Eaton Vance Tax-Managed Diversified Equity Income Fund

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

811-21832

Investment Company Act File Number

Eaton Vance Tax-Managed Diversified Equity Income Fund

(Exact Name of Registrant as Specified in Charter)

Two International Place, Boston, Massachusetts 02110

(Address of Principal Executive Offices)

Maureen A. Gemma

Two International Place, Boston, Massachusetts 02110

(Name and Address of Agent for Services)

(617) 482-8260

(Registrant’s Telephone Number, Including Area Code)

October 31

Date of Fiscal Year End

July 31, 2014

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Managed Diversified Equity Income Fund

July 31, 2014

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 97.1%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 1.3%

      

Boeing Co. (The)

      201,555       $ 24,283,346   
     

 

 

  
      $ 24,283,346   
     

 

 

  

Air Freight & Logistics — 2.0%

      

C.H. Robinson Worldwide, Inc.

      533,791       $ 36,009,541   
     

 

 

  
      $ 36,009,541   
     

 

 

  

Automobiles — 0.7%

      

Honda Motor Co., Ltd.

      360,319       $ 12,543,086   
     

 

 

  
      $ 12,543,086   
     

 

 

  

Banks — 7.5%

      

Bank of America Corp.

      1,698,055       $ 25,895,339   

Citigroup, Inc.

      504,353         24,667,905   

JPMorgan Chase & Co.

      632,425         36,471,950   

PNC Financial Services Group, Inc. (The)

      214,287         17,691,535   

Regions Financial Corp.

      1,788,839         18,138,827   

SunTrust Banks, Inc.

      386,658         14,712,337   
     

 

 

  
      $ 137,577,893   
     

 

 

  

Beverages — 2.1%

      

Constellation Brands, Inc., Class A(1)

      453,571       $ 37,764,321   
     

 

 

  
      $ 37,764,321   
     

 

 

  

Biotechnology — 5.0%

      

Biogen Idec, Inc.(1)

      58,297       $ 19,493,934   

Celgene Corp.(1)

      262,950         22,916,093   

Gilead Sciences, Inc.(1)

      531,850         48,690,867   
     

 

 

  
      $ 91,100,894   
     

 

 

  

Capital Markets — 0.5%

      

Charles Schwab Corp. (The)

      316,175       $ 8,773,856   
     

 

 

  
      $ 8,773,856   
     

 

 

  

Chemicals — 2.8%

      

LyondellBasell Industries NV, Class A

      183,381       $ 19,484,231   

Monsanto Co.

      134,705         15,233,788   

PPG Industries, Inc.

      81,532         16,172,688   
     

 

 

  
      $ 50,890,707   
     

 

 

  

Communications Equipment — 1.9%

      

QUALCOMM, Inc.

      225,000       $ 16,582,500   

Telefonaktiebolaget LM Ericsson, Class B

      1,423,351         17,723,391   
     

 

 

  
      $ 34,305,891   
     

 

 

  

Consumer Finance — 2.7%

      

American Express Co.

      155,451       $ 13,679,688   

Discover Financial Services

      585,052         35,723,275   
     

 

 

  
      $ 49,402,963   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Diversified Telecommunication Services — 2.1%

      

AT&T, Inc.

      380,000       $ 13,524,200   

Verizon Communications, Inc.

      485,000         24,453,700   
     

 

 

  
      $ 37,977,900   
     

 

 

  

Electric Utilities — 1.5%

      

NextEra Energy, Inc.

      286,384       $ 26,888,594   
     

 

 

  
      $ 26,888,594   
     

 

 

  

Electrical Equipment — 3.6%

      

Emerson Electric Co.

      520,000       $ 33,098,000   

Rockwell Automation, Inc.

      290,000         32,381,400   
     

 

 

  
      $ 65,479,400   
     

 

 

  

Electronic Equipment, Instruments & Components — 1.8%

      

Corning, Inc.

