Eaton Vance Risk-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

811-22044

Investment Company Act File Number

Eaton Vance Risk-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)

December 31

Date of Fiscal Year End

September 30, 2013

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Risk-Managed Diversified Equity Income Fund

September 30, 2013

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 99.5%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 3.2%

      

Boeing Co. (The)

      156,703       $ 18,412,602   

United Technologies Corp.

      80,596         8,689,861   
     

 

 

  
      $ 27,102,463   
     

 

 

  

Airlines — 0.8%

      

United Continental Holdings, Inc.(1)

      211,015       $ 6,480,271   
     

 

 

  
      $ 6,480,271   
     

 

 

  

Auto Components — 0.4%

      

TRW Automotive Holdings Corp.(1)

      47,200       $ 3,365,832   
     

 

 

  
      $ 3,365,832   
     

 

 

  

Automobiles — 0.7%

      

Honda Motor Co., Ltd.

      147,278       $ 5,629,374   
     

 

 

  
      $ 5,629,374   
     

 

 

  

Beverages — 2.2%

      

Beam, Inc.

      127,942       $ 8,271,450   

PepsiCo, Inc.

      128,071         10,181,645   
     

 

 

  
      $ 18,453,095   
     

 

 

  

Biotechnology — 4.5%

      

Celgene Corp.(1)

      118,149       $ 18,186,675   

Gilead Sciences, Inc.(1)

      310,545         19,514,648   
     

 

 

  
      $ 37,701,323   
     

 

 

  

Capital Markets — 1.4%

      

Charles Schwab Corp. (The)

      192,774       $ 4,075,242   

Morgan Stanley

      269,928         7,274,560   
     

 

 

  
      $ 11,349,802   
     

 

 

  

Chemicals — 3.5%

      

LyondellBasell Industries NV, Class A

      139,045       $ 10,182,265   

Monsanto Co.

      156,779         16,363,024   

PPG Industries, Inc.

      13,561         2,265,501   
     

 

 

  
      $ 28,810,790   
     

 

 

  

Commercial Banks — 3.4%

      

PNC Financial Services Group, Inc. (The)

      151,102       $ 10,947,340   

Regions Financial Corp.

      982,098         9,094,227   

SunTrust Banks, Inc.

      244,887         7,939,237   
     

 

 

  
      $ 27,980,804   
     

 

 

  

Communications Equipment — 1.2%

      

QUALCOMM, Inc.

      153,991       $ 10,372,834   
     

 

 

  
      $ 10,372,834   
     

 

 

  

Computers & Peripherals — 2.9%

      

Apple, Inc.

      50,616       $ 24,131,178   
     

 

 

  
      $ 24,131,178   
     

 

 

  

Consumer Finance — 1.3%

      

American Express Co.

      142,794       $ 10,783,803   
     

 

 

  
      $ 10,783,803   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Diversified Financial Services — 6.1%

      

Bank of America Corp.

      1,074,076       $ 14,822,249   

Citigroup, Inc.

      373,190         18,103,447   

JPMorgan Chase & Co.

      343,986         17,780,636   
     

 

 

  
      $ 50,706,332   
     

 

 

  

Diversified Telecommunication Services — 2.0%

      

AT&T, Inc.

      250,635       $ 8,476,476   

Verizon Communications, Inc.

      179,163         8,359,745   
     

 

 

  
      $ 16,836,221   
     

 

 

  

Electric Utilities — 1.9%

      

Duke Energy Corp.

      65,511       $ 4,374,825   

Edison International

      103,463         4,765,506   

NextEra Energy, Inc.

      52,252         4,188,520   

PPL Corp.

      83,862         2,547,727   
     

 

 

  
      $ 15,876,578   
     

 

 

  

Electrical Equipment — 1.6%

      

Emerson Electric Co.

      210,973       $ 13,649,953   
     

 

 

  
      $ 13,649,953   
     

 

 

  

Electronic Equipment, Instruments & Components — 1.0%

      

Corning, Inc.

      578,283       $ 8,437,149   
     

 

 

  
      $ 8,437,149   
     

 

 

  

Energy Equipment & Services — 1.6%

      

Halliburton Co.

      280,534       $ 13,507,712   
     

 

 

  
      $ 13,507,712   
     

 

 

  

Food & Staples Retailing — 1.1%

      

Costco Wholesale Corp.

