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, 2014

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Risk-Managed Diversified Equity Income Fund

September 30, 2014

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 100.3%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 1.4%

      

Boeing Co. (The)

      86,873       $ 11,065,883   
     

 

 

  
      $ 11,065,883   
     

 

 

  

Air Freight & Logistics — 2.0%

      

C.H. Robinson Worldwide, Inc.

      232,934       $ 15,448,183   
     

 

 

  
      $ 15,448,183   
     

 

 

  

Banks — 7.4%

      

Bank of America Corp.

      889,559       $ 15,166,981   

Citigroup, Inc.

      155,112         8,037,904   

JPMorgan Chase & Co.

      295,261         17,786,523   

PNC Financial Services Group, Inc.

      115,903         9,918,979   

SunTrust Banks, Inc.

      200,821         7,637,222   
     

 

 

  
      $ 58,547,609   
     

 

 

  

Beverages — 2.1%

      

Constellation Brands, Inc., Class A(1)

      185,136       $ 16,136,454   
     

 

 

  
      $ 16,136,454   
     

 

 

  

Biotechnology — 4.7%

      

Biogen Idec, Inc.(1)

      25,193       $ 8,334,096   

Celgene Corp.(1)

      130,390         12,358,364   

Gilead Sciences, Inc.(1)

      152,149         16,196,261   
     

 

 

  
      $ 36,888,721   
     

 

 

  

Chemicals — 2.0%

      

LyondellBasell Industries NV, Class A

      71,211       $ 7,737,787   

Monsanto Co.

      71,249         8,016,225   
     

 

 

  
      $ 15,754,012   
     

 

 

  

Communications Equipment — 2.5%

      

QUALCOMM, Inc.

      159,000       $ 11,888,430   

Telefonaktiebolaget LM Ericsson, Class B

      632,549         7,975,723   
     

 

 

  
      $ 19,864,153   
     

 

 

  

Consumer Finance — 3.6%

      

American Express Co.

      135,694       $ 11,878,653   

Discover Financial Services

      260,276         16,759,171   
     

 

 

  
      $ 28,637,824   
     

 

 

  

Diversified Telecommunication Services — 1.5%

      

Verizon Communications, Inc.

      239,000       $ 11,947,610   
     

 

 

  
      $ 11,947,610   
     

 

 

  

Electric Utilities — 1.5%

      

NextEra Energy, Inc.

      124,252       $ 11,664,778   
     

 

 

  
      $ 11,664,778   
     

 

 

  

Electrical Equipment — 3.5%

      

Emerson Electric Co.

      210,973       $ 13,202,690   

Rockwell Automation, Inc.

      132,588         14,568,770   
     

 

 

  
      $ 27,771,460   
     

 

 

  

Electronic Equipment, Instruments & Components — 2.5%

      

Corning, Inc.

      1,009,546       $ 19,524,620   
     

 

 

  
      $ 19,524,620   
     

 

 

  

Energy Equipment & Services — 0.9%

      

FMC Technologies, Inc.(1)

      134,035       $ 7,279,441   
     

 

 

  
      $ 7,279,441   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Food & Staples Retailing — 2.1%

      

Costco Wholesale Corp.

      133,872       $ 16,776,839   
     

 

 

  
      $ 16,776,839   
     

 

 

  

Food Products — 2.5%

      

Hershey Co. (The)

      87,594       $ 8,359,095   

Mondelez International, Inc., Class A

      336,819         11,541,103   
     

 

 

  
      $ 19,900,198   
     

 

 

  

Health Care Equipment & Supplies — 2.5%

      

Abbott Laboratories

      273,662       $ 11,381,603   

Covidien PLC

      91,791         7,940,839   
     

 

 

  
      $ 19,322,442   
     

 

 

  

Health Care Technology — 1.4%

      

Cerner Corp.(1)

      186,359       $ 11,101,406   
     

 

 

  
      $ 11,101,406   
     

 

 

  

Household Durables — 1.0%

      

Mohawk Industries, Inc.(1)

      55,060       $ 7,423,189   
     

 

 

  
      $ 7,423,189   
     

 

 

  

Industrial Conglomerates — 1.6%

      

Danaher Corp.

      161,573       $ 12,276,316   
     

 

 

  
      $ 12,276,316   
     

 

 

  

Insurance — 4.0%

      

ACE, Ltd.

      112,948       $ 11,844,857   

Aflac, Inc.

      204,957         11,938,745   

MetLife, Inc.