      1,700,000       $ 33,405,000   
     

 

 

  
      $ 33,405,000   
     

 

 

  

Energy Equipment & Services — 1.0%

      

FMC Technologies, Inc.(1)

      312,742       $ 19,014,714   
     

 

 

  
      $ 19,014,714   
     

 

 

  

Food & Staples Retailing — 1.5%

      

Costco Wholesale Corp.

      230,766       $ 27,124,236   
     

 

 

  
      $ 27,124,236   
     

 

 

  

Food Products — 3.5%

      

Hershey Co. (The)

      426,437       $ 37,590,422   

Mondelez International, Inc., Class A

      729,502         26,262,072   
     

 

 

  
      $ 63,852,494   
     

 

 

  

Health Care Equipment & Supplies — 2.3%

      

Abbott Laboratories

      630,534       $ 26,558,092   

Covidien PLC

      187,316         16,204,707   
     

 

 

  
      $ 42,762,799   
     

 

 

  

Health Care Technology — 1.3%

      

Cerner Corp.(1)

      430,571       $ 23,767,519   
     

 

 

  
      $ 23,767,519   
     

 

 

  

Household Durables — 0.9%

      

Mohawk Industries, Inc.(1)

      127,818       $ 15,947,852   
     

 

 

  
      $ 15,947,852   
     

 

 

  

Industrial Conglomerates — 1.5%

      

Danaher Corp.

      382,747       $ 28,277,348   
     

 

 

  
      $ 28,277,348   
     

 

 

  

Insurance — 1.9%

      

ACE, Ltd.

      73,400       $ 7,347,340   

Aflac, Inc.

      268,962         16,067,790   

MetLife, Inc.

      216,490         11,387,374   
     

 

 

  
      $ 34,802,504   
     

 

 

  

Internet & Catalog Retail — 1.1%

      

Amazon.com, Inc.(1)

      64,846       $ 20,296,150   
     

 

 

  
      $ 20,296,150   
     

 

 

  

Internet Software & Services — 7.4%

      

Facebook, Inc., Class A(1)

      520,629       $ 37,823,697   

Google, Inc., Class C(1)

      170,500         97,457,800   
     

 

 

  
      $ 135,281,497   
     

 

 

  

IT Services — 2.3%

      

Fiserv, Inc.(1)

      377,127       $ 23,257,422   

Visa, Inc., Class A

      88,000         18,568,880   
     

 

 

  
      $ 41,826,302   
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Machinery — 1.9%

      

Caterpillar, Inc.

      345,006       $ 34,759,355   
     

 

 

  
      $ 34,759,355   
     

 

 

  

Media — 2.8%

      

Live Nation Entertainment, Inc.(1)

      629,781       $ 14,617,217   

Walt Disney Co. (The)

      429,000         36,842,520   
     

 

 

  
      $ 51,459,737   
     

 

 

  

Metals & Mining — 0.8%

      

Freeport-McMoRan, Inc.

      384,230       $ 14,301,041   
     

 

 

  
      $ 14,301,041   
     

 

 

  

Multi-Utilities — 1.5%

      

Sempra Energy

      277,968       $ 27,716,189   
     

 

 

  
      $ 27,716,189   
     

 

 

  

Multiline Retail — 2.0%

  

Dollar General Corp.(1)

      315,631       $ 17,432,300   

Macy’s, Inc.

      324,484         18,751,930   
     

 

 

  
   $ 36,184,230   
     

 

 

  

Oil, Gas & Consumable Fuels — 9.0%

  

Anadarko Petroleum Corp.

      346,616       $ 37,035,920   

Chevron Corp.

      293,327         37,909,581   

Devon Energy Corp.

      479,026         36,166,463   

Occidental Petroleum Corp.

      317,583         31,031,035   

Range Resources Corp.

      279,622         21,136,627   
     

 

 

  
   $ 163,279,626   
     

 

 

  

Pharmaceuticals — 4.9%

  

Johnson & Johnson

      152,177       $ 15,231,396   

Merck & Co., Inc.

      739,393         41,953,159   

Perrigo Co. PLC

      125,000         18,806,250   

Roche Holding AG PC

      48,341         14,028,827   
     

 

 

  
   $ 90,019,632   
     

 

 

  

Real Estate Investment Trusts (REITs) — 1.6%

  

AvalonBay Communities, Inc.