      82,332       $ 9,478,060   
     

 

 

  
      $ 9,478,060   
     

 

 

  

Food Products — 3.0%

      

Hershey Co. (The)

      134,736       $ 12,463,080   

Mondelez International, Inc., Class A

      395,185         12,416,713   
     

 

 

  
      $ 24,879,793   
     

 

 

  

Health Care Equipment & Supplies — 1.9%

      

Abbott Laboratories

      273,662       $ 9,082,842   

Covidien PLC

      114,791         6,995,363   
     

 

 

  
      $ 16,078,205   
     

 

 

  

Health Care Providers & Services — 0.9%

      

Express Scripts Holding Co.(1)

      118,586       $ 7,326,243   
     

 

 

  
      $ 7,326,243   
     

 

 

  

Hotels, Restaurants & Leisure — 1.0%

      

McDonald’s Corp.

      86,762       $ 8,347,372   
     

 

 

  
      $ 8,347,372   
     

 

 

  

Household Products — 1.5%

      

Procter & Gamble Co.

      162,868       $ 12,311,192   
     

 

 

  
      $ 12,311,192   
     

 

 

  

Industrial Conglomerates — 3.2%

      

Danaher Corp.

      186,467       $ 12,925,892   

General Electric Co.

      581,191         13,884,653   
     

 

 

  
      $ 26,810,545   
     

 

 

  

Insurance — 2.5%

      

ACE, Ltd.

      47,680       $ 4,460,941   

Aflac, Inc.

      164,378         10,189,792   

MetLife, Inc.

      130,875         6,144,581   
     

 

 

  
      $ 20,795,314   
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Internet & Catalog Retail — 3.4%

      

Amazon.com, Inc.(1)

      67,425       $ 21,079,752   

Netflix, Inc.(1)

      23,172         7,165,014   
     

 

 

  
      $ 28,244,766   
     

 

 

  

Internet Software & Services — 7.6%

      

eBay, Inc.(1)

      321,701       $ 17,947,699   

Facebook, Inc., Class A(1)

      244,791         12,298,300   

Google, Inc., Class A(1)

      38,002         33,286,332   
     

 

 

  
      $ 63,532,331   
     

 

 

  

IT Services — 2.2%

      

Accenture PLC, Class A

      112,921       $ 8,315,503   

Visa, Inc., Class A

      53,170         10,160,787   
     

 

 

  
      $ 18,476,290   
     

 

 

  

Machinery — 1.0%

      

Deere & Co.

      104,137       $ 8,475,710   
     

 

 

  
      $ 8,475,710   
     

 

 

  

Media — 2.4%

      

Comcast Corp., Class A

      95,742       $ 4,322,751   

Lions Gate Entertainment Corp.(1)

      48,385         1,695,894   

Walt Disney Co. (The)

      222,126         14,324,906   
     

 

 

  
      $ 20,343,551   
     

 

 

  

Metals & Mining — 0.3%

      

Freeport-McMoRan Copper & Gold, Inc.

      74,972       $ 2,480,074   
     

 

 

  
      $ 2,480,074   
     

 

 

  

Multi-Utilities — 0.7%

      

Sempra Energy

      69,500       $ 5,949,200   
     

 

 

  
      $ 5,949,200   
     

 

 

  

Multiline Retail — 2.1%

      

Dollar General Corp.(1)

      180,543       $ 10,193,458   

Macy’s, Inc.

      179,029         7,746,585   
     

 

 

  
      $ 17,940,043   
     

 

 

  

Oil, Gas & Consumable Fuels — 9.5%

      

Anadarko Petroleum Corp.

      79,015       $ 7,347,605   

Chevron Corp.

      101,277         12,305,155   

Concho Resources, Inc.(1)

      36,758         3,999,638   

EOG Resources, Inc.

      70,132         11,871,945   

Exxon Mobil Corp.

      49,246         4,237,126   

Marathon Oil Corp.

      252,215         8,797,259   

Occidental Petroleum Corp.

      152,613         14,275,420   

Phillips 66

      182,012         10,523,934   

Range Resources Corp.

      80,955         6,143,675   
     

 

 

  
      $ 79,501,757   
     

 

 

  

Personal Products — 1.3%

      

Estee Lauder Cos., Inc. (The), Class A

      150,313       $ 10,506,879   
     

 

 

  
      $ 10,506,879   
     

 

 

  

Pharmaceuticals — 5.8%

      

AbbVie, Inc.

      154,944       $ 6,930,645   

Johnson & Johnson

      101,801         8,825,129   

Pfizer, Inc.

