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

January 31, 2015

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Managed Diversified Equity Income Fund

January 31, 2015

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 98.9%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 1.8%

      

United Technologies Corp.

      279,482       $ 32,078,944   
     

 

 

  
      $ 32,078,944   
     

 

 

  

Air Freight & Logistics — 1.0%

      

C.H. Robinson Worldwide, Inc.

      246,752       $ 17,573,677   
     

 

 

  
      $ 17,573,677   
     

 

 

  

Banks — 5.5%

      

Bank of America Corp.

      2,127,817       $ 32,236,428   

JPMorgan Chase & Co.

      824,204         44,820,213   

PNC Financial Services Group, Inc. (The)

      256,440         21,679,438   
     

 

 

  
      $ 98,736,079   
     

 

 

  

Beverages — 2.0%

      

Constellation Brands, Inc., Class A(1)

      323,457       $ 35,725,826   
     

 

 

  
      $ 35,725,826   
     

 

 

  

Biotechnology — 3.9%

      

Celgene Corp.(1)

      292,816       $ 34,891,954   

Gilead Sciences, Inc.(1)

      340,271         35,670,609   
     

 

 

  
      $ 70,562,563   
     

 

 

  

Chemicals — 2.3%

      

LyondellBasell Industries NV, Class A

      160,227       $ 12,672,354   

Monsanto Co.

      235,338         27,765,177   
     

 

 

  
      $ 40,437,531   
     

 

 

  

Communications Equipment — 2.1%

      

QUALCOMM, Inc.

      613,238       $ 38,302,845   
     

 

 

  
      $ 38,302,845   
     

 

 

  

Consumer Finance — 3.1%

      

American Express Co.

      399,670       $ 32,249,372   

Discover Financial Services

      421,325         22,911,654   
     

 

 

  
      $ 55,161,026   
     

 

 

  

Diversified Telecommunication Services — 2.2%

      

Verizon Communications, Inc.

      871,526       $ 39,837,453   
     

 

 

  
      $ 39,837,453   
     

 

 

  

Electric Utilities — 1.7%

      

NextEra Energy, Inc.

      274,252       $ 29,959,288   
     

 

 

  
      $ 29,959,288   
     

 

 

  

Electrical Equipment — 0.7%

      

Emerson Electric Co.

      230,637       $ 13,132,471   
     

 

 

  
      $ 13,132,471   
     

 

 

  

Electronic Equipment, Instruments & Components — 2.1%

      

Corning, Inc.

      1,562,727       $ 37,146,021   
     

 

 

  
      $ 37,146,021   
     

 

 

  

Energy Equipment & Services — 1.3%

      

Halliburton Co.

      572,119       $ 22,879,039   
     

 

 

  
      $ 22,879,039   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Food & Staples Retailing — 3.5%

      

Costco Wholesale Corp.

      218,308       $ 31,215,861   

CVS Health Corp.

      328,436         32,239,278   
     

 

 

  
      $ 63,455,139   
     

 

 

  

Food Products — 2.6%

      

Hershey Co. (The)

      195,143       $ 19,945,566   

Mondelez International, Inc., Class A

      746,603         26,310,290   
     

 

 

  
      $ 46,255,856   
     

 

 

  

Health Care Equipment & Supplies — 3.1%

      

Abbott Laboratories

      603,633       $ 27,018,613   

Medtronic PLC

      390,184         27,859,135   
     

 

 

  
      $ 54,877,748   
     

 

 

  

Health Care Technology — 1.5%

      

Cerner Corp.(1)

      394,575       $ 26,180,051   
     

 

 

  
      $ 26,180,051   
     

 

 

  

Household Durables — 1.2%

      

Mohawk Industries, Inc.(1)

      131,751       $ 21,744,185   
     

 

 

  
      $ 21,744,185   
     

 

 

  

Industrial Conglomerates — 5.1%

      

Danaher Corp.

      382,254       $ 31,490,084   

General Electric Co.

      1,389,756         33,201,271   

Roper Industries, Inc.

      178,690         27,579,015   
     

 

 

  
      $ 92,270,370   
     

 

 

  

Insurance — 3.0%

      

ACE, Ltd.

      255,573       $ 27,591,661   

Aflac, Inc.

      454,798         25,959,870   
     

 

 

  
      $ 53,551,531   
     

 

 

  

Internet & Catalog Retail — 3.2%

      

Amazon.com, Inc.(1)

      163,584       $ 57,995,436   
     

 

 

  
      $ 57,995,436   
     

 

 

  

Internet Software & Services — 5.6%

      

Facebook, Inc., Class A(1)

      363,190       $ 27,569,753   

Google, Inc., Class C(1)

      137,140         73,304,073   
     

 

 

  
      $ 100,873,826   
     

 

 

  

IT Services — 2.0%

      

Visa, Inc., Class A

      143,505       $ 36,580,860   
     

 

 

  
      $ 36,580,860   
     

 

 

  

Machinery — 1.5%

      

Deere & Co.

      316,679       $ 26,977,884   
     

 

 

  
      $ 26,977,884   
     

 

 

  

Media — 4.9%

      

Comcast Corp., Class A

      601,975       $ 31,991,961   

Live Nation Entertainment, Inc.(1)

      833,462         19,811,392   

Walt Disney Co. (The)

      398,991         36,292,221   
     

 

 

  
      $ 88,095,574   
     

 

 

  

Multi-Utilities — 1.6%

      

Sempra Energy

      259,839       $ 29,081,181   
     

 

 

  
      $ 29,081,181   
     

 

 

  

Oil, Gas & Consumable Fuels — 6.7%

      

Anadarko Petroleum Corp.