      93,758       $ 13,883,685   

Simon Property Group, Inc.

      92,466         15,551,856   
     

 

 

  
   $ 29,435,541   
     

 

 

  

Semiconductors & Semiconductor Equipment — 1.8%

  

NXP Semiconductors NV(1)

      517,213       $ 32,248,231   
     

 

 

  
   $ 32,248,231   
     

 

 

  

Software — 1.0%

  

Microsoft Corp.

      407,239       $ 17,576,435   
     

 

 

  
   $ 17,576,435   
     

 

 

  

Specialty Retail — 2.8%

  

AutoNation, Inc.(1)

      346,359       $ 18,467,862   

Home Depot, Inc. (The)

      223,536         18,072,885   

TJX Cos., Inc. (The)

      262,665         13,997,418   
     

 

 

  
   $ 50,538,165   
     

 

 

  

Technology Hardware, Storage & Peripherals — 3.8%

  

Apple, Inc.

      724,500       $ 69,240,465   
     

 

 

  
   $ 69,240,465   
     

 

 

  

 

3

 

 

                                                 
Security    Shares      Value  

Textiles, Apparel & Luxury Goods — 0.5%

  

NIKE, Inc., Class B

      119,272       $ 9,199,449   
     

 

 

  
   $ 9,199,449   
     

 

 

  

Thrifts & Mortgage Finance — 0.5%

  

Federal National Mortgage Association(1)

      2,215,657       $ 9,283,603   
     

 

 

  
   $ 9,283,603   
     

 

 

  

Tobacco — 2.0%

  

Altria Group, Inc.

      877,371       $ 35,621,263   
     

 

 

  
   $ 35,621,263   
     

 

 

  

Total Common Stocks
(identified cost $1,649,954,415)

   

    $ 1,770,219,769   
     

 

 

  

Short-Term Investments — 2.2%

      
Description    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.14%(2)

    $ 41,124       $ 41,123,831   
     

 

 

  

Total Short-Term Investments
(identified cost $41,123,831)

   

    $ 41,123,831   
     

 

 

  

Total Investments — 99.3%
(identified cost $1,691,078,246)

   

    $ 1,811,343,600   
     

 

 

  

Call Options Written — (0.0)%(3)

      

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      1,190         1,985         8/1/14       $ (8,925 ) 

S&P 500 Index

      800         1,970         8/8/14         (216,000 ) 

S&P 500 Index

      1,185         1,980         8/16/14         (373,275 ) 

S&P 500 Index

      1,130         2,005         8/22/14         (163,850 ) 
           

 

 

  

Total Call Options Written
(premiums received $5,732,229)

   

    $ (762,050 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.7%

  

    $ 12,768,006   
           

 

 

  

Net Assets — 100.0%

  

    $ 1,823,349,556   
           

 

 

  

The percentage shown for each investment category in the Portfolio of Investments is based on net assets.

 

PC

   -   Participation Certificate

 

(1) Non-income producing security.

 

(2) Affiliated investment company, available to Eaton Vance portfolios and funds, which invests in high quality, U.S. dollar denominated money market instruments. The rate shown is the annualized seven-day yield as of July 31, 2014. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended July 31, 2014 was $28,735.

 

(3) Amount is less than (0.05)%.

 

4

 

 

Country Concentration of Portfolio

 

                                                 
Country    Percentage of
Total Investments		     Value  

United States

      92.4 %    $     1,672,957,536   

Netherlands

      2.8        51,732,462   

Ireland

      1.9        35,010,957   

Switzerland

      1.2        21,376,168   

Sweden

      1.0        17,723,391   

Japan

      0.7        12,543,086   
  

 

 

    

 

 

  

Total Investments

      100.0 %    $ 1,811,343,600   
  

 

 

    

 

 

  

The cost and unrealized appreciation (depreciation) of investments of the Fund at July 31, 2014, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $     1,694,002,289   
  

 

 

  

Gross unrealized appreciation

    $ 137,552,010   

Gross unrealized depreciation

      (20,210,699 ) 
  