      681,966         19,579,244   

Roche Holding AG PC

      28,692         7,743,207   

Shire PLC ADR

      44,314         5,312,805   
     

 

 

  
      $ 48,391,030   
     

 

 

  

 

3

 

 

                                                 
Security    Shares      Value  

Real Estate Investment Trusts (REITs) — 1.7%

      

AvalonBay Communities, Inc.

      54,354       $ 6,907,850   

Boston Properties, Inc.

      65,336         6,984,418   
     

 

 

  
      $ 13,892,268   
     

 

 

  

Road & Rail — 0.7%

      

Union Pacific Corp.

      40,143       $ 6,235,814   
     

 

 

  
      $ 6,235,814   
     

 

 

  

Semiconductors & Semiconductor Equipment — 0.7%

      

NXP Semiconductors NV(1)

      160,737       $ 5,981,024   
     

 

 

  
      $ 5,981,024   
     

 

 

  

Software — 2.6%

      

Microsoft Corp.

      401,225       $ 13,364,805   

Oracle Corp.

      259,026         8,591,892   
     

 

 

  
      $ 21,956,697   
     

 

 

  

Specialty Retail — 1.2%

      

AutoNation, Inc.(1)

      31,941       $ 1,666,362   

Home Depot, Inc. (The)

      108,846         8,255,969   
     

 

 

  
      $ 9,922,331   
     

 

 

  

Textiles, Apparel & Luxury Goods — 0.6%

      

NIKE, Inc., Class B

      69,064       $ 5,016,809   
     

 

 

  
      $ 5,016,809   
     

 

 

  

Tobacco — 0.9%

      

Philip Morris International, Inc.

      91,070       $ 7,885,751   
     

 

 

  
      $ 7,885,751   
     

 

 

  

Total Common Stocks
(identified cost $583,316,884)

       $ 831,934,563   
     

 

 

  

Put Options Purchased — 0.5%

      

 

                                                                                                   
Description   

Number of

Contracts

     

Strike

Price

     

Expiration

Date

      Value  

S&P 500 Index

      401       $ 1,585         10/4/13       $ 29,072   

S&P 500 Index

      396         1,630         10/11/13         219,780   

S&P 500 Index

      396         1,655         10/19/13         526,680   

S&P 500 Index

      394         1,630         10/25/13         451,130   

S&P 500 Index FLEX

      399         1,580         10/2/13         31   

S&P 500 Index FLEX

      396         1,595         10/7/13         27,696   

S&P 500 Index FLEX

      396         1,620         10/9/13         94,757   

S&P 500 Index FLEX

      392         1,640         10/14/13         282,725   

S&P 500 Index FLEX

      392         1,670         10/16/13         633,608   

S&P 500 Index FLEX

      393         1,645         10/21/13         465,888   

S&P 500 Index FLEX

      393         1,640         10/23/13         462,403   

S&P 500 Index FLEX

      395         1,610         10/28/13         399,799   
           

 

 

  

Total Put Options Purchased
(identified cost $4,158,400)

             $ 3,593,569   
           

 

 

  

Total Investments — 100.0%
(identified cost $587,475,284)

             $     835,528,132   
           

 

 

  

 

4

 

 

                                                                                                   

Call Options Written — (0.3)%

            
Description   

Number of

Contracts

     

Strike

Price

     

Expiration

Date

      Value  

S&P 500 Index

      401       $ 1,685         10/4/13       $ (429,070 ) 

S&P 500 Index

      396         1,715         10/11/13         (160,380 ) 

S&P 500 Index

      396         1,740         10/19/13         (72,270 ) 

S&P 500 Index

      394         1,720         10/25/13         (321,110 ) 

S&P 500 Index FLEX

      399         1,678         10/2/13         (275,248 ) 

S&P 500 Index FLEX

      396         1,698         10/7/13         (165,467 ) 

S&P 500 Index FLEX

      396         1,713         10/9/13         (85,391 ) 

S&P 500 Index FLEX

      392         1,735         10/14/13         (44,824 ) 

S&P 500 Index FLEX

      392         1,751         10/16/13         (22,034 ) 

S&P 500 Index FLEX

      393         1,733         10/21/13         (111,183 ) 

S&P 500 Index FLEX

      393         1,729         10/23/13         (154,882 ) 

S&P 500 Index FLEX

      395         1,718         10/28/13         (365,488 ) 
           

 

 

  

Total Call Options Written
(premiums received $4,312,839)

             $ (2,207,347 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.3%

             $ 2,713,316   
           

 

 

  

Net Assets — 100.0%

             $     836,034,101   
           

 

 

  

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

 

ADR

   -   American Depositary Receipt

FLEX

   -   FLexible EXchange traded option, representing a customized option contract with negotiated contract terms.

