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, 2017

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Managed Diversified Equity Income Fund

January 31, 2017

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 98.3%

 

                                                 
Security    Shares      Value  

Air Freight & Logistics — 1.8%

      

C.H. Robinson Worldwide, Inc.

      410,504      $ 31,222,934  
     

 

 

  
      $ 31,222,934  
     

 

 

  

Auto Components — 1.6%

      

Delphi Automotive PLC

      145,160      $ 10,169,909  

Goodyear Tire & Rubber Co. (The)

      556,315        18,019,043  
     

 

 

  
      $ 28,188,952  
     

 

 

  

Banks — 5.9%

      

JPMorgan Chase & Co.

      691,404      $ 58,513,520  

PNC Financial Services Group, Inc. (The)

      278,249        33,517,875  

Wells Fargo & Co.

      167,673        9,445,020  
     

 

 

  
      $ 101,476,415  
     

 

 

  

Beverages — 2.3%

      

Constellation Brands, Inc., Class A

      127,340      $ 19,070,438  

PepsiCo, Inc.

      206,248        21,404,418  
     

 

 

  
      $ 40,474,856  
     

 

 

  

Biotechnology — 1.9%

      

Celgene Corp.(1)

      287,934      $ 33,443,534  
     

 

 

  
      $ 33,443,534  
     

 

 

  

Capital Markets — 4.4%

      

Charles Schwab Corp. (The)

      1,005,314      $ 41,459,150  

Goldman Sachs Group, Inc. (The)

      151,782        34,806,648  
     

 

 

  
      $ 76,265,798  
     

 

 

  

Chemicals — 1.3%

      

PPG Industries, Inc.

      220,631      $ 22,065,306  
     

 

 

  
      $ 22,065,306  
     

 

 

  

Communications Equipment — 1.8%

      

Cisco Systems, Inc.

      996,269      $ 30,605,384  
     

 

 

  
      $ 30,605,384  
     

 

 

  

Containers & Packaging — 1.4%

      

International Paper Co.

      436,207      $ 24,689,316  
     

 

 

  
      $ 24,689,316  
     

 

 

  

Distributors — 1.4%

      

LKQ Corp.(1)

      762,413      $ 24,328,599  
     

 

 

  
      $ 24,328,599  
     

 

 

  

Diversified Telecommunication Services — 2.4%

      

Verizon Communications, Inc.

      600,646      $ 29,437,660  

Zayo Group Holdings, Inc.(1)

      381,979        12,208,049  
     

 

 

  
      $ 41,645,709  
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Electric Utilities — 1.6%

      

NextEra Energy, Inc.

      223,744      $ 27,681,608  
     

 

 

  
      $ 27,681,608  
     

 

 

  

Energy Equipment & Services — 2.2%

      

Oceaneering International, Inc.

      499,456      $ 13,909,850  

Schlumberger, Ltd.

      284,947        23,852,913  
     

 

 

  
      $ 37,762,763  
     

 

 

  

Equity Real Estate Investment Trusts (REITs) — 2.6%

      

Equity Residential

      300,413      $ 18,256,098  

Federal Realty Investment Trust

      189,410        26,598,846  
     

 

 

  
      $ 44,854,944  
     

 

 

  

Food Products — 1.4%

      

General Mills, Inc.

      392,192      $ 24,504,156  
     

 

 

  
      $ 24,504,156  
     

 

 

  

Health Care Equipment & Supplies — 3.4%

      

Danaher Corp.

      472,450      $ 39,648,004  

Zimmer Biomet Holdings, Inc.

      166,938        19,753,774  
     

 

 

  
      $ 59,401,778  
     

 

 

  

Household Durables — 1.7%

      

Newell Brands, Inc.

      220,289      $ 10,426,278  

Whirlpool Corp.

      106,842        18,685,598  
     

 

 

  
      $ 29,111,876  
     

 

 

  

Industrial Conglomerates — 3.0%

      

General Electric Co.

      1,749,942      $ 51,973,277  
     

 

 

  
      $ 51,973,277  
     

 

 

  

Insurance — 3.3%

      

American Financial Group, Inc.

      294,977      $ 25,418,168  

Chubb, Ltd.

      240,411        31,611,642  
     

 

 

  
      $ 57,029,810  
     

 

 

  

Internet & Direct Marketing Retail — 3.7%

      

Amazon.com, Inc.(1)

      76,888      $ 63,315,730  
     

 

 

  
      $ 63,315,730  
     

 

 

  

Internet Software & Services — 6.0%

      

Alphabet, Inc., Class C(1)

      96,167      $ 76,624,904  

Facebook, Inc., Class A(1)

      61,746        8,046,738  

GoDaddy, Inc., Class A(1)

      508,634        18,173,493  
     

 

 

  
      $ 102,845,135  
     

 

 

  

IT Services — 2.9%

      

Visa, Inc., Class A

      601,997      $ 49,791,172  
     

 

 

  
      $ 49,791,172  
     

 

 

  

Machinery — 3.7%

      

Caterpillar, Inc.

      253,777      $ 24,276,308  

Fortive Corp.

      702,987        38,882,211  
     

 

 

  
      $ 63,158,519  
     

 

 

  

Multi-Utilities — 1.6%

      

Sempra Energy

      274,891      $ 28,146,090  
     

 

 

  
      $ 28,146,090  
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Oil, Gas & Consumable Fuels — 5.1%

      

Chevron Corp.

      318,104      $ 35,420,881  

ConocoPhillips

      455,440        22,207,254  

EOG Resources, Inc.

