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, 2019

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Managed Diversified Equity Income Fund

January 31, 2019

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 101.2%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 1.4%

      

Raytheon Co.

      147,007      $ 24,220,873  
     

 

 

  
      $ 24,220,873  
     

 

 

  

Air Freight & Logistics — 1.6%

      

FedEx Corp.(1)

      155,223      $ 27,562,948  
     

 

 

  
      $ 27,562,948  
     

 

 

  

Auto Components — 1.7%

      

Aptiv PLC(1)

      367,163      $ 29,053,608  
     

 

 

  
      $ 29,053,608  
     

 

 

  

Banks — 6.7%

      

Bank of America Corp.(1)

      1,881,137      $ 53,555,970  

JPMorgan Chase & Co.(1)

      591,208        61,190,028  
     

 

 

  
      $ 114,745,998  
     

 

 

  

Beverages — 3.4%

      

Constellation Brands, Inc., Class A(1)

      159,440      $ 27,688,350  

PepsiCo, Inc.(1)

      262,732        29,602,015  
     

 

 

  
      $ 57,290,365  
     

 

 

  

Biotechnology — 3.3%

      

Gilead Sciences, Inc.(1)

      391,380      $ 27,400,514  

Vertex Pharmaceuticals, Inc.(2)

      149,982        28,633,063  
     

 

 

  
      $ 56,033,577  
     

 

 

  

Capital Markets — 1.8%

      

Charles Schwab Corp. (The)(1)

      654,398      $ 30,606,194  
     

 

 

  
      $ 30,606,194  
     

 

 

  

Chemicals — 1.6%

      

DowDuPont, Inc.

      507,689      $ 27,318,745  
     

 

 

  
      $ 27,318,745  
     

 

 

  

Consumer Finance — 2.1%

      

American Express Co.(1)

      350,105      $ 35,955,784  
     

 

 

  
      $ 35,955,784  
     

 

 

  

Containers & Packaging — 1.7%

      

Ball Corp.

      551,068      $ 28,809,835  
     

 

 

  
      $ 28,809,835  
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Diversified Telecommunication Services — 3.3%

      

Verizon Communications, Inc.(1)

      1,010,738      $ 55,651,234  
     

 

 

  
      $ 55,651,234  
     

 

 

  

Electric Utilities — 1.7%

      

NextEra Energy, Inc.(1)

      163,215      $ 29,212,221  
     

 

 

  
      $ 29,212,221  
     

 

 

  

Electronic Equipment, Instruments & Components — 2.2%

      

Corning, Inc.(1)

      1,148,327      $ 38,193,356  
     

 

 

  
      $ 38,193,356  
     

 

 

  

Entertainment — 4.4%

      

Live Nation Entertainment, Inc.(1)(2)

      641,456      $ 34,324,311  

Walt Disney Co. (The)(1)

      362,887        40,469,158  
     

 

 

  
      $ 74,793,469  
     

 

 

  

Equity Real Estate Investment Trusts (REITs) — 2.6%

      

American Tower Corp.

      158,191      $ 27,341,733  

AvalonBay Communities, Inc.

      90,145        17,390,773  
     

 

 

  
      $ 44,732,506  
     

 

 

  

Food Products — 2.1%

      

Mondelez International, Inc., Class A(1)

      754,203      $ 34,889,431  
     

 

 

  
      $ 34,889,431  
     

 

 

  

Health Care Equipment & Supplies — 5.0%

      

Abbott Laboratories(1)

      516,668      $ 37,706,431  

Danaher Corp.(1)

      426,955        47,357,848  
     

 

 

  
      $ 85,064,279  
     

 

 

  

Health Care Providers & Services — 2.0%

      

Anthem, Inc.(1)

      111,631      $ 33,824,193  
     

 

 

  
      $ 33,824,193  
     

 

 

  

Household Products — 2.6%

      

Procter & Gamble Co. (The)(1)

      462,506      $ 44,617,954  
     

 

 

  
      $ 44,617,954  
     

 

 

  

Insurance — 3.1%

      

American International Group, Inc.

      424,745      $ 18,361,726  

Progressive Corp. (The)

      501,127        33,720,836  
     

 

 

  
      $ 52,082,562  
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Interactive Media & Services — 1.9%

      

Alphabet, Inc., Class C(1)(2)

      29,415      $ 32,838,024  
     

 

 

  
      $ 32,838,024  
     

 

 

  

Internet & Direct Marketing Retail — 4.0%

      

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

      39,240      $ 67,442,965  
     

 

 

  
      $ 67,442,965  
     

 

 

  

IT Services — 7.1%

      

Accenture PLC, Class A

      160,502      $ 24,645,082  

Akamai Technologies, Inc.(2)

      331,514        21,581,561  

GoDaddy, Inc., Class A(2)

      364,577        25,020,920  

Visa, Inc., Class A(1)

      361,784        48,844,458  
     

 

 

  
      $ 120,092,021  
     

 

 

  

Machinery — 4.1%

      

Caterpillar, Inc.(1)

      266,812      $ 35,528,686  

Fortive Corp.(1)

      446,880        33,511,531  
     

 

 

  
      $ 69,040,217  
     

 

 

  

Multi-Utilities — 1.4%

      

Sempra Energy

      205,386      $ 24,026,054  
     

 

 

  
      $ 24,026,054  
     

 

 

  

Multiline Retail — 1.5%

      

Dollar Tree, Inc.(2)

      257,567      $ 24,940,213  
     

 

 

  
      $ 24,940,213  
     

 

 

  

Oil, Gas & Consumable Fuels — 6.1%

      

ConocoPhillips

      366,155      $ 24,785,032  

EOG Resources, Inc.

