Company: ETY
Filing Date: 2025-02-14
Form Type: N-2ASR
Source: 0001193125-25-026876
Chunk: 23

Company: Eaton Vance Tax-Managed Diversified Equity Income Fund
Filing Date: 2025-02-14
Form: N-2ASR
Chunk 23
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 often have limited product lines, markets, distribution channels or financial resources; and the management of such companies may be dependent upon one or a few key people. The market movements of equity securities of smaller and mid-sizedcompanies may be more abrupt or erratic than the market movements of equity securities of larger, more established companies or the stock market in general. Historically, smaller and mid-sizedcompanies have sometimes gone through extended periods when they did not perform as well as larger companies. In addition, equity securities of smaller and mid-sizedcompanies generally are less liquid than those of larger companies. This means that the Fund could have greater difficulty selling such securities at the time and price that the Fund would like. Risk of Selling Index Call Options.Under normal market conditions, a portion of the Fund’s common stock portfolio value is subject to written index call options. The purchaser of an index call option has the right to any appreciation in the value of the index over the exercise price of the call option as of the valuation date of the option. Because their exercise is settled in cash, sellers of index call options such as the Fund cannot provide in advance for their potential settlement obligations by acquiring and holding the underlying securities. The Fund intends to mitigate the risks of its options activities by writing options on one or more broad-based stock indices that the Adviser believes collectively approximate the characteristics of the Fund’s common stock portfolio (or that portion of its portfolio against which options are written). The Fund will not, however, hold stocks that fully replicate the indices on which it writes call options. Due to tax considerations, the Fund intends to generally limit the overlap between its stock holdings (and any subset thereof) and each index on which it has outstanding options positions to less than 70% on an ongoing basis. The Fund’s stock holdings will normally include stocks not included in the indices on which it writes call options. Consequently, the Fund bears the risk that the performance of its stock portfolio will vary from the performance of the indices on which it writes call options. For example, with

respect to the portion of its stock portfolio against which S&P 500 ®index call options have been written, the Fund will suffer a loss if the S&P 500 ®appreciates above the exercise price of the options written while the associated securities held by the Fund fail to appreciate as much or decline in value over the life of the written option. Index options written by the Fund is priced on a daily basis. Their value is affected primarily by changes in the prices and dividend rates of the underlying common stocks in