31, 2005, and the reinvestment of $0.789 per share in dividend income. Based on the Fund’s most recent dividend and a closing share price of $23.45 on February 28, 2006, the Fund had a market yield of 6.27%.(2)
• Based on an increase in net asset value (NAV) to $25.87 per share on February 28, 2006, from $24.86 on August 31, 2005, and the reinvestment of $0.789 per share in dividend income, the Fund had a total return at NAV of 7.72% for the six months ended February 28, 2006.(1)
• For the six months ended February 28, 2006, the S&P 500 Index and the Russell 1000 Value Index had returns of 5.92% and 7.31%, respectively.(3) During this same period, the Fund outperformed both of these widely followed indices.
Management Discussion
• In recent months, most global equity markets extended their advances for a third year. While increased energy prices threatened consumer growth and global economic growth in general throughout the period, the economy continued to expand (albeit at a slower pace than in recent years) and remained an important driver of equity market strength. Continued economic growth helped corporations grow their earnings and cash flows, lower their debt levels, and strengthen their balance sheets. Over the past six months, a growing number of companies rewarded shareholders with increased dividend payments or common share repurchase programs.
• Based on the Fund’s objective of providing a high level of after-tax total return, consisting primarily of tax-advantaged dividend income and capital appreciation, the Fund was primarily invested in securities that generated a relatively high level of qualifying dividend income (QDI) during the period. At the end of the period, the Fund had approximately 74.6% of total investments invested in common stocks, approximately 25.1% of total investments invested in preferred stocks and 0.2% of total investments in cash equivalents. Within the common stock portfolio, the Fund had a significant exposure to the higher-yielding utility, telecommunication and financial sectors. In addition, the Fund maintained a diversified common stock portfolio across the consumer, industrial, energy, health care and materials sectors.
• Over the past six months, the best-performing sectors within the Russell 1000 Value Index were the industrial, information technology, and materials sectors. Performance of stocks in the energy sector, which had led the market during the first part of 2005, slowed in the latter half of the year. This was partly due to unusually warm winter weather, which caused the prices of oil and gas to stabilize or fall somewhat in value.
• The Fund’s six-month performance benefited from its stock selection in each of the industrial, information technology, materials, and energy sectors. Holdings in each of these sectors recorded better performance relative to comparable stocks in the Russell 1000 Value Index. The past six months’ performance also benefited from stock selection in the utility sector, where the Fund had a significant percentage of its assets invested due to the attractive levels of dividend income and
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value or share price (as applicable) with all distributions reinvested. 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, current performance may be lower or higher than quoted. For performance as of the most recent month-end, please refer to www.eatonvance.com.
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) Performance results reflect the effect of leverage resulting from the Fund’s issuance of Auction Preferred Shares.
(2) The Fund’s market yield is calculated by dividing the most recent dividend per share by the share price at the end of the period and annualizing the result.
(3) It is not possible to invest directly in an Index. The Indexes’ 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 Index. Unlike the Fund, an Index’s return does not reflect the effect of leverage, such as the issuance of Auction Preferred Shares.
2
growth within the sector. On the other hand, the performance of the Fund’s financial holdings mirrored the returns of comparable holdings in the Russell 1000 Value Index, while returns of stocks held in the telecommunication sector slightly lagged those of the same Index.
• In selecting stocks, we consider (among other factors) a company’s cash flow capabilities. Over the past few months, the strong free cash flows generated by the Fund’s common stocks have allowed many of these holdings to increase their regular dividend payments and, in a number of cases, to reward shareholders with special one-time dividend payments.
• The six-month period ended February 28, 2006, was challenging for the preferred stock portion of the Fund, as interest rates rose, especially for shorter maturities. While returns were positive, they trailed their dividend rates, as rising yields put downward pressure on the prices of all fixed-income securities, preferreds included. At the same time, corporate credit quality continued to improve, and yield spreads remained stable, supported by strong economic growth and corporate profits and cash flow.
• During the period, a significant portion of the Fund’s common and preferred stocks were invested in non-U.S. companies. These investments provided the Fund with international diversification and dividend yields often more attractive than the yields available on stocks issued by similar domestic corporations. As of February 28, 2006, approximately 39.7% of the Fund’s total investments were invested in non-U.S. common stocks. In addition, approximately 13.2% of the Fund’s total investments were invested in “Yankee” preferreds. Yankee preferreds are preferred stocks of non-U.S. issuers that are denominated in U.S. dollars.
• During the past six months, the Fund has increased its monthly dividend once and also paid out a special dividend. The increase, announced in October 2005, was from $0.1175 to $0.1225 per share, while the special dividend, announced in December 2005, was for $0.0587 per share.
• Since its inception on September 30, 2003, the Fund has increased its monthly dividend four times from an initial distribution of $0.1075 per share to a current distribution of $0.1225 per share. These past increases in the monthly dividend reflect both the implementation of the Fund’s dividend capture strategy and the significant number of dividend increases announced by companies represented in the Fund’s common stock portfolio. The Fund’s dividend capture strategy is a trading strategy designed to enhance the level of tax-advantaged QDI earned by the Fund. By using this strategy, the Fund has been able to collect a greater number of dividend payments over the past six months than it would have collected by simply adhering to a buy-and-hold strategy. There can be no assurance that the dividend capture strategy will continue to be successful in the future. The amount of monthly dividend distributions may vary, depending on a number of factors. As portfolio and market conditions change, the rate of dividends on common shares could change.
• In December 2003, the Fund issued its Auction Preferred Shares (APS) to provide the Fund financial leverage. As of February 28, 2006, the Fund’s $700 million issued and outstanding APS equaled approximately 27% of total assets and maintained a weighted average reset period of 21 days, which is comparable to what it was when the Fund’s leverage was originally issued. Use of financial leverage creates an opportunity for increased income but, at the same time, creates special risks (including the likelihood of greater volatility of net asset value and market price of the common shares). In the event of a rise in longterm interest rates, the value of the Fund’s portfolio could decline, which would reduce the asset coverage for its Auction Preferred Shares.
• Going forward, the Fund will continue to adhere to its strategy of owning a diversified portfolio of dividend paying common and preferred stocks. Our strategy is to focus investments in companies characterized by strong business franchises and solid balance sheets. For common stocks, we generally focus on companies that offer the potential for growth of income and for capital appreciation over time. For preferred stocks, we take into consideration the interest rate sensitivity of the investment and our interest rate expectations. As always, we thank you for your continued confidence and participation in the Fund.
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.
