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, 2015

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Risk-Managed Diversified Equity Income Fund

September 30, 2015

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 99.2%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 1.9%

      

United Technologies Corp.

      150,346       $ 13,379,291   
     

 

 

  
      $ 13,379,291   
     

 

 

  

Banks — 7.0%

      

Bank of America Corp.

      899,806       $ 14,018,977   

JPMorgan Chase & Co.

      327,802         19,986,088   

PNC Financial Services Group, Inc. (The)

      166,989         14,895,419   
     

 

 

  
      $ 48,900,484   
     

 

 

  

Beverages — 1.8%

      

Constellation Brands, Inc., Class A

      100,437       $ 12,575,717   
     

 

 

  
      $ 12,575,717   
     

 

 

  

Biotechnology — 5.9%

      

AbbVie, Inc.

      210,720       $ 11,465,275   

Celgene Corp.(1)

      114,097         12,341,873   

Gilead Sciences, Inc.

      176,849         17,364,803   
     

 

 

  
      $ 41,171,951   
     

 

 

  

Capital Markets — 1.8%

      

Credit Suisse Group AG

      540,831       $ 12,999,865   
     

 

 

  
      $ 12,999,865   
     

 

 

  

Chemicals — 1.2%

      

PPG Industries, Inc.

      47,749       $ 4,187,110   

Praxair, Inc.

      43,777         4,459,125   
     

 

 

  
      $ 8,646,235   
     

 

 

  

Diversified Telecommunication Services — 1.4%

      

Verizon Communications, Inc.

      76,419       $ 3,324,990   

Zayo Group Holdings, Inc.(1)

      253,566         6,430,434   
     

 

 

  
      $ 9,755,424   
     

 

 

  

Electric Utilities — 1.5%

      

NextEra Energy, Inc.

      106,941       $ 10,432,095   
     

 

 

  
      $ 10,432,095   
     

 

 

  

Electronic Equipment, Instruments & Components — 2.4%

      

Corning, Inc.

      975,709       $ 16,704,138   
     

 

 

  
      $ 16,704,138   
     

 

 

  

Energy Equipment & Services — 1.0%

      

Schlumberger, Ltd.

      101,762       $ 7,018,525   
     

 

 

  
      $ 7,018,525   
     

 

 

  

Food & Staples Retailing — 2.7%

      

CVS Health Corp.

      195,188       $ 18,831,738   
     

 

 

  
      $ 18,831,738   
     

 

 

  

Food Products — 3.6%

      

General Mills, Inc.

      224,628       $ 12,608,370   

Mondelez International, Inc., Class A

      298,239         12,487,267   
     

 

 

  
      $ 25,095,637   
     

 

 

  

Health Care Equipment & Supplies — 1.5%

      

Medtronic PLC

      158,715       $ 10,624,382   
     

 

 

  
      $ 10,624,382   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Industrial Conglomerates — 5.6%

      

Danaher Corp.

      173,442       $ 14,778,993   

General Electric Co.

      970,540         24,477,019   
     

 

 

  
      $ 39,256,012   
     

 

 

  

Insurance — 3.4%

      

Aflac, Inc.

      182,154       $ 10,588,612   

American Financial Group, Inc.

      55,033         3,792,324   

XL Group PLC

      267,418         9,712,622   
     

 

 

  
      $ 24,093,558   
     

 

 

  

Internet & Catalog Retail — 4.1%

      

Amazon.com, Inc.(1)

      45,048       $ 23,059,621   

Netflix, Inc.(1)

      54,095         5,585,849   
     

 

 

  
      $ 28,645,470   
     

 

 

  

Internet Software & Services — 6.3%

      

Facebook, Inc., Class A(1)

      145,946       $ 13,120,545   

Google, Inc., Class C(1)

      42,229         25,692,968   

Twitter, Inc.(1)

      197,272         5,314,508   
     

 

 

  
      $ 44,128,021   
     

 

 

  

IT Services — 3.0%

      

Visa, Inc., Class A

      300,484       $ 20,931,715   
     

 

 

  
      $ 20,931,715   
     

 

 

  

Machinery — 1.3%

      

Deere & Co.

      126,696       $ 9,375,504   
     

 

 

  
      $ 9,375,504   
     

 

 

  

Media — 5.9%

      

Comcast Corp., Class A

      201,969       $ 11,487,997   

Live Nation Entertainment, Inc.(1)

      353,978         8,509,631   

Walt Disney Co. (The)

      207,074         21,162,963   
     

 

 

  
      $ 41,160,591   
     

 

 

  

Multi-Utilities — 1.8%

      

Sempra Energy

      128,799       $ 12,457,439   
     

 

 

  
      $ 12,457,439   
     

 

 

  

Multiline Retail — 3.3%

      

Dollar General Corp.