      147,374         7,916,931   
     

 

 

  
      $ 31,700,533   
     

 

 

  

Internet & Catalog Retail — 2.5%

      

Amazon.com, Inc.(1)

      60,447       $ 19,490,531   
     

 

 

  
      $ 19,490,531   
     

 

 

  

Internet Software & Services — 7.2%

      

Facebook, Inc., Class A(1)

      129,000       $ 10,196,160   

Google, Inc., Class C(1)

      66,598         38,451,021   

IAC/InterActiveCorp

      115,000         7,578,500   
     

 

 

  
      $ 56,225,681   
     

 

 

  

IT Services — 1.5%

      

Visa, Inc., Class A

      55,170       $ 11,771,623   
     

 

 

  
      $ 11,771,623   
     

 

 

  

Machinery — 1.9%

      

Caterpillar, Inc.

      151,253       $ 14,978,585   
     

 

 

  
      $ 14,978,585   
     

 

 

  

Media — 3.3%

      

Live Nation Entertainment, Inc.(1)

      369,764       $ 8,881,731   

Walt Disney Co. (The)

      191,418         17,041,945   
     

 

 

  
      $ 25,923,676   
     

 

 

  

Multi-Utilities — 1.6%

      

Sempra Energy

      120,500       $ 12,698,290   
     

 

 

  
      $ 12,698,290   
     

 

 

  

Multiline Retail — 2.4%

      

Dollar General Corp.(1)

      124,000       $ 7,577,640   

Macy’s, Inc.

      195,626         11,381,521   
     

 

 

  
      $ 18,959,161   
     

 

 

  

Oil, Gas & Consumable Fuels — 8.3%

      

Anadarko Petroleum Corp.

      150,382       $ 15,254,750   

Chevron Corp.

      122,102         14,569,211   

 

2

 

 

                                                                                                   
Security                    Shares      Value  

Devon Energy Corp.

            207,643       $ 14,157,100   

Occidental Petroleum Corp.

            136,964         13,169,089   

Range Resources Corp.

            120,955         8,201,958   
           

 

 

  
            $ 65,352,108   
           

 

 

  

Pharmaceuticals — 5.4%

            

Johnson & Johnson

            76,271       $ 8,129,726   

Merck & Co., Inc.

            352,519         20,897,326   

Perrigo Co. PLC

            50,000         7,509,500   

Roche Holding AG PC

            20,692         6,110,408   
           

 

 

  
            $ 42,646,960   
           

 

 

  

Real Estate Investment Trusts (REITs) — 2.0%

            

Simon Property Group, Inc.

            96,148       $ 15,808,654   
           

 

 

  
            $ 15,808,654   
           

 

 

  

Semiconductors & Semiconductor Equipment — 1.5%

  

         

NXP Semiconductors NV(1)

            166,944       $ 11,423,978   
           

 

 

  
            $ 11,423,978   
           

 

 

  

Software — 2.1%

            

Microsoft Corp.

            357,000       $ 16,550,520   
           

 

 

  
            $ 16,550,520   
           

 

 

  

Specialty Retail — 1.0%

            

TJX Cos., Inc. (The)

            136,672       $ 8,086,882   
           

 

 

  
            $ 8,086,882   
           

 

 

  

Technology Hardware, Storage & Peripherals — 3.9%

  

         

Apple, Inc.

            307,000       $ 30,930,250   
           

 

 

  
            $ 30,930,250   
           

 

 

  

Textiles, Apparel & Luxury Goods — 1.7%

            

NIKE, Inc., Class B

            151,675       $ 13,529,410   
           

 

 

  
            $ 13,529,410   
           

 

 

  

Tobacco — 2.6%

            

Altria Group, Inc.

            445,380       $ 20,460,757   
           

 

 

  
            $ 20,460,757   
           

 

 

  

Wireless Telecommunication Services — 0.7%

            

T-Mobile US, Inc.(1)

            195,000       $ 5,629,650   
           

 

 

  
            $ 5,629,650   
           

 

 

  

Total Common Stocks
(identified cost $586,897,275)

             $ 789,498,387   
           

 

 

  

Put Options Purchased — 0.4%

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      315       $ 1,945         10/3/14       $ 144,900   

S&P 500 Index

      317         1,930         10/10/14         259,940   

S&P 500 Index

      315         1,955         10/18/14         568,575   

S&P 500 Index

      313         1,900         10/24/14         333,345   

S&P 500 Index FLEX

      323         1,940         10/1/14         1,633   

S&P 500 Index FLEX

      316         1,940         10/6/14         109,188   

S&P 500 Index FLEX

      317         1,925         10/8/14         107,060   

S&P 500 Index FLEX

      316         1,910         10/13/14         149,981   

S&P 500 Index FLEX

      316         1,955         10/15/14         425,874   

S&P 500 Index FLEX

      317         1,925         10/20/14         329,314   

 

3

 

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index FLEX

      315       $ 1,930         10/22/14       $ 387,875   

S&P 500 Index FLEX

      318         1,900         10/27/14         329,237   
           

 

 

  

Total Put Options Purchased
(identified cost $3,486,484)