      290,966        29,556,326  
     

 

 

  
      $ 87,184,461  
     

 

 

  

Personal Products — 1.6%

      

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

      341,605      $ 27,741,742  
     

 

 

  
      $ 27,741,742  
     

 

 

  

Pharmaceuticals — 7.8%

      

Eli Lilly & Co.

      306,145      $ 23,582,349  

Johnson & Johnson

      497,084        56,294,763  

Pfizer, Inc.

      1,061,293        33,674,827  

Zoetis, Inc.

      381,401        20,954,171  
     

 

 

  
      $ 134,506,110  
     

 

 

  

Road & Rail — 1.3%

      

CSX Corp.

      466,559      $ 21,643,672  
     

 

 

  
      $ 21,643,672  
     

 

 

  

Semiconductors & Semiconductor Equipment — 3.3%

      

Intel Corp.

      1,094,863      $ 40,312,856  

NXP Semiconductors NV(1)

      173,696        16,996,153  
     

 

 

  
      $ 57,309,009  
     

 

 

  

Software — 3.9%

      

Microsoft Corp.

      1,046,150      $ 67,633,598  
     

 

 

  
      $ 67,633,598  
     

 

 

  

Specialty Retail — 2.8%

      

Home Depot, Inc. (The)

      344,914      $ 47,453,268  
     

 

 

  
      $ 47,453,268  
     

 

 

  

Technology Hardware, Storage & Peripherals — 4.5%

      

Apple, Inc.

      632,020      $ 76,695,627  
     

 

 

  
      $ 76,695,627  
     

 

 

  

Textiles, Apparel & Luxury Goods — 1.5%

      

NIKE, Inc., Class B

      473,615      $ 25,054,234  
     

 

 

  
      $ 25,054,234  
     

 

 

  

Tobacco — 3.2%

      

Altria Group, Inc.

      780,614      $ 55,564,105  
     

 

 

  
      $ 55,564,105  
     

 

 

  

Total Common Stocks
(identified cost $1,411,028,404)

       $ 1,694,769,487  
     

 

 

  

Short-Term Investments — 1.9%

      
Description    Units      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.90%(2)

      32,812,552      $ 32,815,833  
     

 

 

  

Total Short-Term Investments
(identified cost $32,815,833)

       $ 32,815,833  
     

 

 

  

 

3

 

 

                        
      Value  

Total Investments — 100.2%
(identified cost $1,443,844,237)

    $ 1,727,585,320  
  

 

 

  

Call Options Written — (0.3)%

   

Exchanged-Traded Options — (0.3)%

   

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      300      $ 2,275        2/1/17      $ (216,000 ) 

S&P 500 Index

      300        2,275        2/3/17        (307,500 ) 

S&P 500 Index

      300        2,280        2/6/17        (261,000 ) 

S&P 500 Index

      300        2,275        2/8/17        (415,500 ) 

S&P 500 Index

      300        2,280        2/10/17        (372,000 ) 

S&P 500 Index

      300        2,275        2/13/17        (489,000 ) 

S&P 500 Index

      300        2,280        2/15/17        (451,500 ) 

S&P 500 Index

      305        2,275        2/17/17        (588,650 ) 

S&P 500 Index

      300        2,270        2/21/17        (714,000 ) 

S&P 500 Index

      300        2,290        2/22/17        (393,000 ) 

S&P 500 Index

      300        2,300        2/24/17        (289,500 ) 

S&P 500 Index

      300        2,280        2/27/17        (600,000 ) 
           

 

 

  

Total Call Options Written
(premiums received $7,061,424)

             $ (5,097,650 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.1%

             $ 1,089,107  
           

 

 

  

Net Assets — 100.0%

             $ 1,723,576,777  
           

 

 

  

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, 2017. Net income from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended January 31, 2017 was $38,881.

Written options activity for the fiscal year to date ended January 31, 2017 was as follows:

 

     Number of
Contracts		      Premiums
Received		  
Outstanding, beginning of period      3,750      $ 6,370,521  
Options written      12,120        23,385,531  
Options terminated in closing purchase transactions      (7,950 )       (15,216,728 ) 
Options exercised      (1,260 )       (2,415,203 ) 
Options expired      (3,055 )       (5,062,697 ) 
  

 

 

     

 

 

  
Outstanding, end of period      3,605      $ 7,061,424  
  

 

 

     

 

 

  

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At January 31, 2017, the Fund had sufficient cash and/or securities to cover commitments under open derivative contracts.

 

4

 

 

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, 2017, 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 $5,097,650.

The cost and unrealized appreciation (depreciation) of investments of the Fund at January 31, 2017, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $     1,450,056,874  
  

 

 

  

Gross unrealized appreciation

    $ 283,452,886  

Gross unrealized depreciation

      (5,924,440 ) 
  

 

 

  

Net unrealized appreciation

    $ 277,528,446  
  

 

 

  

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.

At January 31, 2017, 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

    $ 1,694,769,487 *     $ —      $ —      $ 1,694,769,487  

Short-Term Investments

      —        32,815,833        —        32,815,833  

Total Investments

    $     1,694,769,487      $     32,815,833      $ —      $     1,727,585,320  
Liability Description                                

Call Options Written

    $ (5,097,650 )     $ —      $ —      $ (5,097,650 ) 

Total

    $ (5,097,650 )     $ —      $ —      $ (5,097,650 ) 

 

* 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, 2016 whose fair value was determined using Level 3 inputs. At January 31, 2017, 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/ Edward J. Perkin
  Edward J. Perkin
  President
Date:   March 24, 2017

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/ Edward J. Perkin
  Edward J. Perkin
  President
Date:   March 24, 2017

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   March 24, 2017