      213,425       $ 15,460,507   

Target Corp.

      97,098         7,637,729   
     

 

 

  
      $ 23,098,236   
     

 

 

  

Oil, Gas & Consumable Fuels — 5.8%

      

Anadarko Petroleum Corp.

      89,754       $ 5,420,244   

Devon Energy Corp.

      193,102         7,162,153   

Exxon Mobil Corp.

      218,079         16,214,174   

Occidental Petroleum Corp.

      179,721         11,888,544   
     

 

 

  
      $ 40,685,115   
     

 

 

  

Pharmaceuticals — 7.4%

      

Bristol-Myers Squibb Co.

      192,652       $ 11,404,998   

Eli Lilly & Co.

      128,918         10,789,148   

Merck & Co., Inc.

      237,017         11,706,270   

Perrigo Co. PLC

      72,816         11,451,772   

Teva Pharmaceutical Industries, Ltd. ADR

      122,505         6,916,632   
     

 

 

  
      $ 52,268,820   
     

 

 

  

Real Estate Investment Trusts (REITs) — 2.4%

      

Simon Property Group, Inc.

      92,894       $ 17,066,486   
     

 

 

  
      $ 17,066,486   
     

 

 

  

Semiconductors & Semiconductor Equipment — 4.0%

      

Intel Corp.

      457,380       $ 13,785,433   

NXP Semiconductors NV(1)

      167,276         14,564,721   
     

 

 

  
      $ 28,350,154   
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Software — 2.7%

      

Oracle Corp.

      327,788       $ 11,839,702   

Tableau Software, Inc., Class A(1)

      86,869         6,930,409   
     

 

 

  
      $ 18,770,111   
     

 

 

  

Technology Hardware, Storage & Peripherals — 4.5%

      

Apple, Inc.

      289,412       $ 31,922,144   
     

 

 

  
      $ 31,922,144   
     

 

 

  

Textiles, Apparel & Luxury Goods — 2.3%

      

NIKE, Inc., Class B

      134,732       $ 16,567,994   
     

 

 

  
      $ 16,567,994   
     

 

 

  

Tobacco — 1.7%

      

Altria Group, Inc.

      215,874       $ 11,743,546   
     

 

 

  
      $ 11,743,546   
     

 

 

  

Total Common Stocks
(identified cost $592,854,556)

       $ 696,656,398   
     

 

 

  

Put Options Purchased — 0.7%

 

                                                                                                   
Description    Number of
Contracts		     

Strike
Price

      Expiration
Date		      Value  

S&P 500 Index

      289       $ 1,790         10/2/15       $ 4,335   

S&P 500 Index

      291         1,825         10/9/15         176,055   

S&P 500 Index

      295         1,875         10/16/15         651,950   

S&P 500 Index

      286         1,840         10/23/15         547,690   

S&P 500 Index FLEX

      281         1,840         10/5/15         77,771   

S&P 500 Index FLEX

      288         1,850         10/7/15         173,832   

S&P 500 Index FLEX

      290         1,845         10/12/15         289,578   

S&P 500 Index FLEX

      293         1,880         10/14/15         571,927   

S&P 500 Index FLEX

      290         1,885         10/19/15         748,602   

S&P 500 Index FLEX

      290         1,845         10/21/15         508,497   

S&P 500 Index FLEX

      290         1,785         10/26/15         339,763   

S&P 500 Index FLEX

      282         1,810         10/28/15         485,575   
           

 

 

  

Total Put Options Purchased
(identified cost $5,884,938)

             $ 4,575,575   
           

 

 

  

Short-Term Investments — 0.3%

            
Description                    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.23%(2)

          $ 2,043       $ 2,042,985   
           

 

 

  

Total Short-Term Investments
(identified cost $2,042,985)

             $ 2,042,985   
           

 

 

  

Total Investments — 100.2%
(identified cost $600,782,479)

             $ 703,274,958   
           

 

 

  

 

3

 

 

                                                                                                   

Call Options Written — (0.3)%

            
Description    Number of
Contracts		     

Strike
Price

      Expiration
Date		      Value  

S&P 500 Index

      289       $ 1,980         10/2/15       $ (15,172 ) 

