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, 2018

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Managed Diversified Equity Income Fund

July 31, 2018

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 99.3%

 

                                                 
Security    Shares      Value  

Air Freight & Logistics — 2.1%

      

FedEx Corp.(1)

      161,848      $ 39,793,568  
     

 

 

  
      $ 39,793,568  
     

 

 

  

Auto Components — 2.1%

      

Aptiv PLC(1)

      409,184      $ 40,128,675  
     

 

 

  
      $ 40,128,675  
     

 

 

  

Banks — 7.8%

      

Bank of America Corp.(1)

      1,784,879      $ 55,117,064  

First Republic Bank

      212,197        20,977,795  

JPMorgan Chase & Co.(1)

      606,435        69,709,703  
     

 

 

  
      $ 145,804,562  
     

 

 

  

Beverages — 3.9%

      

Constellation Brands, Inc., Class A(1)

      146,832      $ 30,868,491  

PepsiCo, Inc.(1)

      362,063        41,637,245  
     

 

 

  
      $ 72,505,736  
     

 

 

  

Biotechnology — 3.1%

      

Gilead Sciences, Inc.(1)

      408,092      $ 31,761,801  

Vertex Pharmaceuticals, Inc.(2)

      156,386        27,375,369  
     

 

 

  
      $ 59,137,170  
     

 

 

  

Capital Markets — 1.9%

      

Charles Schwab Corp. (The)(1)

      682,341      $ 34,840,331  
     

 

 

  
      $ 34,840,331  
     

 

 

  

Chemicals — 1.2%

      

DowDuPont, Inc.

      318,640      $ 21,912,873  
     

 

 

  
      $ 21,912,873  
     

 

 

  

Consumer Finance — 1.3%

      

American Express Co.

      242,240      $ 24,107,725  
     

 

 

  
      $ 24,107,725  
     

 

 

  

Containers & Packaging — 1.2%

      

Ball Corp.

      574,602      $ 22,392,240  
     

 

 

  
      $ 22,392,240  
     

 

 

  

Diversified Telecommunication Services — 4.0%

      

Verizon Communications, Inc.(1)

      893,791      $ 46,155,367  

Zayo Group Holdings, Inc.(2)

      792,681        29,400,539  
     

 

 

  
      $ 75,555,906  
     

 

 

  

Electric Utilities — 1.5%

      

NextEra Energy, Inc.(1)

      170,184      $ 28,512,627  
     

 

 

  
      $ 28,512,627  
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Electronic Equipment, Instruments & Components — 2.1%

      

Corning, Inc.(1)

      1,197,362      $ 39,728,471  
     

 

 

  
      $ 39,728,471  
     

 

 

  

Equity Real Estate Investment Trusts (REITs) — 2.9%

      

American Tower Corp.(1)

      256,045      $ 37,956,111  

AvalonBay Communities, Inc.

      93,993        16,622,662  
     

 

 

  
      $ 54,578,773  
     

 

 

  

Food Products — 1.8%

      

Mondelez International, Inc., Class A

      781,290      $ 33,892,360  
     

 

 

  
      $ 33,892,360  
     

 

 

  

Health Care Equipment & Supplies — 3.9%

      

Abbott Laboratories

      434,367      $ 28,468,413  

Danaher Corp.(1)

      445,187        45,667,283  
     

 

 

  
      $ 74,135,696  
     

 

 

  

Health Care Providers & Services — 1.2%

      

Aetna, Inc.

      120,994      $ 22,794,060  
     

 

 

  
      $ 22,794,060  
     

 

 

  

Insurance — 2.7%

      

American Financial Group, Inc.

      248,252      $ 27,975,518  

American International Group, Inc.

      400,459        22,109,341  
     

 

 

  
      $ 50,084,859  
     

 

 

  

Internet & Direct Marketing Retail — 3.3%

      

Amazon.com, Inc.(1)(2)

      35,122      $ 62,427,248  
     

 

 

  
      $ 62,427,248  
     

 

 

  

Internet Software & Services — 7.8%

      

Akamai Technologies, Inc.(2)

      374,739      $ 28,202,857  

Alphabet, Inc., Class C(1)(2)

      52,301        63,663,915  

Facebook, Inc., Class A(2)

      44,962        7,759,542  

GoDaddy, Inc., Class A(1)(2)

      380,145        27,986,275  

Spotify Technology SA(2)

      100,909        18,449,193  
     

 

 

  
      $ 146,061,782  
     

 

 

  

IT Services — 2.7%

      

Visa, Inc., Class A(1)

      377,231      $ 51,582,567  
     

 

 

  
      $ 51,582,567  
     

 

 

  

Machinery — 5.0%

      

Atlas Copco AB, Class A

      418,044      $ 11,971,278  

Caterpillar, Inc.(1)

      288,488        41,484,574  

Fortive Corp.(1)

      503,312        41,311,849  
     

 

 

  
      $ 94,767,701  
     

 

 

  

Media — 3.9%

      

Live Nation Entertainment, Inc.(2)

      600,557      $ 29,595,449  

Walt Disney Co. (The)(1)

      378,383        42,969,173  
     

 

 

  
      $ 72,564,622  
     

 

 

  

Multi-Utilities — 1.3%

      

Sempra Energy

      214,158      $ 24,754,523  
     

 

 

  
      $ 24,754,523  
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Oil, Gas & Consumable Fuels — 6.4%

      

ConocoPhillips

      381,789      $ 27,553,712  

EOG Resources, Inc.