             $ 3,146,922   
           

 

 

  

Short-Term Investments — 0.2%

            
Description                    Interest
(000’s omitted)		      Value  

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

          $ 1,804       $ 1,804,258   
           

 

 

  

Total Short-Term Investments
(identified cost $1,804,258)

             $ 1,804,258   
           

 

 

  

Total Investments — 100.9%
(identified cost $592,188,017)

             $ 794,449,567   
           

 

 

  

Call Options Written — (0.2)%

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      315       $ 2,025         10/3/14       $ (3,150 ) 

S&P 500 Index

      317         2,015         10/10/14         (61,815 ) 

S&P 500 Index

      315         2,030         10/18/14         (55,913 ) 

S&P 500 Index

      313         2,000         10/24/14         (381,860 ) 

S&P 500 Index FLEX

      323         2,025         10/1/14         (1 ) 

S&P 500 Index FLEX

      316         2,026         10/6/14         (14,994 ) 

S&P 500 Index FLEX

      317         2,012         10/8/14         (75,927 ) 

S&P 500 Index FLEX

      316         2,012         10/13/14         (150,394 ) 

S&P 500 Index FLEX

      316         2,031         10/15/14         (72,822 ) 

S&P 500 Index FLEX

      317         2,015         10/20/14         (221,591 ) 

S&P 500 Index FLEX

      315         2,016         10/22/14         (236,880 ) 

S&P 500 Index FLEX

      318         2,007         10/27/14         (394,736 ) 
           

 

 

  

Total Call Options Written
(premiums received $3,625,681)

             $ (1,670,083 ) 
           

 

 

  

Other Assets, Less Liabilities — (0.7)%

             $ (5,516,950 ) 
           

 

 

  

Net Assets — 100.0%

             $ 787,262,534   
           

 

 

  

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

 

FLEX

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

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 September 30, 2014. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended September 30, 2014 was $7,540.

 

4

 

 

The cost and unrealized appreciation (depreciation) of investments of the Fund at September 30, 2014, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $ 592,701,782   
  

 

 

  

Gross unrealized appreciation

    $ 208,310,589   

Gross unrealized depreciation

      (6,562,804 ) 
  

 

 

  

Net unrealized appreciation

    $     201,747,785   
  

 

 

  

Written options activity for the fiscal year to date ended September 30, 2014 was as follows:

 

     Number of
Contracts		     Premiums
Received		  
Outstanding, beginning of period      4,408      $ 3,738,388   
Options written      39,262        35,893,543   
Options terminated in closing purchase transactions      (17,674 )      (16,767,824 ) 
Options expired      (22,198 )      (19,238,426 ) 
  

 

 

    

 

 

  
Outstanding, end of period      3,798      $ 3,625,681   
  

 

 

    

 

 

  

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At September 30, 2014, 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, 2014 was as follows:

 

          Fair Value  

Risk

   

Derivative

    Asset
Derivative		      Liability
Derivative		  
Equity Price    Purchased options    $ 3,146,922       $ —   

Equity Price

   

Written options

      —         (1,670,083 ) 
     

 

 

     

 

 

  

Total

       $     3,146,922       $     (1,670,083 ) 
     

 

 

     

 

 

  

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 September 30, 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

    $ 93,412,849      $ —      $ —       $ 93,412,849   

Consumer Staples

      73,274,248        —        —         73,274,248   

Energy

      72,631,548        —        —         72,631,548   

Financials

      134,694,621        —        —         134,694,621   

Health Care

      103,849,121        6,110,408        —         109,959,529   

Industrials

      81,540,427        —        —         81,540,427   

Information Technology

      158,315,102        7,975,723        —         166,290,825   

Materials

      15,754,012        —        —         15,754,012   

Telecommunication Services

      17,577,260        —        —         17,577,260   

Utilities

      24,363,068        —        —         24,363,068   

Total Common Stocks

    $ 775,412,256      $ 14,086,131 *    $ —       $ 789,498,387   

Put Options Purchased

    $ 1,306,760      $ 1,840,162      $ —       $ 3,146,922   

Short-Term Investments

      —        1,804,258        —         1,804,258   

Total Investments

    $     776,719,016      $     17,730,551      $     —       $     794,449,567   
Liability Description                              

Call Options Written

    $ (502,738 )    $ (1,167,345 )    $ —       $ (1,670,083 ) 

Total

    $ (502,738 )    $ (1,167,345 )    $ —       $ (1,670,083 ) 

 

* 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, 2013 whose fair value was determined using Level 3 inputs. At September 30, 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 Risk-Managed Diversified Equity Income Fund

 

By:   /s/ Walter A. Row, III
  Walter A. Row, III
  President
Date:   November 24, 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:   November 24, 2014

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   November 24, 2014