S&P 500 Index

      291         2,000         10/9/15         (51,653 ) 

S&P 500 Index

      295         2,020         10/16/15         (41,300 ) 

S&P 500 Index

      286         1,995         10/23/15         (230,230 ) 

S&P 500 Index FLEX

      281         2,005         10/5/15         (12,161 ) 

S&P 500 Index FLEX

      288         2,008         10/7/15         (26,170 ) 

S&P 500 Index FLEX

      290         2,007         10/12/15         (76,884 ) 

S&P 500 Index FLEX

      293         2,027         10/14/15         (51,927 ) 

S&P 500 Index FLEX

      290         2,020         10/19/15         (112,624 ) 

S&P 500 Index FLEX

      290         1,983         10/21/15         (330,100 ) 

S&P 500 Index FLEX

      290         1,955         10/26/15         (694,105 ) 

S&P 500 Index FLEX

      282         1,972         10/28/15         (461,298 ) 
           

 

 

  

Total Call Options Written
(premiums received $5,978,593)

             $ (2,103,624 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.1%

             $ 845,460   
           

 

 

  

Net Assets — 100.0%

             $ 702,016,794   
           

 

 

  

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

 

ADR

   -   American Depositary Receipt

FLEX

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

 

(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, 2015. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended September 30, 2015 was $6,162.

The cost and unrealized appreciation (depreciation) of investments of the Fund at September 30, 2015, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $ 599,635,022   
  

 

 

  

Gross unrealized appreciation

    $ 144,037,302   

Gross unrealized depreciation

      (40,397,366 ) 
  

 

 

  

Net unrealized appreciation

    $     103,639,936   
  

 

 

  

Written options activity for the fiscal year to date ended September 30, 2015 was as follows:

 

     Number of
Contracts		      Premiums
Received		  

Outstanding, beginning of period

      3,547       $ 4,179,654   

Options written

      33,806             43,108,463   

Options terminated in closing purchase transactions

      (5,300 )       (7,070,315 ) 

Options expired

      (28,588 )       (34,239,209 ) 
  

 

 

     

 

 

  

Outstanding, end of period

      3,465       $ 5,978,593   
  

 

 

     

 

 

  

All of the securities of the Fund, unless otherwise pledged, are subject to segregation to satisfy the requirements of the escrow agent with respect to exchange-traded options. At September 30, 2015, the Fund had sufficient cash and/or securities to cover commitments under these contracts.

 

4

 

 

In the normal course of pursuing its investment objectives, 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.

The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) and whose primary underlying risk exposure is equity price risk at September 30, 2015 was as follows:

 

     Fair Value  

Derivative

    Asset
Derivative		      Liability
Derivative		  

Purchased options

    $ 4,575,575       $ —   

Written options

      —         (2,103,624 ) 
  

 

 

     

 

 

  

Total

    $     4,575,575       $     (2,103,624 ) 
  

 

 

     

 

 

  

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 September 30, 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

    $ 109,472,291       $ —       $ —       $ 109,472,291   

Consumer Staples

      68,246,638         —         —         68,246,638   

Energy

      47,703,640         —         —         47,703,640   

Financials

      90,060,528         12,999,865         —         103,060,393   

Health Care

      104,065,153         —         —         104,065,153   

Industrials

      62,010,807         —         —         62,010,807   

Information Technology

      160,806,283         —         —         160,806,283   

Materials

      8,646,235         —         —         8,646,235   

Telecommunication Services

      9,755,424         —         —         9,755,424   

Utilities

      22,889,534         —         —         22,889,534   

Total Common Stocks

    $     683,656,533       $     12,999,865 *     $     —       $     696,656,398   

Put Options Purchased

    $ 1,380,030       $ 3,195,545       $ —       $ 4,575,575   

Short-Term Investments

      —         2,042,985         —         2,042,985   

Total Investments

    $ 685,036,563       $ 18,238,395       $ —       $ 703,274,958   
Liability Description                                

Call Options Written

    $ (338,355 )     $ (1,765,269 )     $ —       $ (2,103,624 ) 

Total

    $ (338,355 )     $ (1,765,269 )     $ —       $ (2,103,624 ) 

 

* 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.

 

5

 

 

The Fund held no investments or other financial instruments as of December 31, 2014 whose fair value was determined using Level 3 inputs. At September 30, 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.

 

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/ Michael A. Allison
  Michael A. Allison
  President
Date:   November 23, 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:   November 23, 2015

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   November 23, 2015