      212,623        27,415,610  

Exxon Mobil Corp.(1)

      560,930        45,721,404  

Phillips 66

      165,887        20,460,503  
     

 

 

  
      $ 121,151,229  
     

 

 

  

Pharmaceuticals — 4.9%

      

Johnson & Johnson(1)

      461,137      $ 61,109,875  

Zoetis, Inc.(1)

      354,439        30,651,885  
     

 

 

  
      $ 91,761,760  
     

 

 

  

Road & Rail — 2.0%

      

CSX Corp.(1)

      537,625      $ 37,999,335  
     

 

 

  
      $ 37,999,335  
     

 

 

  

Semiconductors & Semiconductor Equipment — 1.9%

      

QUALCOMM, Inc.(1)

      569,476      $ 36,497,717  
     

 

 

  
      $ 36,497,717  
     

 

 

  

Software — 5.5%

      

Microsoft Corp.(1)

      965,731      $ 102,444,744  
     

 

 

  
      $ 102,444,744  
     

 

 

  

Specialty Retail — 3.0%

      

Home Depot, Inc. (The)(1)

      282,966      $ 55,891,444  
     

 

 

  
      $ 55,891,444  
     

 

 

  

Technology Hardware, Storage & Peripherals — 5.5%

      

Apple, Inc.(1)

      360,063      $ 68,516,388  

Xerox Corp.(1)

      1,350,242        35,065,785  
     

 

 

  
      $ 103,582,173  
     

 

 

  

Textiles, Apparel & Luxury Goods — 1.4%

      

NIKE, Inc., Class B(1)

      346,438      $ 26,644,547  
     

 

 

  
      $ 26,644,547  
     

 

 

  

Total Common Stocks
(identified cost $1,371,075,749)

       $ 1,868,037,024  
     

 

 

  

Total Written Call Options — (0.5)%
(premiums received $7,140,689)

       $ (9,618,525 ) 
     

 

 

  

Other Assets, Less Liabilities — 1.2%

       $ 22,546,785  
     

 

 

  

Net Assets — 100.0%

       $ 1,880,965,284  
     

 

 

  

During the fiscal year to date ended July 31, 2018, the Fund held investments in Eaton Vance Cash Reserves Fund, LLC, an affiliated investment company available to Eaton Vance portfolios and funds, which invests in high quality, U.S. dollar denominated money market instruments. Net income from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended July 31, 2018 was $293,071.

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

 

(1)

Security (or a portion thereof) has been pledged as collateral for written options.

 

(2)

Non-income producing security.

 

3

 

 

                                                                                                                            

Written Call Options — (0.5)%

               

Exchange-Traded Options — (0.5)%

               
Description    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      265      $     74,631,685      $     2,765        8/1/18      $ (1,497,250 ) 

S&P 500 Index

      265        74,631,685        2,775        8/3/18        (1,285,250 ) 

S&P 500 Index

      260        73,223,540        2,800        8/6/18        (699,400 ) 

S&P 500 Index

      265        74,631,685        2,810        8/8/18        (572,400 ) 

S&P 500 Index

      265        74,631,685        2,815        8/10/18        (528,675 ) 

S&P 500 Index

      265        74,631,685        2,800        8/13/18        (846,675 ) 

S&P 500 Index

      265        74,631,685        2,815        8/15/18        (612,150 ) 

S&P 500 Index

      265        74,631,685        2,800        8/17/18        (939,425 ) 

S&P 500 Index

      265        74,631,685        2,800        8/20/18        (957,975 ) 

S&P 500 Index

      260        73,223,540        2,815        8/22/18        (729,300 ) 

S&P 500 Index

      265        74,631,685        2,850        8/24/18        (304,750 ) 

S&P 500 Index

      265        74,631,685        2,825        8/27/18        (645,275 ) 
              

 

 

  

Total

 

    $     (9,618,525 ) 
              

 

 

  

At July 31, 2018, the Fund had sufficient cash and/or securities to cover commitments under open derivative 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, 2018, 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 $9,618,525.

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.

 

4

 

 

At July 31, 2018, 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

    $ 257,656,536      $ —      $ —      $ 257,656,536  

Consumer Staples

      106,398,096        —        —        106,398,096  

Energy

      121,151,229        —        —        121,151,229  

Financials

      254,837,477        —        —        254,837,477  

Health Care

      247,828,686        —        —        247,828,686  

Industrials

      160,589,326        11,971,278        —        172,560,604  

Information Technology

      479,897,454        —        —        479,897,454  

Materials

      44,305,113        —        —        44,305,113  

Real Estate

      54,578,773        —        —        54,578,773  

Telecommunication Services

      75,555,906        —        —        75,555,906  

Utilities

      53,267,150        —        —        53,267,150  

Total Common Stocks

    $ 1,856,065,746      $ 11,971,278 *     $ —      $ 1,868,037,024  

Total Investments

    $     1,856,065,746      $     11,971,278      $     —      $     1,868,037,024  
Liability Description                                

Written Call Options

    $ (9,618,525 )     $ —      $ —      $ (9,618,525 ) 

Total

    $ (9,618,525 )     $ —      $ —      $ (9,618,525 ) 

 

*

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.

At July 31, 2018, 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.

Item 3. Exhibits

A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act is attached hereto.

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:   September 24, 2018

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:   September 24, 2018

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   September 24, 2018