PC

   -   Participation Certificate

 

(1) Non-income producing security.

The cost and unrealized appreciation (depreciation) of investments of the Fund at September 30, 2013, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $     591,685,686   
  

 

 

  

Gross unrealized appreciation

    $ 247,367,704   

Gross unrealized depreciation

      (3,525,258 ) 
  

 

 

  

Net unrealized appreciation

    $ 243,842,446   
  

 

 

  

A summary of obligations under these financial instruments at September 30, 2013 is as follows:

Forward Foreign Currency Exchange Contracts

Sales

 

Settlement
Date		     

Deliver

   

In Exchange For

   

Counterparty

    Net  Unrealized
Depreciation		  
10/31/13      Japanese Yen
565,130,000		    United States Dollar
5,713,809		    Credit Suisse International    $     (36,448 ) 
             

 

 

  

 

5

 

 

Written options activity for the fiscal year to date ended September 30, 2013 was as follows:

 

         Number of
Contracts		     Premiums
Received		  
  Outstanding, beginning of period      5,562      $ 4,805,536   
  Options written      50,151        40,446,925   
  Options terminated in closing purchase transactions      (29,094 )      (23,905,409 ) 
  Options expired      (21,876 )      (17,034,213 ) 
    

 

 

    

 

 

  
  Outstanding, end of period      4,743      $     4,312,839   
    

 

 

    

 

 

  

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At September 30, 2013, the Fund had sufficient cash and/or securities to cover commitments under these contracts.

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

Equity Price Risk: The Fund pursues a “collared” options strategy which consists of buying S&P 500 index put options below the current value of the index and writing S&P 500 index call options above the current value of the index with the same expiration. The strategy uses the premium income from the written call options to buy an equal number of put options. In buying put options on an index, the Fund in effect, acquires protection against decline in the value of the applicable index below the exercise price in exchange for the option premium paid. In writing index call options, the Fund in effect, sells potential appreciation in the value of the applicable index above the exercise price. The Fund retains the risk of lost appreciation, minus the premium received, should the price of the underlying index rise above the strike price. Under normal market conditions, the Fund’s use of option collars is expected to provide a more consistent level of market exposure and market protection.

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 enters into forward foreign currency exchange contracts.

The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) by risk exposure at September 30, 2013 was as follows:

 

          Fair Value  

Risk

   

Derivative

    Asset
Derivative		      Liability
Derivative		  
Equity Price    Purchased Options    $ 3,593,569       $ —   
Equity Price    Written Options    $ —       $ (2,207,347 ) 
Foreign Exchange    Forward Foreign Currency Exchange Contracts    $ —       $ (36,448 ) 
     

 

 

     

 

 

  
      $     3,593,569       $     (2,243,795 ) 
     

 

 

     

 

 

  

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.

 

6

 

 

At September 30, 2013, 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

    $ 93,180,704      $ 5,629,374      $ —       $ 98,810,078   

Consumer Staples

      83,514,770        —        —         83,514,770   

Energy

      93,009,469        —        —         93,009,469   

Financials

      135,508,323        —        —         135,508,323   

Health Care

      101,753,594        7,743,207        —         109,496,801   

Industrials

      88,754,756        —        —         88,754,756   

Information Technology

      152,887,503        —        —         152,887,503   

Materials

      31,290,864        —        —         31,290,864   

Telecommunication Services

      16,836,221        —        —         16,836,221   

Utilities

      21,825,778        —        —         21,825,778   

Total Common Stocks

    $ 818,561,982      $ 13,372,581 *    $ —       $ 831,934,563   

Put Options Purchased

    $ 1,226,662      $ 2,366,907      $ —       $ 3,593,569   

Total Investments

    $     819,788,644      $     15,739,488      $     —       $     835,528,132   
Liability Description                              

Call Options Written

    $ (982,830 )    $ (1,224,517 )    $     —       $ (2,207,347 ) 

Forward Foreign Currency Exchange Contracts

      —        (36,448 )      —         (36,448 ) 

Total

    $     (982,830 )    $     (1,260,965 )    $ —       $     (2,243,795 ) 

 

* 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 December 31, 2012 whose fair value was determined using Level 3 inputs. At September 30, 2013, 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.

 

7

 

 

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 Risk-Managed Diversified Equity Income Fund

 

By:   /s/ Walter A. Row, III
  Walter A. Row, III
  President
Date:   November 25, 2013

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:   November 25, 2013

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   November 25, 2013