Global Dividend Income Fund (A)

A Word On The Markets  as of Dec 31, 2011

Political irresolution characterized most of the developed world during the fourth quarter of 2011, creating an atmosphere of uncertainty that subjected global equity markets to dramatic volatility. In the U.S., the congressional Super Committee failed to identify $1.2 trillion in federal spending cuts in November. Then, in December, Congress waffled once more and failed to approve until the twelfth hour a two-month extension of unemployment benefits and the payroll-tax holiday. In Europe, EU officials were unable to convince the markets that they had a viable plan to stem the region's sovereign debt crisis.

In spite of this, the U.S. economy displayed signs of economic growth in the fourth quarter, spurred largely by lower energy prices. Looking globally, manufacturing data showed expansion, including in China, where there had been concerns about slowing.

Despite extreme volatility during the fourth quarter, global equity markets generally posted positive returns. The MSCI EAFE Index rose 3.33%¹¹, while the broader-based MSCI All Country World Index¹² rose 7.18%. In the U.S., the S&P 500 Index¹³ added 11.82% during the quarter to finish up 2.11% for the calendar year, while the blue chip Dow Jones Industrial Average¹⁴ gained 12.78%, posting a return of 8.38% for the year. Small-cap stocks outperformed large caps during the quarter, with the Russell 2000 Index¹⁵ gaining 15.47% compared to 11.84% for the large-cap Russell 1000 Index¹⁶. Across capitalizations, value stocks outperformed growth stocks.

Performance Summary 

Eaton Vance Global Dividend Income Fund outperformed its benchmark, the MSCI World Index², during the fourth quarter at NAV.

• Reflecting the rebound in world markets, most country returns were positive in the benchmark for the quarter. Three of the four regions in the benchmark had positive returns, the exception being the Pacific Rim region, which declined less than 1%. North America was the best-performing region in the benchmark, returning over 11%.
• All sectors in the benchmark delivered positive returns for the quarter. Energy was the best-performing sector in the benchmark with a return of 16.52%, and utilities was the worst-performing sector with a return of 1.61%.

Contributors 

Stock selection in the Fund aided overall performance relative to the benchmark, especially in the financials, consumer staples and materials sectors. An underweight position in the financials sector also contributed to relative performance compared to the benchmark.

• Phillip Morris International in the consumer staples sector was the top contributor to relative performance for the quarter compared to the benchmark.
• In the consumer discretionary sector, McDonald's, TJX and Home Depot were among the Fund's strongest performers.
• Two energy sector stocks, Total and Royal Dutch Shell, along with two railroads, Canadian National and Union Pacific, aided overall results for the quarter.

Detractors 

Stock selection, primarily in the information technology and health care sectors, detracted from the Fund's relative performance during the quarter. An overweight position in the utilities sector also had a negative impact on performance.

• Three stocks in the information technology sector, Accenture, Oracle and HTC, were among the largest detractors to Fund performance.
• In the health care sector, Merck and Fresenius Medical Care, had a negative impact on overall performance during the quarter.
• Three international utility stocks, SSE, United Utilities Group and SNAM, were also detractors to performance.

Investment Outlook And Fund Positioning 

Entering 2012, political and economic uncertainty remains an issue in the equity markets. However, we believe there continue to be attractive opportunities in large-capitalization, dividend-paying stocks. We have continued to see companies increase their dividends; for the year 2011, there were 60% more dividend increases within the benchmark than in 2010.

Management remains committed to our fundamental, research-driven process. We continue to invest in companies we feel have strong business franchises and attractive growth prospects.

At year end, the Fund's most meaningful overweight positions were in the utilities, consumer staples and energy sectors; the most substantive underweights were in the financials, industrials and information technology sectors.

The views expressed in this report are those of portfolio manager(s) and are current only through the date stated at the top of this page. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. This commentary may contain statements that are not historical facts, referred to as "forward looking statements". The Fund's actual future results may differ significantly from those stated in any forward-looking statement, depending on factors such as changes in securities or financial markets or general economic conditions, the volume of sales and purchases of Fund shares, the continuation of investment advisory, administrative and service contracts, and other risks discussed from time to time in the Fund's filings with the Securities and Exchange Commission.

Fund invests in an affiliated investment company (Portfolio) with the same objective(s) and policies as the Fund. References to investments are to the Portfolio's holdings. Portfolio profile subject to change due to active management. Percentages may not total 100% due to rounding.

About Risk 

Fund share values are sensitive to stock market volatility. Changes in the dividend policies of companies could make it difficult to provide a predictable level of income. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions. Dividend capture strategies may result in higher portfolio turnover, increased trading costs and potential for capital loss or gain. When interest rates rise, the value of preferred stocks will generally decline. No Fund is a complete investment program and you may lose money investing in a Fund. The Fund may engage in other investment practices that may involve additional risks and you should review the Fund prospectus for a complete description.

No attribution information is available.

Fund invests in an affiliated investment company (Portfolio) with the same objective(s) and policies as the Fund. References to investments are to the Portfolio's holdings. Portfolio profile subject to change due to active management. Percentages may not total 100% due to rounding.

About Risk 

Fund share values are sensitive to stock market volatility. Changes in the dividend policies of companies could make it difficult to provide a predictable level of income. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions. Dividend capture strategies may result in higher portfolio turnover, increased trading costs and potential for capital loss or gain. When interest rates rise, the value of preferred stocks will generally decline. No Fund is a complete investment program and you may lose money investing in a Fund. The Fund may engage in other investment practices that may involve additional risks and you should review the Fund prospectus for a complete description.