      325,234       $ 26,587,879   

Devon Energy Corp.

      484,984         29,229,986   

 

2

 

 

                                                 
Security    Shares      Value  

Exxon Mobil Corp.

      426,919       $ 37,321,259   

Occidental Petroleum Corp.

      350,675         28,054,000   
     

 

 

  
      $ 121,193,124   
     

 

 

  

Pharmaceuticals — 5.5%

      

Johnson & Johnson

      259,538       $ 25,990,136   

Merck & Co., Inc.

      729,714         43,987,160   

Perrigo Co. PLC

      184,445         27,987,684   
     

 

 

  
      $ 97,964,980   
     

 

 

  

Real Estate Investment Trusts (REITs) — 2.0%

      

Simon Property Group, Inc.

      184,855       $ 36,723,294   
     

 

 

  
      $ 36,723,294   
     

 

 

  

Semiconductors & Semiconductor Equipment — 1.5%

      

NXP Semiconductors NV(1)

      333,563       $ 26,464,888   
     

 

 

  
      $ 26,464,888   
     

 

 

  

Software — 4.2%

      

Microsoft Corp.

      1,174,103       $ 47,433,761   

Oracle Corp.

      678,031         28,402,719   
     

 

 

  
      $ 75,836,480   
     

 

 

  

Specialty Retail — 1.4%

      

TJX Cos., Inc. (The)

      383,912       $ 25,315,157   
     

 

 

  
      $ 25,315,157   
     

 

 

  

Technology Hardware, Storage & Peripherals — 4.4%

      

Apple, Inc.

      682,490       $ 79,960,528   
     

 

 

  
      $ 79,960,528   
     

 

 

  

Textiles, Apparel & Luxury Goods — 1.8%

      

NIKE, Inc., Class B

      346,856       $ 31,997,466   
     

 

 

  
      $ 31,997,466   
     

 

 

  

Tobacco — 2.1%

      

Altria Group, Inc.

      716,298       $ 38,035,424   
     

 

 

  
      $ 38,035,424   
     

 

 

  

Wireless Telecommunication Services — 0.8%

      

T-Mobile US, Inc.(1)

      472,369       $ 14,256,096   
     

 

 

  
      $ 14,256,096   
     

 

 

  

Total Common Stocks
(identified cost $1,617,792,916)

       $ 1,777,219,841   
     

 

 

  

Short-Term Investments — 1.0%

      
Description    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.15%(2)

    $ 18,853       $ 18,852,940   
     

 

 

  

Total Short-Term Investments
(identified cost $18,852,940)

       $ 18,852,940   
     

 

 

  

Total Investments — 99.9%
(identified cost $1,636,645,856)

       $ 1,796,072,781   
     

 

 

  

 

3

 

 

                                                 

Call Options Written — (0.2)%

      

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      1,125       $ 2,090         2/6/15       $ (16,875 ) 

S&P 500 Index

      1,090         2,035         2/13/15         (1,226,250 ) 

S&P 500 Index

      750         2,085         2/20/15         (213,750 ) 

S&P 500 Index

      1,220         2,055         2/27/15         (1,464,000 ) 
           

 

 

  

Total Call Options Written
(premiums received $6,821,879)

             $ (2,920,875 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.3%

             $ 4,401,096   
           

 

 

  

Net Assets — 100.0%

             $ 1,797,553,002   
           

 

 

  

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

 

(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 January 31, 2015. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended January 31, 2015 was $3,695.

The cost and unrealized appreciation (depreciation) of investments of the Fund at January 31, 2015, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $     1,637,016,767   
  

 

 

  

Gross unrealized appreciation

    $ 199,163,797   

Gross unrealized depreciation

      (40,107,783 ) 
  

 

 

  

Net unrealized appreciation

    $ 159,056,014   
  

 

 

  

Written options activity for the fiscal year to date ended January 31, 2015 was as follows:

 

     Number of
Contracts		      Premiums
Received		  

Outstanding, beginning of period

      4,300       $ 6,137,586   

Options written

      13,805         19,818,886   

Options terminated in closing purchase transactions

      (7,465 )       (10,319,598 ) 

Options expired

      (6,455 )       (8,814,995 ) 
  

 

 

     

 

 

  

Outstanding, end of period

      4,185       $ 6,821,879   
  

 

 

     

 

 

  

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At January 31, 2015, the Fund had sufficient cash and/or securities to cover commitments under these contracts.

The Fund is subject to equity price risk in the normal course of pursuing its investment objectives. 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.

At January 31, 2015, 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 $2,920,875.

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)

 

4

 

 

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.

At January 31, 2015, 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

    $     1,777,219,841 *     $ —       $ —       $ 1,777,219,841   

Short-Term Investments

      —             18,852,940             —         18,852,940   

Total Investments

    $ 1,777,219,841       $ 18,852,940       $ —       $     1,796,072,781   
Liability Description                                

Call Options Written

    $ (2,920,875 )     $ —       $ —       $ (2,920,875 ) 

Total

    $ (2,920,875 )     $ —       $ —       $ (2,920,875 ) 

 

* The level classification by major category of investments is the same as the category presentation in the Portfolio of Investments.

The Fund held no investments or other financial instruments as of October 31, 2014 whose fair value was determined using Level 3 inputs. At January 31, 2015, 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.

 

5

 

 

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:   March 23, 2015

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:   March 23, 2015

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   March 23, 2015