3
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
PORTFOLIO OF INVESTMENTS (Unaudited)
| Common Stocks — 101.7% | |
| Security | | Shares | | Value | |
| Aerospace & Defense — 1.3% | |
| Honeywell International, Inc. | | | 300,000 | | | $ | 12,285,000 | | |
| United Technologies Corp. | | | 224,100 | | | | 13,109,850 | | |
| | | $ | 25,394,850 | | |
| Auto Components — 0.6% | |
| Johnson Controls, Inc. | | | 159,300 | | | $ | 11,353,311 | | |
| | | $ | 11,353,311 | | |
| Commercial Banks — 21.4% | |
| Allied Irish Banks PLC(1) | | | 516,642 | | | $ | 12,347,013 | | |
| Bank of America Corp. | | | 555,300 | | | | 25,460,505 | | |
| Bank of Montreal(1) | | | 179,000 | | | | 10,870,670 | | |
| Bank of Nova Scotia(1) | | | 206,600 | | | | 8,666,870 | | |
| Barclays PLC(1) | | | 4,120,928 | | | | 48,190,059 | | |
| BNP Paribas SA(1) | | | 325,000 | | | | 30,081,523 | | |
| Canadian Imperial Bank of Commerce(1) | | | 200,000 | | | | 14,051,584 | | |
| HBOS PLC(1) | | | 2,776,235 | | | | 51,618,091 | | |
| HSBC Holdings PLC(1) | | | 3,067,979 | | | | 52,417,938 | | |
| Lloyds TSB Group PLC(1) | | | 5,465,379 | | | | 53,005,737 | | |
| Societe Generale(1) | | | 180,000 | | | | 25,493,692 | | |
| Standard Chartered PLC(1) | | | 819,258 | | | | 21,359,956 | | |
| Wachovia Corp. | | | 900,000 | | | | 50,463,000 | | |
| | | $ | 404,026,638 | | |
| Commercial Services & Supplies — 0.8% | |
| R.R. Donnelley & Sons Co. | | | 450,000 | | | $ | 15,147,000 | | |
| | | $ | 15,147,000 | | |
| Communications Equipment — 0.7% | |
| Nokia Oyj ADR(1) | | | 750,000 | | | $ | 13,935,000 | | |
| | | $ | 13,935,000 | | |
| Diversified Financial Services — 0.6% | |
| JPMorgan Chase & Co. | | | 256,400 | | | $ | 10,548,296 | | |
| | | $ | 10,548,296 | | |
| Diversified Telecommunication Services — 6.9% | |
| AT&T, Inc. | | | 1,500,000 | | | $ | 41,385,000 | | |
| BellSouth Corp. | | | 550,000 | | | | 17,369,000 | | |
| Security | | Shares | | Value | |
| Diversified Telecommunication Services (continued) | |
| BT Group PLC(1) | | | 6,250,000 | | | $ | 22,505,992 | | |
| Telefonos de Mexico SA de CV ADR(1) | | | 1,700,000 | | | | 38,063,000 | | |
| Verizon Communications, Inc. | | | 316,900 | | | | 10,679,530 | | |
| | | $ | 130,002,522 | | |
| Electric Utilities — 13.6% | |
| E.ON AG(1) | | | 500,000 | | | $ | 55,395,492 | | |
| Edison International | | | 1,500,000 | | | | 66,540,000 | | |
| Enel SPA(1) | | | 1,000,000 | | | | 8,321,373 | | |
| Entergy Corp. | | | 50,000 | | | | 3,625,500 | | |
| Exelon Corp. | | | 75,000 | | | | 4,283,250 | | |
| FirstEnergy Corp. | | | 350,000 | | | | 17,878,000 | | |
| Fortum Oyj(1) | | | 1,200,000 | | | | 29,035,391 | | |
| FPL Group, Inc. | | | 500,000 | | | | 20,965,000 | | |
| Progress Energy, Inc. | | | 204,200 | | | | 9,062,396 | | |
| Scottish Power PLC(1) | | | 4,100,000 | | | | 41,871,955 | | |
| | | $ | 256,978,357 | | |
| Electrical Equipment — 1.7% | |
| Cooper Industries, Ltd., Class A(1) | | | 225,000 | | | $ | 18,832,500 | | |
| Emerson Electric Co. | | | 150,000 | | | | 12,271,500 | | |
| | | $ | 31,104,000 | | |
| Energy Equipment and Services — 3.6% | |
| Diamond Offshore Drilling, Inc. | | | 52,406 | | | $ | 4,055,700 | | |
| GlobalSantaFe Corp.(1) | | | 779,710 | | | | 43,149,151 | | |
| Noble Corp.(1) | | | 217,650 | | | | 16,086,512 | | |
| Transocean, Inc.(1)(2) | | | 69,000 | | | | 5,118,420 | | |
| | | $ | 68,409,783 | | |
| Food & Staples Retailing — 1.6% | |
| Boots Group PLC(1) | | | 2,459,387 | | | $ | 30,533,738 | | |
| | | $ | 30,533,738 | | |
| Hotels, Restaurants & Leisure — 1.4% | |
| Harrah's Entertainment, Inc. | | | 250,000 | | | $ | 17,980,000 | | |
| Starwood Hotels & Resorts Worldwide, Inc. | | | 130,000 | | | | 8,255,000 | | |
| | | $ | 26,235,000 | | |
See notes to financial statements
5
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
| Security | | Shares | | Value | |
| Household Durables — 1.1% | |
| Stanley Works (The) | | | 400,000 | | | $ | 20,056,000 | | |
| | | $ | 20,056,000 | | |
| Household Products — 0.4% | |
| Kimberly-Clark Corp. | | | 135,000 | | | $ | 7,989,300 | | |
| | | $ | 7,989,300 | | |
| Industrial Conglomerates — 2.1% | |
| Siemens AG(1) | | | 423,900 | | | $ | 38,934,653 | | |
| | | $ | 38,934,653 | | |
| IT Services — 1.0% | |
| Fidelity National Information Services, Inc. | | | 464,188 | | | $ | 18,405,054 | | |
| | | $ | 18,405,054 | | |
| Machinery — 1.4% | |
| Caterpillar, Inc. | | | 350,000 | | | $ | 25,578,000 | | |
| | | $ | 25,578,000 | | |
| Metals & Mining — 5.7% | |
| Cia Vale do Rio Doce ADR(1) | | | 487,500 | | | $ | 22,634,625 | | |
| Fording Canadian Coal Trust(1) | | | 255,000 | | | | 10,406,550 | | |
| Phelps Dodge Corp. | | | 122,300 | | | | 16,877,400 | | |
| Rio Tinto PLC(1) | | | 701,616 | | | | 32,965,882 | | |
| Southern Copper Corp. | | | 253,700 | | | | 20,207,205 | | |
| Worthington Industries, Inc. | | | 250,000 | | | | 4,900,000 | | |
| | | $ | 107,991,662 | | |
| Multi-Utilities — 6.4% | |
| KeySpan Corp. | | | 122,510 | | | $ | 4,992,283 | | |
| National Grid PLC(1) | | | 1,487,431 | | | | 15,613,742 | | |
| RWE AG(1) | | | 800,000 | | | | 68,618,347 | | |
| SCANA Corp. | | | 200,000 | | | | 8,156,000 | | |
| Sempra Energy | | | 500,000 | | | | 23,920,000 | | |
| | | $ | 121,300,372 | | |
| Oil, Gas & Consumable Fuels — 17.0% | |
| BP PLC ADR(1) | | | 800,000 | | | $ | 53,136,000 | | |
| Chevron Corp. | | | 900,000 | | | | 50,832,000 | | |
| ConocoPhillips | | | 720,000 | | | | 43,891,200 | | |
| ENI SPA(1) | | | 850,000 | | | | 24,302,928 | | |
| Security | | Shares | | Value | |
| Oil, Gas & Consumable Fuels (continued) | |
| Husky Energy, Inc.(1) | | | 386,000 | | | $ | 23,595,202 | | |
| Marathon Oil Corp. | | | 1,000,000 | | | | 70,600,000 | | |
| Neste Oil Oyj(1)(2) | | | 300,000 | | | | 9,166,012 | | |
| Peabody Energy Corp. | | | 500,000 | | | | 24,135,000 | | |