 

 

  

Net unrealized appreciation

    $ 117,341,311   
  

 

 

  

Written options activity for the fiscal year to date ended July 31, 2014 was as follows:

 

     Number of
Contracts		     Premiums
Received		  
Outstanding, beginning of period      3,565      $ 5,790,147   
Options written      44,280        64,864,532   
Options terminated in closing purchase transactions      (33,055 )      (49,102,606 ) 
Options expired      (10,485 )          (15,819,844 ) 
  

 

 

    

 

 

  
Outstanding, end of period      4,305      $ 5,732,229   
  

 

 

    

 

 

  

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At July 31, 2014, the Fund had sufficient cash and/or securities to cover commitments under these contracts.

In the normal course of pursuing its investment objectives, the Fund is subject to the following risks:

Equity Price Risk: The Fund writes index call options above the current value of the index to generate premium income. In writing index call options, the Fund in effect, sells potential appreciation in the value of the applicable index above the exercise price in exchange for the option premium received. The Fund retains the risk of loss, minus the premium received, should the price of the underlying index decline.

Foreign Exchange Risk: Because the Fund holds foreign currency denominated investments, the value of these investments and related receivables and payables may change due to future changes in foreign currency exchange rates. To hedge against this risk, the Fund entered into forward foreign currency exchange contracts during the fiscal year to date ended July 31, 2014.

At July 31, 2014, the aggregate fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in a liability position and whose primary underlying risk exposure is equity price risk was $762,050.

Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

 

•  

Level 1 — quoted prices in active markets for identical investments

 

•  

Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

•  

Level 3 — significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments)

In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

5

 

 

At July 31, 2014, the hierarchy of inputs used in valuing the Fund’s investments and open derivative instruments, which are carried at value, were as follows:

 

Asset Description    Level 1     Level 2     Level 3      Total  
Common Stocks          

Consumer Discretionary

    $ 183,625,583      $ 12,543,086      $ —       $ 196,168,669   

Consumer Staples

      164,362,314        —        —         164,362,314   

Energy

      182,294,340        —        —         182,294,340   

Financials

      269,276,360        —        —         269,276,360   

Health Care

      233,622,017        14,028,827        —         247,650,844   

Industrials

      188,808,990        —        —         188,808,990   

Information Technology

      346,160,430        17,723,391        —         363,883,821   

Materials

      65,191,748        —        —         65,191,748   

Telecommunication Services

      37,977,900        —        —         37,977,900   

Utilities

      54,604,783        —        —         54,604,783   

Total Common Stocks

    $     1,725,924,465      $     44,295,304 *    $     —       $     1,770,219,769   

Short-Term Investments

    $ —      $ 41,123,831      $ —       $ 41,123,831   

Total Investments

    $ 1,725,924,465      $ 85,419,135      $ —       $ 1,811,343,600   
Liability Description                              

Call Options Written

    $ (762,050 )    $ —      $ —       $ (762,050 ) 

Total

    $ (762,050 )    $ —      $ —       $ (762,050 ) 

 

* Includes foreign equity securities whose values were adjusted to reflect market trading of comparable securities or other correlated instruments that occurred after the close of trading in their applicable foreign markets.

The Fund held no investments or other financial instruments as of October 31, 2013 whose fair value was determined using Level 3 inputs. At July 31, 2014, there were no investments transferred between Level 1 and Level 2 during the fiscal year to date then ended.

For information on the Fund’s policy regarding the valuation of investments and other significant accounting policies, please refer to the Fund’s most recent financial statements included in its semiannual or annual report to shareholders.

 

6

 

 

Item 2. 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 on this Form N-Q 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 on this Form N-Q 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 fiscal quarter for which the report is being filed that have materially affected, or are reasonably likely to materially affect the registrant’s internal control over financial reporting.

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-Managed Diversified Equity Income Fund

 

By:   /s/ Walter A. Row, III
  Walter A. Row, III
  President
Date:   September 22, 2014

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/ Walter A. Row, III
  Walter A. Row, III
  President
Date:   September 22, 2014
By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   September 22, 2014