Notes to Financial Statements
1 Significant Accounting Policies
Eaton Vance Tax-Advantaged Dividend Income Fund (the
Fund) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company. The Funds 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 of the Fund. The policies are in conformity with accounting principles generally accepted in the
United States of America (U.S. GAAP). The Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946.
A Investment Valuation The following methodologies are used to determine the
market value or fair value of investments.
Equity Securities. Equity securities listed on a U.S. securities exchange generally are valued at the
last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and ask prices on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ
Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid
and ask prices or, in the case of preferred equity securities that are not listed or traded in the over-the-counter market, by a third party pricing service that uses various techniques that consider factors including, but not limited to, prices or
yields of securities with similar characteristics, benchmark yields, broker/dealer quotes, quotes of underlying common stock, issuer spreads, as well as industry and economic events.
Debt Obligations. Debt obligations are generally valued on the basis of valuations provided by third party pricing services, as derived from such services pricing models. Inputs to the models may
include, but are not limited to, reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, interest rates, anticipated prepayments, benchmark curves or information
pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term
debt obligations purchased with a remaining maturity of sixty days or less for which a valuation from a third party pricing service is not readily available may be valued at amortized cost, which approximates fair value.
Derivatives. Forward foreign currency exchange contracts are generally valued at the mean of the average bid and average ask prices that are reported by
currency dealers to a third party pricing service at the valuation time. Such third party pricing service valuations are supplied for specific settlement periods and the Funds forward foreign currency exchange contracts are valued at an
interpolated rate between the closest preceding and subsequent settlement period reported by the third party pricing service.
Foreign Securities and
Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate.
Inputs to the model include reported trades and implied bid/ask spreads. The daily valuation of exchange-traded foreign securities generally is determined as of the close of trading on the principal exchange on which such securities trade. Events
occurring after the close of trading on foreign exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange. When valuing
foreign equity securities that meet certain criteria, the Funds Trustees have approved the use of a fair value service that values such securities to reflect market trading that occurs after the close of the applicable foreign markets of
comparable securities or other instruments that have a strong correlation to the fair-valued securities.
Affiliated Fund. The Fund may invest in
Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by
Eaton Vance Management (EVM). While Cash Reserves Fund is not a registered money market mutual fund, it conducts all of its investment
activities in accordance with the requirements of Rule 2a-7 under the 1940 Act. Investments in Cash Reserves Fund are valued at the closing net asset value per unit on the valuation day. Cash Reserves Fund generally values its investment securities
based on available market quotations provided by a third party pricing service.
Fair Valuation. Investments for which valuations or market
quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that most fairly reflects the securitys fair
value, which is the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from
one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the securitys disposition, the price and extent of public trading in similar securities
of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for
exchange-traded securities), an analysis of the companys or entitys financial statements, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions Investment transactions for financial statement purposes
are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income Dividend income is recorded on the ex-dividend date for dividends
received in cash and/or securities. However, if the ex-dividend date has passed, certain dividends from foreign securities are recorded as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends, interest and capital
gains have been provided for in accordance with the Funds understanding of the applicable countries tax rules and rates. In consideration of recent decisions rendered by European courts, the Fund has filed additional tax reclaims for
previously withheld taxes on dividends earned
Eaton Vance
Tax-Advantaged Dividend Income Fund
October 31, 2019
Notes to Financial Statements continued
in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Due to the uncertainty as to the ultimate resolution of these proceedings,
the likelihood of receipt of these reclaims, and the potential timing of payment, no income was recorded in the financial statements for such outstanding reclaims during the year ended October 31, 2019. Interest income is recorded on the basis
of interest accrued, adjusted for amortization of premium or accretion of discount. Distributions from investment companies are recorded as dividend income, capital gains or return of capital based on the nature of the distribution.
D Federal Taxes The Funds policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision
for federal income or excise tax is necessary.
As of October 31, 2019, the Fund had no uncertain tax positions that would require financial
statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of
filing.
E Foreign Currency Translation Investment valuations, other
assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in
foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange
rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately
disclosed.
F Use of Estimates The preparation of the financial
statements in conformity with U.S. GAAP 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.
G Indemnifications Under the Funds organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Under
Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Fund) could be deemed to have personal liability for the obligations of the Fund. However, the Funds Declaration of Trust contains an
express disclaimer of liability on the part of Fund shareholders and the By-laws provide that the Fund shall assume, upon request by the shareholder, the defense on behalf of any Fund shareholders. Moreover, the By-laws also provide for
indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Fund
enters into agreements with service providers that may contain indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet
occurred.
H Forward Foreign Currency Exchange Contracts The Fund may
enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded as unrealized until such time as the contracts have been closed. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their
contracts and from movements in the value of a foreign currency relative to the U.S. dollar.