| Statoil ASA(1) | | | 475,000 | | | | 12,162,634 | | |
| Total SA(1) | | | 34,000 | | | | 8,552,035 | | |
| | | $ | 320,373,011 | | |
| Pharmaceuticals — 1.5% | |
| AstraZeneca PLC ADR(1) | | | 185,350 | | | $ | 8,572,438 | | |
| Pfizer, Inc. | | | 725,000 | | | | 18,987,750 | | |
| | | $ | 27,560,188 | | |
| Real Estate — 1.2% | |
| Boston Properties, Inc. | | | 261,600 | | | $ | 22,149,672 | | |
| | | $ | 22,149,672 | | |
| Specialty Retail — 0.6% | |
| Limited, Inc. (The) | | | 500,000 | | | $ | 11,835,000 | | |
| | | $ | 11,835,000 | | |
| Textiles, Apparel & Luxury Goods — 0.8% | |
| VF Corp. | | | 275,000 | | | $ | 15,070,000 | | |
| | | $ | 15,070,000 | | |
| Thrifts & Mortgage Finance — 1.4% | |
| Washington Mutual, Inc. | | | 600,000 | | | $ | 25,620,000 | | |
| | | $ | 25,620,000 | | |
| Tobacco — 4.5% | |
| Altria Group, Inc. | | | 900,000 | | | $ | 64,710,000 | | |
| Imperial Tobacco Group PLC(1) | | | 688,868 | | | | 20,683,981 | | |
| | | $ | 85,393,981 | | |
| Water Utilities — 1.1% | |
| Severn Trent PLC(1) | | | 1,000,000 | | | $ | 20,187,855 | | |
| | | $ | 20,187,855 | | |
See notes to financial statements
6
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
| Security | | Shares | | Value | |
| Wireless Telecommunication Services — 1.3% | |
| Alltel Corp. | | | 50,000 | | | $ | 3,157,500 | | |
| Sprint Nextel Corp. | | | 900,000 | | | | 21,627,000 | | |
| | | $ | 24,784,500 | | |
Total Common Stocks
(identified cost $1,430,525,867) | | | | | | $ | 1,916,897,743 | | |
| Preferred Stocks — 34.3% | |
| Security | | Shares | | Value | |
| Capital Markets — 0.9% | |
| UBS Preferred Funding Trust I, 8.622%(1)(3)(4) | | | 150,000 | | | $ | 17,465,040 | | |
| | | $ | 17,465,040 | | |
| Commercial Banks — 11.8% | |
| Abbey National Capital Trust I, 8.963%(1)(3)(4) | | | 20,000 | | | $ | 2,755,696 | | |
| Abbey National PLC, 7.375%(1) | | | 390,200 | | | | 10,043,748 | | |
| ABN AMRO Capital Funding Trust VII, 6.08%(1) | | | 103,000 | | | | 2,559,550 | | |
| ABN AMRO North America Capital Funding Trust, 6.968%(1)(5) | | | 1,250 | | | | 1,326,172 | | |
| Barclays Bank PLC, 6.86%(1)(3)(4)(5) | | | 35,000 | | | | 3,979,087 | | |
| Barclays Bank PLC, 8.55%(1)(3)(4)(5) | | | 141,000 | | | | 16,338,234 | | |
| BBVA Preferred Capital Ltd., 7.75%(1) | | | 252,300 | | | | 6,431,127 | | |
| BNP Paribas Capital Trust, 9.003%(1)(3)(4)(5) | | | 123,950 | | | | 14,349,828 | | |
| CA Preferred Fund Trust II, 7.00%(1)(3) | | | 50,000 | | | | 5,187,140 | | |
| CA Preferred Fund Trust, 7.00%(1)(3) | | | 255,000 | | | | 25,977,666 | | |
| Cobank, ABC, 7.00%(5) | | | 400,000 | | | | 20,508,000 | | |
| Den Norske Bank, 7.729%(1)(3)(4)(5) | | | 160,000 | | | | 17,933,264 | | |
| First Republic Bank, 6.70% | | | 576,700 | | | | 14,659,714 | | |
| First Tennessee Bank, 5.40%(4)(5) | | | 9,000 | | | | 9,230,062 | | |
| HSBC Capital Funding LP, 9.547%(1)(3)(4)(5) | | | 205,000 | | | | 24,017,082 | | |
| HSBC Holdings PLC, 6.20%(1) | | | 100,000 | | | | 2,482,000 | | |
| Lloyds TSB Bank PLC, 6.90%(1)(3) | | | 110,000 | | | | 11,087,791 | | |
| Royal Bank of Scotland Group PLC, 8.10%(1) | | | 31,000 | | | | 808,480 | | |
| Royal Bank of Scotland Group PLC, 9.118%(1)(3) | | | 256,250 | | | | 29,980,046 | | |
| Standard Chartered PLC, 8.90%(1)(3) | | | 18,000 | | | | 2,008,546 | | |
| | | $ | 221,663,233 | | |
| Electric Utilities — 0.3% | |
| Interstate Power & Light Co., 7.10% | | | 181,400 | | | $ | 4,970,360 | | |
| | | $ | 4,970,360 | | |
| Security | | Shares | | Value | |
| Food Products — 1.4% | |
| Dairy Farmers of America, 7.875%(5) | | | 220,000 | | | $ | 21,784,642 | | |
| Ocean Spray Cranberries, Inc., 6.25%(5) | | | 47,500 | | | | 3,927,656 | | |
| | | $ | 25,712,298 | | |
| Gas Utilities — 1.3% | |
| Southern Union Co., 7.55% | | | 965,000 | | | $ | 25,379,500 | | |
| | | $ | 25,379,500 | | |
| Insurance — 8.1% | |
| ACE Ltd., 7.80%(1) | | | 540,775 | | | $ | 14,108,820 | | |
| Aegon NV, 6.50%(1) | | | 100,000 | | | | 2,525,000 | | |
| Arch Capital Group, Ltd., 8.00%(1) | | | 485,000 | | | | 12,503,931 | | |
| AXA, 7.10%(1)(3) | | | 200,000 | | | | 20,149,660 | | |
| Endurance Specialty Holdings, Ltd., 7.75%(1) | | | 277,500 | | | | 6,943,050 | | |
| ING Capital Funding Trust III, 8.439%(1)(3)(4) | | | 105,750 | | | | 12,022,559 | | |
| ING Groep NV, 6.125%(1) | | | 225,000 | | | | 5,600,250 | | |
| ING Groep NV, 7.20%(1) | | | 473,155 | | | | 12,226,325 | | |
| MetLife, Inc., 5.491%(4) | | | 240,000 | | | | 6,242,400 | | |
| PartnerRe Ltd., 6.75%(1) | | | 98,200 | | | | 2,472,676 | | |
| PartnerRe, Ltd., 6.50%(1) | | | 200,000 | | | | 4,884,000 | | |
| Prudential PLC, 6.50%(1)(3) | | | 265,000 | | | | 26,559,917 | | |
| RenaissanceRe Holdings, Ltd., 6.08%(1) | | | 309,100 | | | | 6,837,292 | | |
| Zurich Regcaps Fund Trust I, 6.58%(1)(4)(5) | | | 6,000 | | | | 6,286,875 | | |
| Zurich Regcaps Fund Trust VI, 5.05%(1)(4)(5) | | | 12,500 | | | | 12,406,250 | | |
| | | $ | 151,769,005 | | |
| Real Estate — 9.6% | |
| AMB Property Corp., 6.75% | | | 426,000 | | | $ | 10,603,140 | | |
| Colonial Properties Trust, 8.125% | | | 577,000 | | | | 14,886,600 | | |
| Developers Diversified Realty Corp., 7.35% | | | 160,000 | | | | 4,041,600 | | |
| Developers Diversified Realty Corp., 8.00% | | | 250,000 | | | | 6,377,500 | | |
| Federal Realty Investment, 8.50% | | | 50,000 | | | | 1,282,500 | | |
| Health Care REIT, Inc., 7.875% | | | 170,100 | | | | 4,376,673 | | |
| Prologis Trust, 6.75% | | | 1,500,000 | | | | 37,845,000 | | |
| PS Business Parks, Inc., 7.00% | | | 400,000 | | | | 9,904,000 | | |
| PS Business Parks, Inc., 7.95% | | | 400,000 | | | | 10,480,000 | | |
| Public Storage, Inc., 6.85% | | | 1,600,000 | | | | 39,650,080 | | |
| Regency Centers Corp., 7.45% | | | 45,000 | | | | 1,134,000 | | |
| Shurgard Storage Centers, 8.75% | | | 20,000 | | | | 503,400 | | |
| Vornado Realty Trust, 7.00% | | | 1,600,000 | | | | 40,450,080 | | |
