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, 2015

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Managed Diversified Equity Income Fund

July 31, 2015

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 99.6%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 1.6%

      

United Technologies Corp.

      308,564       $ 30,952,055   
     

 

 

  
      $ 30,952,055   
     

 

 

  

Banks — 5.2%

      

Bank of America Corp.

      996,405       $ 17,815,721   

JPMorgan Chase & Co.

      800,836         54,881,291   

PNC Financial Services Group, Inc. (The)

      251,376         24,680,096   
     

 

 

  
      $ 97,377,108   
     

 

 

  

Beverages — 1.6%

      

Constellation Brands, Inc., Class A

      246,160       $ 29,544,123   
     

 

 

  
      $ 29,544,123   
     

 

 

  

Biotechnology — 3.4%

      

Celgene Corp.(1)

      281,428       $ 36,937,425   

Gilead Sciences, Inc.

      223,930         26,392,390   
     

 

 

  
      $ 63,329,815   
     

 

 

  

Capital Markets — 2.1%

      

Credit Suisse Group AG(1)

      1,345,881       $ 39,704,534   
     

 

 

  
      $ 39,704,534   
     

 

 

  

Chemicals — 1.9%

      

Monsanto Co.

      229,493       $ 23,383,042   

Praxair, Inc.

      106,690         12,177,596   
     

 

 

  
      $ 35,560,638   
     

 

 

  

Communications Equipment — 1.5%

      

QUALCOMM, Inc.

      454,475       $ 29,263,645   
     

 

 

  
      $ 29,263,645   
     

 

 

  

Consumer Finance — 1.2%

      

American Express Co.

      310,991       $ 23,653,975   
     

 

 

  
      $ 23,653,975   
     

 

 

  

Diversified Telecommunication Services — 1.3%

      

Verizon Communications, Inc.

      186,164       $ 8,710,613   

Zayo Group Holdings, Inc.(1)

      592,517         15,820,204   
     

 

 

  
      $ 24,530,817   
     

 

 

  

Electric Utilities — 1.5%

      

NextEra Energy, Inc.

      261,167       $ 27,474,768   
     

 

 

  
      $ 27,474,768   
     

 

 

  

Electrical Equipment — 0.4%

      

Generac Holdings, Inc.(1)

      229,502       $ 8,048,635   
     

 

 

  
      $ 8,048,635   
     

 

 

  

Electronic Equipment, Instruments & Components — 2.4%

      

Corning, Inc.

      2,387,653       $ 44,601,358   
     

 

 

  
      $ 44,601,358   
     

 

 

  

Food & Staples Retailing — 2.8%

      

CVS Health Corp.

      476,673       $ 53,611,412   
     

 

 

  
      $ 53,611,412   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Food Products — 3.5%

      

General Mills, Inc.

      555,236       $ 32,320,288   

Mondelez International, Inc., Class A

      731,786         33,025,502   
     

 

 

  
      $ 65,345,790   
     

 

 

  

Health Care Equipment & Supplies — 4.2%

      

Abbott Laboratories

      790,657       $ 40,078,403   

Medtronic PLC

      496,699         38,936,235   
     

 

 

  
      $ 79,014,638   
     

 

 

  

Health Care Technology — 1.5%

      

Cerner Corp.(1)

      386,754       $ 27,737,997   
     

 

 

  
      $ 27,737,997   
     

 

 

  

Industrial Conglomerates — 6.6%

      

Danaher Corp.

      374,628       $ 34,300,940   

General Electric Co.

      2,369,853         61,853,163   

Roper Technologies, Inc.

      175,222         29,309,384   
     

 

 

  
      $ 125,463,487   
     

 

 

  

Insurance — 2.8%

      

Aflac, Inc.

      445,716       $ 28,548,110   

XL Group PLC

      652,833         24,820,711   
     

 

 

  
      $ 53,368,821   
     

 

 

  

Internet & Catalog Retail — 3.1%

      

Amazon.com, Inc.(1)

      110,141       $ 59,052,097   
     

 

 

  
      $ 59,052,097   
     

 

 

  

Internet Software & Services — 5.6%

      

Facebook, Inc., Class A(1)

      207,011       $ 19,461,104   

Google, Inc., Class C(1)

      114,307         71,511,602   

Twitter, Inc.(1)

      481,271         14,924,214   
     

 

 

  
      $ 105,896,920   
     

 

 

  

IT Services — 2.9%

      

Visa, Inc., Class A

      733,837       $ 55,287,280   
     

 

 

  
      $ 55,287,280   
     

 

 

  

Machinery — 1.6%

      

Deere & Co.

      310,355       $ 29,350,272   
     

 

 

  
      $ 29,350,272   
     

 

 

  

Media — 5.5%

      

Comcast Corp., Class A

      574,202       $ 35,835,947   

Live Nation Entertainment, Inc.(1)

      844,040         22,130,729   

Walt Disney Co. (The)

      388,361         46,603,320   
     

 

 

  
      $ 104,569,996   
     

 

 

  

Multi-Utilities — 1.3%

      

Sempra Energy

      247,528       $ 25,193,400   
     

 

 

  
      $ 25,193,400   
     

 

 

  

Multiline Retail — 2.3%

      

Dollar General Corp.

      529,783       $ 42,578,660   
     

 

 

  
      $ 42,578,660   
     

 

 

  

Oil, Gas & Consumable Fuels — 6.0%

      

Anadarko Petroleum Corp.

      219,373       $ 16,310,382   

Devon Energy Corp.

      471,873         23,319,964   

Exxon Mobil Corp.

