Tax-Managed Global Dividend Income Fund (I)

A Word On The Markets  as of Mar 31, 2012

Investor confidence snapped back in the first quarter of 2012 as equity markets staged a powerful rally. After the extreme volatility of 2011, U.S. and global stocks began climbing in early January and continued their rapid ascent nearly uninterrupted before cooling slightly in late March. Several key market indices reached post-financial crisis highs during the quarter.

Among upbeat economic indicators, falling unemployment in the U.S. helped drive stocks higher, and even the long-depressed housing market showed signs of improvement. The Federal Reserve's renewed commitment to keeping interest rates low for the foreseeable future provided an additional tailwind. Concerns about political gridlock in Washington and the upcoming elections appeared to have little negative impact on the world markets for the time being. Encouraging steps toward resolving Europe's debt crisis boosted international markets and helped sustain U.S. stock gains. Cautionary influences on world markets included ongoing worries about China's slowing economy and elevated oil prices fueled by geopolitical tensions in the Middle East.

The breadth of the market rally across geographies and market segments was reflected in the returns delivered by the major U.S. and overseas indexes. The MSCI EAFE Index¹⁰ rose 10.86% during the quarter, while the MSCI Emerging Markets Index¹¹ gained 14.08%. In the U.S., the S&P 500 Index¹² surged 12.59%, while the Dow Jones Industrial Average¹³ advanced 8.84%. Large-cap stocks narrowly outperformed their small-cap counterparts, with the Russell 1000 Index¹⁴ jumping 12.90% versus 12.44% for the Russell 2000 Index¹⁵. Across market capitalizations, growth stocks outperformed value stocks.

Performance Summary 

Eaton Vance Tax Managed Global Dividend Income Fund underperformed its benchmark, the MSCI World Index², during the first quarter of 2012, returning 8.57% at net asset value versus the benchmark's 11.56% return.

• Reflecting the rebound in world markets, 23 of the 24 countries in the benchmark had positive returns for the quarter. The best-performing country in the benchmark, Germany, returned more than 20% for the quarter. Spain was the only country in the benchmark that posted a negative return for the quarter.
• All of the sectors in the benchmark delivered positive returns for the quarter. Information technology was the best-performing sector in the benchmark with a return of 20%, while telecommunication services was the worst-performing sector with a return of 0.98%.
• Preferred securities, as measured by the BofA Merrill Lynch Fixed Rate Preferred Securities Index¹⁶, underperformed the Fund's benchmark for the quarter. As of 3/31/2012, preferred securities comprised 20.3% of the Fund's total assets.

Contributors 

Stock selection in the consumer staples, materials, and financial sectors aided Fund performance relative to the benchmark. An underweight position in industrials also had a positive impact on performance. At the country level, an overweight position in Germany contributed to relative performance.

• Two global materials companies, LyondellBasell Industries N.V. and BASF, were top individual performance contributors for the quarter.
• Three financial companies--insurer Prudential, regional bank U.S. Bancorp and national bank Wells Fargo--also added to relative performance for the quarter.
• International health care company Covidien PLC also contributed to relative performance for the quarter.

Detractors 

Stock selection in the consumer discretionary, information technology, industrials, and energy sectors were key detractors from performance. Sector allocation also hurt relative performance compared to the benchmark. In particular, an overweight position in utilities had a negative impact on performance. Preferred securities, as measured by the BofA Merrill Lynch Fixed Rate Preferred Securities Index, underperformed the Fund's benchmark for the quarter.

• Two energy companies, Royal Dutch Shell and Repsol, were among the Fund's largest individual performance detractors for the quarter.
• Consumer discretionary company McDonald's had a negative impact on relative performance during the quarter.
• Three utilities companies--American Electric Power, CMS Energy and SSE PLC—also hurt relative performance.

Investment Outlook And Fund Positioning 

The strength of the first-quarter equity market rally suggests that the worst effects of recent global financial crises may be behind us. The upswing confirms our belief that investors have finally begun to focus more on healthy economic and corporate fundamentals than on the macro risks that have dominated headlines for so long. Dividend increases and initiations have kept pace: during the first quarter of 2012, dividend increases and initiations within the benchmark were in line with the first quarter of 2011.

However, investors should not be surprised if equity markets turn volatile again or pull back in the months ahead, particularly following the strong run-up we have just experienced. We believe there are attractive investment opportunities to be found in U.S. and overseas companies with strong business franchises and solid growth prospects.

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.

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. Market conditions may limit the ability to generate tax losses or to generate dividend income taxed at favorable tax rates. The Fund's ability to utilize various tax-managed techniques may be curtailed or eliminated in the future by tax legislation or regulation. 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.

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. Market conditions may limit the ability to generate tax losses or to generate dividend income taxed at favorable tax rates. The Fund's ability to utilize various tax-managed techniques may be curtailed or eliminated in the future by tax legislation or regulation. 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.