| | | $ | 181,534,573 | | |
See notes to financial statements
7
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
| Security | | Shares | | Value | |
| Thrifts & Mortgage Finance — 0.9% | |
Federal National Mortgage Association,
Series K, 5.396%(4) | | | 200,000 | | | $ | 10,300,000 | | |
Federal National Mortgage Association,
Series O, 7.00%(4) | | | 120,000 | | | | 6,566,256 | | |
| | | $ | 16,866,256 | | |
Total Preferred Stocks
(identified cost $652,338,860) | | | | | | $ | 645,360,265 | | |
| Commercial Paper — 0.1% | |
| Security | | Principal
Amount
(000's omitted) | | Value | |
| General Electric Capital Corp., 4.56%, 3/1/06 | | $ | 2,122 | | | $ | 2,122,000 | | |
Total Commercial Paper
(at amortized cost, $2,122,000) | | | | | | $ | 2,122,000 | | |
| Other Short-Term Investments — 0.2% | |
| Security | | Principal
Amount
(000's omitted) | | Value | |
Investors Bank and Trust Company Time Deposit,
4.57%, 3/1/06 | | $ | 3,960 | | | $ | 3,960,000 | | |
Total Other Short-Term Investments
(at amortized cost, $3,960,000) | | | | | | $ | 3,960,000 | | |
Total Investments — 136.3%
(identified cost $2,088,946,727) | | | | | | $ | 2,568,340,008 | | |
| Other Assets, Less Liabilities — 0.9% | | | | | | $ | 15,907,348 | | |
Auction Preferred Shares Plus Cumulative
Unpaid Dividends — (37.2)% | | | | | | $ | (700,262,633 | ) | |
Net Assets Applicable to
Common Shares — 100.0% | | | | | | $ | 1,883,984,723 | | |
ADR - American Depository Receipt
(1) Foreign security.
(2) Non-income producing security.
(3) Security valued at fair value using methods determined in good faith by or at the direction of the Trustees.
(4) Variable rate security. The stated interest rate represents the rate in effect at February 28, 2006.
(5) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At February 28, 2006, the aggregate value of the securities is $152,087,152 or 8.1% of the Fund's net assets.
| Country Concentration of Portfolio | |
| Country | | Percentage of
Total Investments | | Value | |
| United States | | | 47.0 | % | | $ | 1,207,598,366 | | |
| United Kingdom | | | 23.5 | | | | 602,723,991 | | |
| Germany | | | 6.3 | | | | 162,948,493 | | |
| France | | | 5.0 | | | | 129,791,543 | | |
| Cayman Islands | | | 3.3 | | | | 84,894,030 | | |
| Canada | | | 2.6 | | | | 67,590,876 | | |
| Bermuda | | | 2.1 | | | | 52,473,449 | | |
| Finland | | | 2.0 | | | | 52,136,404 | | |
| Mexico | | | 1.5 | | | | 38,063,000 | | |
| Netherlands | | | 1.4 | | | | 36,259,855 | | |
| Switzerland | | | 1.4 | | | | 36,158,165 | | |
| Italy | | | 1.3 | | | | 32,624,301 | | |
| Norway | | | 1.2 | | | | 30,095,897 | | |
| Brazil | | | 0.9 | | | | 22,634,625 | | |
| Ireland | | | 0.5 | | | | 12,347,013 | | |
| Total | | | 100 | % | | $ | 2,568,340,008 | | |
See notes to financial statements
8
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of February 28, 2006
| Assets | |
| Investments, at value (identified cost, $2,088,946,727) | | $ | 2,568,340,008 | | |
| Foreign currency, at value (cost $4,429,485) | | | 4,483,592 | | |
| Receivable for investments sold | | | 15,923,824 | | |
| Dividends and interest receivable | | | 20,587,564 | | |
| Prepaid expenses | | | 26,305 | | |
| Tax reclaim receivable | | | 230,288 | | |
| Total assets | | $ | 2,609,591,581 | | |
| Liabilities | |
| Payable for investments purchased | | $ | 23,713,284 | | |
| Payable to affiliate for investment adviser fee | | | 1,261,271 | | |
| Due to custodian | | | 19,417 | | |
| Other accrued expenses | | | 350,253 | | |
| Total liabilities | | $ | 25,344,225 | | |
Auction preferred shares (28,000 shares outstanding) at liquidation
value plus cumulative unpaid dividends | | $ | 700,262,633 | | |
| Net assets applicable to common shares | | $ | 1,883,984,723 | | |
| Sources of Net Assets | |
Common Shares, $0.01 par value, unlimited number of shares authorized,
72,835,900 shares issued and outstanding | | $ | 728,359 | | |
| Additional paid-in capital | | | 1,382,213,413 | | |
Accumulated undistributed net realized gain (computed on the basis of
identified cost) | | | 6,781,539 | | |
| Accumulated undistributed net investment income | | | 14,748,711 | | |
| Net unrealized appreciation (computed on the basis of identified cost) | | | 479,512,701 | | |
| Net assets applicable to common shares | | $ | 1,883,984,723 | | |
| Net Asset Value Per Common Share | |
($1,883,984,723 ÷ 72,835,900 common shares
issued and outstanding) | | $ | 25.87 | | |
Statement of Operations
For the Six Months Ended
February 28, 2006
| Investment Income | |
| Dividends (net of foreign taxes, $569,383) | | $ | 74,459,282 | | |
| Interest | | | 508,148 | | |
| Total investment income | | $ | 74,967,430 | | |
| Expenses | |
| Investment adviser fee | | $ | 10,596,817 | | |
| Trustees' fees and expenses | | | 15,180 | | |
| Preferred shares remarketing agent fee | | | 867,808 | | |
| Custodian fee | | | 273,206 | | |
| Printing and postage | | | 142,519 | | |
| Legal and accounting services | | | 52,451 | | |
| Transfer and dividend disbursing agent fees | | | 32,877 | | |
| Miscellaneous | | | 81,336 | | |
| Total expenses | | $ | 12,062,194 | | |
Deduct —
Reduction of investment adviser fee | | $ | 2,659,650 | | |
| Total expense reductions | | $ | 2,659,650 | | |
| Net expenses | | $ | 9,402,544 | | |
| Net investment income | | $ | 65,564,886 | | |
| Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) —
Investment transactions (identified cost basis) | | $ | 17,379,670 | | |
| Foreign currency transactions | | | (742,308 | ) | |
| Net realized gain | | $ | 16,637,362 | | |
Change in unrealized appreciation (depreciation) —
Investments (identified cost basis) | | $ | 61,397,919 | | |
| Foreign currency | | | 162,303 | | |
| Net change in unrealized appreciation (depreciation) | | $ | 61,560,222 | | |
| Net realized and unrealized gain | | $ | 78,197,584 | | |