2 Distributions to Shareholders
and Income Tax Information
Subject to its Managed Distribution Plan, the Fund intends to make monthly distributions from its net investment income, net
capital gain (which is the excess of net long-term capital gain over net short-term capital loss) and other sources. The Fund intends to distribute all or substantially all of its net realized capital gains. Distributions are recorded on the
ex-dividend date. Distributions to shareholders are determined in accordance with income tax regulations, which may differ from U.S. GAAP. As required by U.S. GAAP, only distributions in excess of tax basis earnings and profits are reported in the
financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from
ordinary income. Distributions in any year may include a return of capital component.
The tax character of distributions declared for the year ended
October 31, 2019, two months ended October 31, 2018 and year ended August 31, 2018 was as follows:
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Year Ended
October 31, 2019
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Period Ended
October 31, 2018
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Year Ended
August 31, 2018
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Ordinary income
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$
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40,906,954
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$
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15,563,576
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$
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34,189,693
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Long-term capital gains
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$
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86,080,027
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$
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5,575,379
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$
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92,551,664
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Eaton Vance
Tax-Advantaged Dividend Income Fund
October 31, 2019
Notes to Financial Statements continued
During the year ended October 31, 2019, distributable earnings was increased by $4,537 and paid-in capital was decreased by $4,537 due to differences between book and tax accounting. These reclassifications
had no effect on the net assets or net asset value per share of the Fund.
As of October 31, 2019, the components of distributable earnings
(accumulated loss) on a tax basis were as follows:
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Undistributed long-term capital gains
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$
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1,504,476
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Net unrealized appreciation
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$
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386,522,992
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Other temporary differences
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$
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2,377,922
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The cost and unrealized appreciation (depreciation) of investments, including open derivative contracts, of the Fund at
October 31, 2019, as determined on a federal income tax basis, were as follows:
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Aggregate cost
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$
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1,841,619,834
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Gross unrealized appreciation
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$
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419,466,824
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Gross unrealized depreciation
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(32,944,494
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)
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Net unrealized appreciation
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$
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386,522,330
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3 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by EVM as compensation for management and investment advisory services rendered to the Fund. Pursuant to the investment
advisory agreement and subsequent fee reduction agreement, the fee is computed at an annual rate of 0.85% of the Funds average daily gross assets up to and including $1.5 billion, 0.83% over $1.5 billion up to and including $3 billion, and at
reduced rates as daily gross assets exceed $3 billion, and is payable monthly. Gross assets as referred to herein represent net assets plus obligations attributable to investment leverage. The fee reduction cannot be terminated without the
consent of a majority of Trustees and a majority of shareholders. For the year ended October 31, 2019, the Funds investment adviser fee amounted to $17,949,735 or 0.84% of the Funds average daily gross assets. The Fund invests its
cash in Cash Reserves Fund. EVM does not currently receive a fee for advisory services provided to Cash Reserves Fund. EVM also serves as administrator of the Fund, but receives no compensation.
Trustees and officers of the Fund who are members of EVMs organization receive remuneration for their services to the Fund out of the investment adviser fee.
Trustees of the Fund who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the year ended October 31, 2019, no
significant amounts have been deferred. Certain officers and Trustees of the Fund are officers of EVM.
4 Purchases and Sales
of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $1,044,456,248 and $1,134,761,526, respectively, for
the year ended October 31, 2019.
5 Common Shares of Beneficial Interest and Shelf Offering
Common shares issued by the Fund pursuant to its dividend reinvestment plan for the year ended October 31, 2019, the two months ended October 31, 2018 and
the year ended August 31, 2018 were 139,956, 20,943 and 46,577, respectively.
Pursuant to a registration statement filed with and declared
effective on July 31, 2019 by the SEC, the Fund is authorized to issue up to an additional 5,472,154 common shares through an equity shelf offering program (the shelf offering). Under the shelf offering, the Fund, subject to market
conditions, may raise additional capital from time to time and in varying amounts and offering methods at a net price at or above the Funds net asset value per common share.
During the year ended October 31, 2019, the Fund sold 255,496 common shares and received proceeds (net of offering costs) of $6,106,101 through its shelf offering. The net proceeds in excess of the net asset
value of the shares sold were $46,562. Offering costs (other than the applicable sales commissions) incurred in connection with the shelf offering were borne directly by EVM. Eaton Vance Distributors, Inc. (EVD), an affiliate of EVM, is the
distributor of the Funds shares and is entitled to receive a sales commission from the Fund of 1.00% of the gross sales price per share, a portion of which is re-allowed to sales agents. The Fund was informed that the sales commissions
retained by EVD during the year ended October 31, 2019 were $12,336.