      533,004         42,219,247   

Occidental Petroleum Corp.

      439,261         30,836,122   
     

 

 

  
      $ 112,685,715   
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Pharmaceuticals — 7.2%

      

Bristol-Myers Squibb Co.

      279,566       $ 18,350,712   

Eli Lilly & Co.

      318,680         26,931,647   

Merck & Co., Inc.

      582,635         34,352,160   

Perrigo Co. PLC

      179,340         34,469,148   

Teva Pharmaceutical Industries, Ltd. ADR

      311,224         21,480,680   
     

 

 

  
      $ 135,584,347   
     

 

 

  

Real Estate Investment Trusts (REITs) — 2.3%

      

Simon Property Group, Inc.

      230,303       $ 43,117,328   
     

 

 

  
      $ 43,117,328   
     

 

 

  

Semiconductors & Semiconductor Equipment — 2.7%

      

NXP Semiconductors NV(1)

      409,926       $ 39,758,723   

Qorvo, Inc.(1)

      195,561         11,332,760   
     

 

 

  
      $ 51,091,483   
     

 

 

  

Software — 4.6%

      

Microsoft Corp.

      685,996       $ 32,036,013   

Oracle Corp.

      1,369,844         54,711,570   
     

 

 

  
      $ 86,747,583   
     

 

 

  

Technology Hardware, Storage & Peripherals — 3.5%

      

Apple, Inc.

      537,435       $ 65,190,866   
     

 

 

  
      $ 65,190,866   
     

 

 

  

Textiles, Apparel & Luxury Goods — 2.0%

      

NIKE, Inc., Class B

      329,377       $ 37,950,818   
     

 

 

  
      $ 37,950,818   
     

 

 

  

Tobacco — 2.1%

      

Altria Group, Inc.

      735,938       $ 40,020,308   
     

 

 

  
      $ 40,020,308   
     

 

 

  

Wireless Telecommunication Services — 1.4%

      

Vodafone Group PLC

      7,101,722       $ 26,901,298   
     

 

 

  
      $ 26,901,298   
     

 

 

  

Total Common Stocks
(identified cost $1,720,938,812)

       $ 1,879,801,987   
     

 

 

  

Short-Term Investments — 0.4%

      
Description    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.20%(2)

    $ 7,216       $ 7,215,841   
     

 

 

  

Total Short-Term Investments
(identified cost $7,215,841)

       $ 7,215,841   
     

 

 

  

Total Investments — 100.0%
(identified cost $1,728,154,653)

       $ 1,887,017,828   
     

 

 

  

Call Options Written — (0.2)%

      

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      1,045       $ 2,110         8/7/15       $ (851,675 ) 

S&P 500 Index

      1,045         2,140         8/14/15         (198,550 ) 

 

3

 

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      1,070       $ 2,120         8/21/15       $ (1,150,250 ) 

S&P 500 Index

      1,060         2,120         8/28/15         (1,521,100 ) 
           

 

 

  

Total Call Options Written
(premiums received $5,291,685)

             $ (3,721,575 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.2%

             $ 2,802,628   
           

 

 

  

Net Assets — 100.0%

             $ 1,886,098,881   
           

 

 

  

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

 

ADR

   -   American Depositary Receipt

 

(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, 2015. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended July 31, 2015 was $13,700.

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

 

Aggregate cost

    $     1,728,525,564   
  

 

 

  

Gross unrealized appreciation

    $ 228,110,478   

Gross unrealized depreciation

      (69,618,214 ) 
  

 

 

  

Net unrealized appreciation

    $ 158,492,264   
  

 

 

  

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

 

     Number of
Contracts		      Premiums
Received		  

Outstanding, beginning of period

      4,300       $ 6,137,586   

Options written

      41,150         52,994,846   

Options terminated in closing purchase transactions

      (19,365 )       (26,864,841 ) 

Options expired

      (21,865 )       (26,975,906 ) 
  

 

 

     

 

 

  

Outstanding, end of period

      4,220       $     5,291,685   
  

 

 

     

 

 

  

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At July 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 July 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 $3,721,575.

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 July 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            

Consumer Discretionary

    $ 244,151,571       $ —       $ —       $ 244,151,571   

Consumer Staples

      188,521,633         —         —         188,521,633   

Energy

      112,685,715         —         —         112,685,715   

Financials

      217,517,232         39,704,534         —         257,221,766   

Health Care

      305,666,797         —         —         305,666,797   

Industrials

      193,814,449         —         —         193,814,449   

Information Technology

      438,079,135         —         —         438,079,135   

Materials

      35,560,638         —         —         35,560,638   

Telecommunication Services

      24,530,817         26,901,298         —         51,432,115   

Utilities

      52,668,168         —         —         52,668,168   

Total Common Stocks

    $     1,813,196,155       $     66,605,832 *     $ —       $     1,879,801,987   

Short-Term Investments

    $ —       $ 7,215,841       $ —       $ 7,215,841   

Total Investments

    $ 1,813,196,155       $ 73,821,673       $ —       $ 1,887,017,828   
Liability Description                                

Call Options Written

    $ (3,721,575 )     $ —       $ —       $ (3,721,575 ) 

Total

    $     (3,721,575 )     $ —       $ —       $ (3,721,575 ) 

 

* 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, 2014 whose fair value was determined using Level 3 inputs. At July 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/ Michael A. Allison
  Michael A. Allison
  President
Date:   September 21, 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/ Michael A. Allison
  Michael A. Allison
  President
Date:   September 21, 2015

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   September 21, 2015