| Distributions to preferred shareholders from net investment income | | $ | (13,154,377 | ) | |
| Net increase in net assets from operations | | $ | 130,608,093 | | |
See notes to financial statements
9
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Increase (Decrease)
in Net Assets | | Six Months Ended
February 28, 2006
(Unaudited) | | Year Ended
August 31, 2005 | |
From operations —
Net investment income | | $ | 65,564,886 | | | $ | 128,005,780 | | |
Net realized gain from
investment transactions and
foreign currency transactions | | | 16,637,362 | | | | 8,223,366 | | |
Net change in unrealized
appreciation (depreciation)
of investments and foreign currency | | | 61,560,222 | | | | 250,504,286 | | |
Distributions to preferred shareholders
from net investment income | | | (13,154,377 | ) | | | (17,381,704 | ) | |
| Net increase in net assets from operations | | $ | 130,608,093 | | | $ | 369,351,728 | | |
Distributions to common shareholders —
From net investment income | | $ | (57,445,675 | ) | | $ | (98,146,376 | ) | |
| Total distributions to common shareholders | | $ | (57,445,675 | ) | | $ | (98,146,376 | ) | |
| Net increase in net assets | | $ | 73,162,418 | | | $ | 271,205,352 | | |
Net Assets Applicable to
Common Shares | |
| At beginning of period | | $ | 1,810,822,305 | | | $ | 1,539,616,953 | | |
| At end of period | | $ | 1,883,984,723 | | | $ | 1,810,822,305 | | |
Accumulated undistributed
net investment income
included in net assets
applicable to common shares | |
| At end of period | | $ | 14,748,711 | | | $ | 19,783,877 | | |
See notes to financial statements
10
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
FINANCIAL STATEMENTS CONT'D
Financial Highlights
| Selected data for a common share outstanding during the periods stated | |
| | | Six Months Ended
February 28, 2006
(Unaudited) | | Year Ended
August 31, 2005 | | Period Ended
August 31, 2004(1) | |
| Net asset value — Beginning of period (Common shares) | | $ | 24.860 | | | $ | 21.140 | | | $ | 19.100 | (3) | |
| Income (loss) from operations | |
| Net investment income(2) | | $ | 0.900 | | | $ | 1.757 | | | $ | 1.314 | | |
| Net realized and unrealized gain | | | 1.080 | | | | 3.550 | | | | 2.009 | | |
| Distributions to preferred shareholders from net investment income(2) | | | (0.181 | ) | | | (0.239 | ) | | | (0.093 | ) | |
| Total income from operations | | $ | 1.799 | | | $ | 5.068 | | | $ | 3.230 | | |
| Less distributions to common shareholders | |
| From net investment income | | $ | (0.789 | ) | | $ | (1.348 | ) | | $ | (1.075 | ) | |
| Total distributions to common shareholders | | $ | (0.789 | ) | | $ | (1.348 | ) | | $ | (1.075 | ) | |
| Preferred and Common shares offering costs charged to paid-in capital(2) | | $ | — | | | $ | — | | | $ | (0.018 | ) | |
| Preferred Shares underwriting discounts(2) | | $ | — | | | $ | — | | | $ | (0.097 | ) | |
| Net asset value — End of period (Common shares) | | $ | 25.870 | | | $ | 24.860 | | | $ | 21.140 | | |
| Market value — End of period (Common shares) | | $ | 23.450 | | | $ | 21.690 | | | $ | 19.120 | | |
| Total Investment Return on Net Asset Value | | | 7.72 | %(4) | | | 26.05 | %(4) | | | 16.84 | %(5) | |
| Total Investment Return on Market Value | | | 11.92 | %(4) | | | 21.59 | %(4) | | | 5.67 | %(5) | |
See notes to financial statements
11
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
FINANCIAL STATEMENTS CONT'D
Financial Highlights
| Selected data for a common share outstanding during the periods stated | |
| | | Six Months Ended
February 28, 2006
(Unaudited) | | Year Ended
August 31, 2005 | | Period Ended
August 31, 2004(1) | |
| Ratios/Supplemental Data† †† | |
| Net assets applicable to common shares, end of period (000's omitted) | | $ | 1,883,985 | | | $ | 1,810,822 | | | $ | 1,539,617 | | |
| Ratios (As a percentage of average net assets applicable to common shares): | |
| Net expenses(6) | | | 1.04 | %(7) | | | 1.08 | % | | | 1.07 | %(7) | |
| Net investment income(6) | | | 7.29 | %(7) | | | 7.55 | % | | | 6.97 | %(7) | |
| Portfolio Turnover | | | 44 | % | | | 54 | % | | | 87 | % | |
† The operating expenses of the Fund reflect reductions of the investment adviser fee. Had such actions
not been taken, the ratios and net investment income per share would have been as follows:
| Ratios (As a percentage of average net assets applicable to common shares): | |
| Expenses(6) | | | 1.34 | %(7) | | | 1.37 | % | | | 1.35 | %(7) | |
| Net investment income(6) | | | 6.99 | %(7) | | | 7.26 | % | | | 6.69 | %(7) | |
| Net investment income per share | | $ | 0.863 | | | $ | 1.690 | | | $ | 1.261 | | |
†† The ratios reported are based on net assets applicable solely to common shares. The ratios based on
net assets, including amounts related to preferred shares, are as follows:
| Ratios (As a percentage of average total net assets):††† | |
| Net expenses | | | 0.75 | %(7) | | | 0.77 | % | | | 0.78 | %(7) | |
| Net investment income | | | 5.26 | %(7) | | | 5.34 | % | | | 5.07 | %(7) | |
††† The operating expenses of the Fund reflect reductions of the investment adviser fee. Had such actions
not been taken, the ratios would have been as follows:
| Ratios (As a percentage of average total net assets): | |
| Expenses | | | 0.97 | %(7) | | | 0.97 | % | | | 0.98 | %(7) | |
| Net investment income | | | 5.04 | %(7) | | | 5.14 | % | | | 4.87 | %(7) | |
| Senior Securities: | |
| Total preferred shares outstanding | | | 28,000 | | | | 28,000 | | | | 28,000 | | |
| Asset coverage per preferred share(8) | | $ | 92,295 | | | $ | 89,681 | | | $ | 79,989 | | |
| Involuntary liquidation preference per preferred share(9) | | $ | 25,000 | | | $ | 25,000 | | | $ | 25,000 | | |
| Approximate market value per preferred share(9) | | $ | 25,000 | | | $ | 25,000 | | | $ | 25,000 | | |
(1) For the period from the start of business, September 30, 2003, to August 31, 2004.