Eaton Vance
Tax-Advantaged Dividend Income Fund
October 31, 2019
Notes to Financial Statements continued
In November 2013, the Board of Trustees initially approved a share repurchase program for the Fund. Pursuant to the reauthorization of the share repurchase program by the Board of Trustees in March 2019, the Fund
is authorized to repurchase up to 10% of its common shares outstanding as of the last day of the prior calendar year at market prices when shares are trading at a discount to net asset value. The share repurchase program does not obligate the Fund
to purchase a specific amount of shares. There were no repurchases of common shares by the Fund for the year ended October 31, 2019, the two months ended October 31, 2018 and the year ended August 31, 2018.
6 Financial Instruments
The Fund may
trade in financial instruments with off-balance sheet risk in the normal course of its investing activities. These financial instruments may include forward foreign currency exchange 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 do not necessarily represent the
amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered. A summary of obligations under these financial instruments at
October 31, 2019 is included in the Portfolio of Investments. At October 31, 2019, the Fund had sufficient cash and/or securities to cover commitments under these contracts.
The Fund is subject to foreign exchange risk in the normal course of pursuing its investment objective. The Fund entered into forward foreign currency exchange contracts to seek to hedge against fluctuations in
currency exchange rates.
The Fund enters into forward foreign currency exchange contracts that may contain provisions whereby the counterparty may
terminate the contract under certain conditions, including but not limited to a decline in the Funds net assets below a certain level over a certain period of time, which would trigger a payment by the Fund for those derivatives in a liability
position. At October 31, 2019, the fair value of derivatives with credit-related contingent features in a net liability position was $29,367. At October 31, 2019, there were no assets pledged by the Fund for such liability.
The over-the-counter (OTC) derivatives in which the Fund invests are subject to the risk that the counterparty to the contract fails to perform its obligations
under the contract. To mitigate this risk, the Fund has entered into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or similar agreement with its derivative counterparties. An ISDA
Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, set-off provisions in the event of a default and/or termination event as defined under the
relevant ISDA Master Agreement. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments payables and/or receivables with collateral held and/or posted and
create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a
particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy or insolvency. Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in
the event the Funds net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA Master Agreements, which would cause the counterparty to accelerate payment by the Fund of any net liability owed to it.
The collateral requirements for derivatives traded under an ISDA Master Agreement are governed by a Credit Support Annex to the ISDA Master Agreement. Collateral
requirements are determined at the close of business each day and are typically based on changes in market values for each transaction under an ISDA Master Agreement and netted into one amount for such agreement. Generally, the amount of collateral
due from or to a counterparty is subject to a minimum transfer threshold amount before a transfer is required, which may vary by counterparty. Collateral pledged for the benefit of the Fund and/or counterparty is held in segregated accounts by the
Funds custodian and cannot be sold, re-pledged, assigned or otherwise used while pledged. The portion of such collateral representing cash, if any, is reflected as deposits for derivatives collateral and, in the case of cash pledged by a
counterparty for the benefit of the Fund, a corresponding liability on the Statement of Assets and Liabilities. Securities pledged by the Fund as collateral, if any, are identified as such in the Portfolio of Investments.
The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) and whose primary underlying risk
exposure is foreign exchange risk at October 31, 2019 was as follows:
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Fair Value
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Derivative
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Asset Derivative
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Liability Derivative(1)
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Forward foreign currency exchange contracts
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$
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$
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(29,367
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)
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(1)
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Statement of Assets and Liabilities location: Payable for open forward foreign currency exchange contracts.
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Eaton Vance
Tax-Advantaged Dividend Income Fund
October 31, 2019
Notes to Financial Statements continued
The Funds derivative assets and liabilities at fair value by risk, which are reported gross in the Statement of Assets and Liabilities, are presented in the table above. The following table presents the
Funds derivative liabilities by counterparty, net of amounts available for offset under a master netting agreement and net of the related collateral pledged by the Fund for such liabilities as of October 31, 2019.
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Counterparty
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Derivative Liabilities
Subject to
Master Netting
Agreement
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Derivatives
Available
for Offset
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Non-cash
Collateral
Pledged(a)
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Cash
Collateral
Pledged(a)
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Net Amount
of Derivative
Liabilities(b)
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State Street Bank and Trust Company
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$
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(29,367
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)
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$
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$
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$
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$
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(29,367
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)
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(a)
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In some instances, the total collateral received and/or pledged may be more than the amount shown due to overcollateralization.
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(b)
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Net amount represents the net amount payable to the counterparty in the event of default.
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The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Statement of Operations and whose primary
underlying risk exposure is foreign exchange risk for the year ended October 31, 2019 was as follows: