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, 2009

Date of Reporting Period

 

 

Item 1. Schedule of Investments

 

PORTFOLIO OF INVESTMENTS (Unaudited)

 

Common Stocks — 101.8%

 

 

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2

 

3

 

4

 

Short-Term Investments — 1.4%

 

 

Covered Call Options Written — (3.4)%

 

 

 

5

Country Concentration of Portfolio

 

		Percentage
Country		of Net Assets				Value
United States			74.5	%		$	1,425,356,301
United Kingdom			5.7				109,817,903
Switzerland			4.7				90,287,765
Germany			3.5				67,089,986
France			3.2				60,804,293
Canada			2.4				46,459,949
Netherlands			1.8				34,761,457
Australia			1.6				31,278,780
Spain			1.3				25,299,501
Bermuda			1.0				18,757,253
Italy			0.9				17,840,954
Ireland			0.7				12,506,640
Sweden			0.6				10,967,667
Israel			0.5				8,736,292
Taiwan			0.4				7,035,478
Finland			0.2				4,002,000
Luxembourg			0.2				3,002,386
Total Investments			103.2	%		$	1,974,004,605

 

The cost and unrealized appreciation (depreciation) of investments of the Fund at July 31, 2009, as determined on a federal income tax basis, were as follows:

 

Aggregate cost		$	2,147,331,583
Gross unrealized appreciation		$	125,279,975
Gross unrealized depreciation			(298,606,953	)
Net unrealized depreciation		$	(173,326,978	)

 

Written call options activity for the fiscal year to date ended July 31, 2009 was as follows:

 

		Number of				Premiums
		Contracts				Received
Outstanding, beginning of period			14,680			$	70,390,742
Options written			98,519				342,864,005
Options terminated in closing purchase transactions			(93,634	)			(374,132,137	)
Options expired			(9,890	)			(14,859,324	)
Outstanding, end of period			9,675			$	24,263,286

 

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At July 31, 2009, 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 objective. The Fund generally intends to write index call options above the current value of an 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 July 31, 2009, the aggregate fair value of derivative instruments (not accounted for as hedging instruments under Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 133) in a liability position and whose primary underlying risk exposure is equity price risk was $63,875,762.

 

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The Fund adopted FASB Statement of Financial Accounting Standards No. 157 (FAS 157), “Fair Value Measurements”, effective November 1, 2008. FAS 157 established a three-tier hierarchy to prioritize the assumptions, referred to as inputs, used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

 

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

At July 31, 2009, the inputs used in valuing the Fund’s investments, which are carried at value, were as follows:

 

		Quoted Prices in
		Active Markets for				Significant Other				Significant
		Identical Assets				Observable Inputs				Unobservable Inputs
Asset Description		(Level 1)				(Level 2)				(Level 3)				Total
Common Stocks
Consumer Discretionary		$	151,261,769			$	17,417,966			$	—			$	168,679,735
Consumer Staples			162,536,251				77,157,858				—				239,694,109
Energy			168,084,784				69,304,131				—				237,388,915
Financials			200,145,662				99,024,571				—				299,170,233
Health Care			227,675,689				39,232,681				—				266,908,370
Industrials			149,841,970				20,877,494				—				170,719,464
Information Technology			332,762,104				8,281,830				—				341,043,934
Materials			84,311,205				8,736,359				—				93,047,564
Telecommunication Services			48,629,028				9,202,939				—				57,831,967
Utilities			41,278,168				31,409,205				—				72,687,373
Total Common Stocks		$	1,566,526,630			$	380,645,034	*		$	—			$	1,947,171,664
Short-Term Investments			26,832,941				—				—				26,832,941
Total Investments		$	1,593,359,571			$	380,645,034			$	—			$	1,974,004,605
Liability Description
Covered Call Options Written		$	(63,875,762	)		$	—			$	—			$	(63,875,762	)
Total		$	(63,875,762	)		$	—			$	—			$	(63,875,762	)

 

 

The Fund held no investments or other financial instruments as of October 31, 2008 whose fair value was determined using Level 3 inputs.

 

For information on the Fund’s policy regarding 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.

 

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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

 

 

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.