(2) Computed using average common shares outstanding.
(3) Net asset value at beginning of period reflects the deduction of the sales load of $0.900 per share paid by the shareholder from the $20.00 offering price.
(4) Returns are historical and are calculated by determining the percentage change in net asset value or market value with all distributions reinvested. Total return is not computed on an annualized basis.
(5) 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. 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. Total investment return on net asset value and total investment return on market value are not computed on an annualized basis.
(6) Ratios do not reflect the effect of dividend payments to preferred shareholders. Ratios to average net assets applicable to common shares reflect the Fund's leveraged capital structure.
(7) Annualized.
(8) Calculated by subtracting the Fund's total liabilities (not including the preferred shares) from the Fund's total assets, and dividing this by the number of preferred shares outstanding.
(9) Plus accumulated and unpaid dividends.
See notes to financial statements
12
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
Eaton Vance Tax-Advantaged Dividend Income Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Fund was organized under the laws of The Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated July 10, 2003. The Fund's investment objective is to provide a high level of after-tax total return consisting primarily of tax-advantaged dividend income and capital appreciation. The Fund pursues its objective by investing primarily in dividend-paying common and preferred stocks. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America.
A Investment Valuation — Securities 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 National Market System generally are valued at the official NASDAQ 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 an independent pricing service. The value of preferred equity securi ties that are valued by a pricing service on a bond basis will be adjusted by an income factor, to be determined by the investment adviser, to reflect the next anticipated regular dividend. Exchange-traded options are valued at the last sale price for the day of valuation as quoted on the principal exchange or board of trade on which the options are traded or, in the absence of sales on such date, at the mean between the latest bid and asked prices therefore. Futures positions on securities and currencies generally are valued at closing settlement prices. Short-term debt securities with a remaining maturity of 60 days or less are valued at amortized cost. If short-term debt securities were acquired with a remaining maturity of more than 60 days, their amortized cost value will be based on their value on the sixty-first day prior to maturity. Other fixed income and debt securities, including listed securities and securities for which price quotations are available, will normally be valued on the basis of valu ations furnished by a pricing service. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by an independent quotation service. 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 securit ies. Investments held by the Fund for which valuations or market quotations are unavailable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund considering relevant factors, data and information including the market value of freely tradable securities of the same class in the principal market on which such securities are normally traded.
B 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. Interest income is recorded on the accrual basis.
C Federal Taxes — The Fund's policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year all of its taxable income, including any net realized gain on investments. Accordingly, no provision for federal income or excise tax is necessary. At August 31, 2005, the Fund, for federal income tax purposes, had a capital loss carryover of $8,330,023, which will reduce the Fund's taxable income arising from future net realized gain on investments, 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 capi tal loss carryover will expire August 31, 2013 ($4,941,064) and August 30, 2012 ($3,388,959).
D Offering Costs — Costs incurred by the Fund in connection with the offering of the common shares and
13
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
preferred shares were recorded as a reduction of capital paid in excess of par applicable to common shares.
E Written Options — Upon the writing of a call or a put option, an amount equal to 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 value of the option written in accordance with the Fund's policies on investment valuations discussed above. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, may have no control over whether the underlying securities 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 underlying the written option.
F 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 Fund's policies on investment valuations discussed above. If an option which the Fund has 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 a Fund exercises a put option, it will r ealize 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.
G Swap Agreements — The Fund may enter into swap agreements to hedge against fluctuations in securities prices, interest rates or market conditions, to change the duration of the overall portfolio, to mitigate non-payment or default risk, or to gain exposure to particular securities, baskets of securities, indices or currencies. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) to be exchanged or swapped between the parties, which returns are calculated with respect to a notional amount (i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or in a "basket" of securities representing a particular index). The Fund will enter into swaps on a net basis. If the other party to a swap defaults, the Fund's risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive. The Fund will not enter into any swap unless the claims-paying ability of the other party thereto is considered to be investment grade by the Adviser. The Fund is exposed to credit loss in the event of non-performance by the counterparty. These instruments are traded in the over-the-counter market. If the Adviser is incorrect in its forecasts of market values, interest rates and other applicable factors, the investment performance of the Fund would be unfavorably affected.
H Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to 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.
I 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.
J Indemnifications — Under the Fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund and shareholders are indemnified against personal liability for obligations of the Fund. Additionally, in the normal course of business, the Fund enters into
14
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
agreements with service providers that may contain indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred.
K Other — Investment transactions are accounted for on a trade date basis. Realized gains and losses are computed on the specific identification of the securities sold.
L Expense Reduction — Investors Bank & Trust Company (IBT) serves as custodian of the Fund. Pursuant to the custodian agreement, IBT receives a fee reduced by credits which are determined based on the average daily cash balance the Fund maintains with IBT. All credit balances used to reduce the Fund's custodian fees are reported as a reduction of total expenses in the Statement of Operations.
M Interim Financial Statements — The interim financial statements relating to February 28, 2006 and for the six months then ended have not been audited by an independent registered public accounting firm, but in the opinion of the Fund's management reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements.
2 Auction Preferred Shares
The Fund issued 4,000 shares of Auction Preferred Shares (APS) Series A, 4,000 shares of APS Series B, 4,000 shares of APS Series C, 4,000 shares of APS Series D, 4,000 shares of APS Series E, 4,000 shares of APS Series F and 4,000 shares of APS Series G on December 10, 2003 in a public offering. The underwriting discount and other offering costs were recorded as a reduction of the capital of the common shares. Dividends of the APS, which accrue daily, are cumulative at a rate which was established at the offering of the APS and have been reset by an auction based on the dividend period of each Series. Rates are reset weekly for Series A, Series B and Series C, approximately monthly for Series E and Series F, and approximately bi-monthly for Series G. The reset period for Series D was changed from an annual to a weekly reset period effective February 03, 2006. Dividends are generally paid on the day following the end of the divi dend period for Series A, Series B, Series C, Series D, Series E and Series F. Series G pays accumulated dividends on the first business day of each month and on the day following the end of the dividend period.