      203,917        20,228,566  

Exxon Mobil Corp.(1)

      537,959        39,421,636  

Phillips 66

      202,525        19,322,910  
     

 

 

  
      $ 103,758,144  
     

 

 

  

Pharmaceuticals — 5.2%

      

Johnson & Johnson(1)

      442,252      $ 58,854,896  

Zoetis, Inc.(1)

      339,925        29,287,938  
     

 

 

  
      $ 88,142,834  
     

 

 

  

Road & Rail — 1.5%

      

CSX Corp.(1)

      377,447      $ 24,798,268  
     

 

 

  
      $ 24,798,268  
     

 

 

  

Software — 6.4%

      

Intuit, Inc.

      123,193      $ 26,587,513  

Microsoft Corp.(1)

      782,296        81,695,172  
     

 

 

  
      $ 108,282,685  
     

 

 

  

 

3

 

 

                                                 
Security    Shares      Value  

Specialty Retail — 3.0%

      

Home Depot, Inc. (The)(1)

      226,886      $ 41,640,388  

Tractor Supply Co.

      111,786        9,546,524  
     

 

 

  
      $ 51,186,912  
     

 

 

  

Technology Hardware, Storage & Peripherals — 3.1%

      

Apple, Inc.(1)

      316,541      $ 52,685,084  
     

 

 

  
      $ 52,685,084  
     

 

 

  

Textiles, Apparel & Luxury Goods — 1.6%

      

NIKE, Inc., Class B(1)

      332,252      $ 27,204,794  
     

 

 

  
      $ 27,204,794  
     

 

 

  

Total Common Stocks
(identified cost $1,344,472,045)

       $ 1,719,097,347  
     

 

 

  

Short-Term Investments — 0.8%

      
Description    Units      Value  

Eaton Vance Cash Reserves Fund, LLC, 2.61%(3)

      14,634,944      $ 14,634,944  
     

 

 

  

Total Short-Term Investments
(identified cost $14,634,944)

       $ 14,634,944  
     

 

 

  

Total Investments — 102.0%
(identified cost $1,359,106,989)

       $ 1,733,732,291  
     

 

 

  

Total Written Call Options — (1.6)%
(premiums received $11,241,228)

       $ (26,512,875 ) 
     

 

 

  

Other Assets, Less Liabilities — (0.4)%

       $ (7,903,675 ) 
     

 

 

  

Net Assets — 100.0%

       $ 1,699,315,741  
     

 

 

  

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)

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, 2019. Net income from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended January 31, 2019 was $125,037.

 

4

 

 

Written Call Options — (1.6)%

Exchange-Traded Options — (1.6)%

 

                                                                                                                            

Description

    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      255      $ 68,954,550      $ 2,525        2/1/19      $ (4,575,975 ) 

S&P 500 Index

      255        68,954,550        2,575        2/4/19        (3,307,350 ) 

S&P 500 Index

      255        68,954,550        2,625        2/6/19        (2,108,850 ) 

S&P 500 Index

      255        68,954,550        2,625        2/8/19        (2,139,450 ) 

S&P 500 Index

      255        68,954,550        2,610        2/11/19        (2,523,225 ) 

S&P 500 Index

      255        68,954,550        2,635        2/13/19        (1,997,925 ) 

S&P 500 Index

      255        68,954,550        2,675        2/15/19        (1,249,500 ) 

S&P 500 Index

      250        67,602,500        2,650        2/19/19        (1,732,500 ) 

S&P 500 Index

      250        67,602,500        2,650        2/20/19        (1,751,250 ) 

S&P 500 Index

      255        68,954,550        2,655        2/22/19        (1,751,850 ) 

S&P 500 Index

      250        67,602,500        2,670        2/25/19        (1,475,000 ) 

S&P 500 Index

      250        67,602,500        2,650        2/27/19        (1,900,000 ) 
              

 

 

  

Total

 

    $ (26,512,875 ) 
              

 

 

  

At January 31, 2019, 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 January 31, 2019, 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 $26,512,875.

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 January 31, 2019, 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

    $ 1,719,097,347 *     $ —      $ —      $ 1,719,097,347  

Short-Term Investments

      —        14,634,944        —        14,634,944  

Total Investments

    $     1,719,097,347      $     14,634,944      $     —      $     1,733,732,291  
Liability Description                                

Written Call Options

    $ (26,512,875 )     $ —      $ —      $ (26,512,875 ) 

Total

    $ (26,512,875 )     $ —      $ —      $ (26,512,875 ) 

 

*

The level classification by major category of investments is the same as the category presentation in the Portfolio of Investments.

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.

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:   March 22, 2019

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 22, 2019

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   March 22, 2019