Dividend rate ranges for the six months ended February 28, 2006 are as indicated below:
| Series | | Dividend Rate Ranges | |
| Series A | | 2.45% – 4.30% | |
| Series B | | 3.00% – 4.00% | |
| Series C | | 3.25% – 4.30% | |
| Series D | | 3.295% – 4.10% | |
| Series E | | 3.45% – 4.25% | |
| Series F | | 3.50% – 4.19% | |
| Series G | | 3.73% – 4.24% | |
The APS are redeemable at the option of the Fund, at a redemption price equal to $25,000 per share, plus accumulated and unpaid dividends on any dividend payment date. The APS are also subject to mandatory redemption at a redemption price equal to $25,000 per share, plus accumulated and unpaid dividends, if the Fund is in default for an extended period on its asset maintenance requirements with respect to the APS. If the dividends on the APS shall remain unpaid in an amount equal to two full years' dividends, the holders of the APS as a class have the right to elect a majority of the Board of Trustees. In general, the holders of the APS and the common shares have equal voting rights of one vote per share, except that the holders of the APS, as a separate class, have the right to elect at least two members of the Board of Trustees. The APS have a liquidation preference of $25,000 per share, plus accumulated and unpaid dividends. The Fund is required to maintain certain asset coverage with respect to the APS as defined in the Fund's By-Laws and the Investment Company Act of 1940. The Fund pays an annual fee equivalent to 0.25% of the preferred shares' liquidation value for the remarketing efforts associated with the preferred auctions.
3 Distribution to Shareholders
The Fund intends to make monthly distributions of net investment income, after payment of any dividends on any outstanding APS. In addition, at least annually, the Fund intends to distribute net capital gain, if any. Distributions are recorded on the ex-dividend date. The applicable dividend rates for APS on February 28, 2006 are listed below. For the six months ended February 28, 2006, the amount of dividends each Series paid to
15
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
Auction Preferred shareholders and average APS dividend rates for such period were as follows:
| Series | | APS
Dividend Rates
as of
February 28, 2006 | | Dividends Paid
to Preferred
Shareholders
for the six
months ended
February 28, 2006 | | Average APS
Dividend
Rates for the six
months ended
February 28, 2006 | |
| Series A | | | 3.950 | % | | $ | 1,855,972 | | | | 3.686 | % | |
| Series B | | | 3.650 | % | | $ | 1,805,227 | | | | 3.587 | % | |
| Series C | | | 3.700 | % | | $ | 1,870,982 | | | | 3.723 | % | |
| Series D | | | 4.049 | % | | $ | 1,705,575 | | | | 3.405 | % | |
| Series E | | | 4.150 | % | | $ | 1,973,570 | | | | 3.889 | % | |
| Series F | | | 4.000 | % | | $ | 1,951,251 | | | | 3.881 | % | |
| Series G | | | 4.240 | % | | $ | 1,991,800 | | | | 3.973 | % | |
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.
4 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Eaton Vance Management (EVM), as compensation for management and investment advisory services rendered to the Fund. Under the advisory agreement, EVM receives a monthly advisory fee in the amount equal to 0.85% annually of average daily gross assets of the Fund. For the six months ended February 28, 2006, the advisory fee amounted to $10,596,817. EVM serves as the administrator of the Fund, but currently receives no compensation for providing administrative services to the Fund.
In addition, the Adviser has contractually agreed to reimburse the Fund for fees and other expenses in the amount of 0.20% of the average daily gross assets for the first five years of the Fund's operations, 0.15% of average daily gross assets in year six, 0.10% in year seven and 0.05% in year eight. For the six months ended February 28, 2006, the Investment Adviser waived $2,493,368 of its advisory fee. The Adviser has also agreed to reduce the investment adviser fee by an amount equal to that portion of commissions paid to broker dealers in execution of Fund portfolio transactions that is consideration for third-party research services. For the six months ended February 28, 2006, the Investment Adviser waived $166,282 of its advisory fee.Trustees of the Fund who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual f ees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months ended February 28, 2006, no significant amounts have been deferred.
Certain officers and Trustees of the Fund are officers of the above organization.
5 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $1,145,682,881 and $1,094,424,052, respectively, for the six months ended February 28, 2006.
6 Federal Income Tax Basis of Unrealized Appreciation (Depreciation)
The cost and unrealized appreciation (depreciation) in value of investments owned by the Fund at February 28, 2006, as computed on a Federal income tax basis, were as follows:
| Aggregate cost | | $ | 2,088,946,727 | | |
| Gross unrealized appreciation | | $ | 513,112,575 | | |
| Gross unrealized depreciation | | | (33,719,294 | ) | |
| Net unrealized appreciation | | $ | 479,393,281 | | |
The net unrealized appreciation on foreign currency at February 28, 2006 was $119,420.
7 Common Shares of Beneficial Interest
The Declaration of Trust permits the Fund to issue an unlimited number of full and fractional $0.01 par value common shares of beneficial interest. There were no transactions in common shares for the six months ended February 28, 2006 and for the the year ended August 31, 2005.
8 Overdraft Advances
Pursuant to the custodian agreement between the Fund and IBT, IBT may, in its discretion, advance funds to the Fund to make properly authorized payments. When such payments result in an overdraft by the Fund, the Fund is obligated to repay IBT at the current rate of interest charged by IBT for secured loans (currently, a rate above the Federal Funds rate). This obligation is payable on demand to IBT. IBT has a lien on the Fund's
16
Eaton Vance Tax-Advantaged Dividend Income Fund as of February 28, 2006
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
assets to the extent of any overdraft. At February 28, 2006, the Fund's payment due to IBT pursuant to the foregoing arrangement was $19,417.
9 Risks Associated with Foreign Investments
Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitation on the removal of funds or other assets of the Fund, political or financial instability or diplomatic and other developments which could affect such investments. Foreign stock markets, while growin g in volume and sophistication, are generally not as developed as those in the United States, and securities of some foreign issuers (particularly those in developing countries) may be less liquid and more volatile than securities of comparable U.S. companies. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker-dealers, and issuers than in the United States.
10 Financial Instruments
The Fund may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts, and financial futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. The notional or contractual amounts of these instruments represent the investment the Fund has in particular classes of financial instruments and does 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. The Fund did not have any open obligations under these financial instruments at February 28, 2006.
17
Eaton Vance Tax-Advantaged Dividend Income Fund
DIVIDEND REINVESTMENT PLAN
The Fund offers a dividend reinvestment plan (the Plan) pursuant to which shareholders may elect to have dividends and capital gains distributions automatically reinvested in common shares (the Shares) of the Fund. You may elect to participate in the Plan by completing the Dividend Reinvestment Plan Application Form. If you do not participate, you will receive all distributions in cash paid by check mailed directly to you by PFPC, Inc. as dividend paying agent. 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 rein vested.
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 Fund's transfer agent, PFPC, Inc. or you will not be able to participate.
The Plan Agent's 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 inquires regarding the Plan can be directed to the Plan Agent, PFPC, Inc., at 1-800-331-1710.
18
Eaton Vance Tax-Advantaged Dividend 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 DIVIDENDS AND DISTRIBUTIONS IN CASH. THIS IS NOT A PROXY.
This authorization form, when signed, should be mailed to the following address:
Eaton Vance Tax-Advantaged Dividend Income Fund
c/o PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
800-331-1710
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 February 28, 2006, our records indicate that there are 124 registered shareholders and approximately 65,830 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.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
New York Stock Exchange symbol
| The New York Stock Exchange Symbol is EVT. | |
|
19
Eaton Vance Tax-Advantaged Dividend Income Fund
INVESTMENT MANAGEMENT
Officers
Thomas E. Faust Jr.
President and Chief Executive Officer
James B. Hawkes
Vice President and Trustee
Aamer Khan
Vice President
Thomas H. Luster
Vice President
Michael R. Mach
Vice President
Judith A. Saryan
Vice President
Barbara E. Campbell
Treasurer and Principal Financial
Accounting Officer
Alan R. Dynner
Secretary
Paul M. O'Neil
Chief Compliance Officer | | Trustees
Samuel L. Hayes, III
Chairman
Benjamin C. Esty
William H. Park
Ronald A. Pearlman
Norton H. Reamer
Lynn A. Stout
Ralph F. Verni | |
|
20
This Page Intentionally Left Blank
Investment Adviser and Administrator of Eaton Vance Tax-Advantaged Dividend Income Fund
Eaton Vance Management
The Eaton Vance Building
255 State Street
Boston, MA 02109
Custodian
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
Transfer Agent
PFPC Inc.
Attn: Eaton Vance Funds
P.O. Box 43027
Providence, RI 02940-3027
(800) 331-1710
Eaton Vance Tax-Advantaged Dividend Income Fund
The Eaton Vance Building
255 State Street
Boston, MA 02109
2004-4/06 CE-TADISRC
Item 2. Code of Ethics
The registrant has adopted a code of ethics applicable to its Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-262-1122.
Item 3. Audit Committee Financial Expert
The registrant’s Board has designated William H. Park, Samuel L. Hayes, III and Norton H. Reamer, each an independent trustee, as its audit committee financial experts. 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). Mr. Hayes is the Jacob H. Schiff Professor of Investment Banking Emeritus of the Harvard University Graduate School of Business Administration. Mr. Reamer is the President, Chief Executive Officer and a Director of Asset Management Finance Corp. (a specialty finance company serving the investment management industry) and is President of Unicorn Corporation (an investment and financial advisory services company). Formerly, Mr. Reamer was Chairman of Hellman, Jordan Management Co., Inc. (an investment management company) and Advisory Director of Berkshire Capital Corporation (an investment banking firm), Chairman of the Board of UAM and Chairman, President and Director of the UAM Funds (mutual funds).
Item 4. Principal Accountant Fees and Services
Not required in this filing
Item 5. Audit Committee of Listed registrants
Not required in this filing.
Item 6. Schedule of Investments
Please see schedule of investments contained in the Report to Stockholders included under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
The Board of Trustees of the Trust has adopted a proxy voting policy and procedure (the “Fund Policy”), pursuant to which the Trustees have delegated proxy voting responsibility to the Fund’s investment adviser and adopted the investment adviser’s proxy voting policies and procedures (the “Policies”) which are described below. The Trustees will review the Fund’s proxy voting records from time to time and will annually consider approving the Policies for the upcoming year. In the event that a conflict of interest arises between the Fund’s shareholders and the investment adviser, the administrator, or any of their affiliates or any affiliate of the Fund, the investment adviser will generally refrain from voting the proxies related to the companies giving rise to such conflict until it consults with the Board’s Special Committee except as contemplated under the Fund Policy. The Board’s Special Committee will instruct the investment adviser on the appropriate course of action.
The Policies are designed to promote accountability of a company’s management to its shareholders and to align the interests of management with those shareholders. The investment adviser will generally support company management on proposals relating to environmental and social policy issues, on matters regarding the state of organization of the company and routine matters related to corporate administration which are not expected to have a significant economic impact on the company or its shareholders. On all other matters, the investment adviser will review each matter on a case-by-case
basis and reserves the right to deviate from the Policies’ guidelines when it believes the situation warrants such a deviation. The Policies include voting guidelines for matters relating to, among other things, the election of directors, approval of independent auditors, executive compensation, corporate structure and anti-takeover defenses. The investment adviser may 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.
In addition, the investment adviser will monitor situations that may result in a conflict of interest between the Fund’s shareholders and the investment adviser, the administrator, or any of their affiliates or any affiliate of the Fund by maintaining a list of significant existing and prospective corporate clients. The investment adviser’s personnel responsible for reviewing and voting proxies on behalf of the Fund will report any proxy received or expected to be received from a company included on that list to members of senior management of the investment adviser identified in the Policies. Such members of senior management will determine if a conflict exists. If a conflict does exist, the investment adviser will seek instruction on how to vote from the Special Committee.
Information on how the Fund voted proxies relating to portfolio securities during the most recent 12 month period ended June 30 is available (1) without charge, upon request, by calling 1-800-262-1122, and (2) on the Securities and Exchange Commission’s website at http://www.sec.gov.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not required in this filing.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
No such purchases this period.
Item 10. Submission of Matters to a Vote of Security Holders.
Effective February 7, 2005, the Governance Committee of the Board of Trustees revised the procedures by which a Fund’s shareholders may recommend nominees to the registrant’s Board of Trustees to add the following (highlighted):
The Governance Committee shall, when identifying candidates for the position of Independent Trustee, consider any such candidate recommended by a shareholder of a Fund if such recommendation contains (i)sufficient background information concerning the candidate, including evidence the candidate is willing to serve as an Independent Trustee if selected for the position; and (ii) is received in a sufficiently timely manner (and in any event no later than the date specified for receipt of shareholder proposals in any applicable proxy statement with respect to a Fund). Shareholders shall be directed to address any such recommendations in writing to the attention of the Governance Committee, c/o the Secretary of the Fund. The Secretary shall retain copies of any shareholder recommendations which meet the foregoing requirements for a period of not more than 12 months following receipt. The Secretary shall have no obligation to acknowledge receipt of any shareholder recommendations.
Item 11. Controls and Procedures
(a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.
(b) There have been no changes in the registrant’s internal controls over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a)(1) | Registrant’s Code of Ethics – Not applicable (please see Item 2). |
(a)(2)(i) | Treasurer’s Section 302 certification. |
(a)(2)(ii) | President’s Section 302 certification. |
(b) | Combined Section 906 certification. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Eaton Vance Tax-Advantaged Dividend Income Fund
By: | /s/Thomas E. Faust Jr. | | |
| Thomas E. Faust Jr. |
| President |
| |
| |
Date: | April 13, 2006 | | | |
| | | | | |
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: | April 13, 2006 | | | |
| | | | | |
By: | /s/ Thomas E. Faust Jr. | | |
| Thomas E. Faust Jr. |
| President |
| |
| |
Date: | April 13, 2006 | | | |
| | | | | |
