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, 2012

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Managed Diversified Equity Income Fund

July 31, 2012

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 97.1%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 1.8%

      

Boeing Co. (The)

      253,623       $ 18,745,276   

United Technologies Corp.

      141,302         10,518,521   
     

 

 

  
      $ 29,263,797   
     

 

 

  

Automobiles — 0.5%

      

Bayerische Motoren Werke AG

      112,335       $ 8,360,336   
     

 

 

  
      $ 8,360,336   
     

 

 

  

Beverages — 3.8%

      

Anheuser-Busch InBev NV

      106,915       $ 8,459,436   

Beam, Inc.

      123,546         7,768,572   

Coca-Cola Co. (The)

      510,591         41,255,753   

Diageo PLC

      222,800         5,955,388   
     

 

 

  
      $ 63,439,149   
     

 

 

  

Biotechnology — 2.4%

      

Celgene Corp.(1)

      248,863       $ 17,037,161   

Gilead Sciences, Inc.(1)

      424,047         23,038,474   
     

 

 

  
      $ 40,075,635   
     

 

 

  

Capital Markets — 0.8%

      

Deutsche Bank AG

      68,064       $ 2,066,466   

Goldman Sachs Group, Inc. (The)

      93,418         9,425,876   

UBS AG(1)

      186,902         1,966,213   
     

 

 

  
      $ 13,458,555   
     

 

 

  

Chemicals — 2.5%

      

Air Liquide SA

      30,768       $ 3,440,973   

BASF SE

      97,600         7,125,240   

Celanese Corp., Series A

      157,332         5,999,069   

Monsanto Co.

      289,572         24,793,155   
     

 

 

  
      $ 41,358,437   
     

 

 

  

Commercial Banks — 5.8%

      

Banco Bilbao Vizcaya Argentaria SA

      477,882       $ 3,115,395   

Banco Santander SA

      634,421         3,841,331   

Bank of Nova Scotia (The)

      207,509         10,829,895   

Barclays PLC

      1,308,215         3,407,119   

BNP Paribas

      47,989         1,772,698   

HSBC Holdings PLC

      923,579         7,715,682   

Intesa Sanpaolo SpA

      1,728,701         2,185,183   

Itau Unibanco Holding SA ADR, PFC Shares

      476,155         7,528,010   

PNC Financial Services Group, Inc.

      243,381         14,383,817   

Regions Financial Corp.

      1,229,703         8,558,733   

Royal Bank of Scotland Group PLC(1)

      408,569         1,369,462   

Societe Generale(1)

      96,538         2,124,899   

Wells Fargo & Co.

      867,073         29,315,738   
     

 

 

  
      $ 96,147,962   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Communications Equipment — 1.9%

      

QUALCOMM, Inc.

      536,733       $ 32,032,226   
     

 

 

  
      $ 32,032,226   
     

 

 

  

Computers & Peripherals — 3.9%

      

Apple, Inc.(1)

      97,226       $ 59,381,752   

EMC Corp.(1)

      234,001         6,133,166   
     

 

 

  
      $ 65,514,918   
     

 

 

  

Construction & Engineering — 1.2%

      

Fluor Corp.

      385,631       $ 19,119,585   
     

 

 

  
      $ 19,119,585   
     

 

 

  

Consumer Finance — 0.9%

      

American Express Co.

      251,154       $ 14,494,097   
     

 

 

  
      $ 14,494,097   
     

 

 

  

Diversified Financial Services — 2.8%

      

Bank of America Corp.

      2,079,183       $ 15,261,203   

Citigroup, Inc.

      609,493         16,535,545   

JPMorgan Chase & Co.

      428,138         15,412,968   
     

 

 

  
      $ 47,209,716   
     

 

 

  

Diversified Telecommunication Services — 3.6%

      

AT&T, Inc.

      737,785       $ 27,976,807   

CenturyLink, Inc.

      592,590         24,616,189   

France Telecom SA

      163,783         2,193,233   

Vivendi SA

      293,621         5,568,698   
     

 

 

  
      $ 60,354,927   
     

 

 

  

Electric Utilities — 3.0%

      

American Electric Power Co., Inc.

      257,104       $ 10,860,073   

Duke Energy Corp.

      108,156         7,330,814   

Edison International

      161,770         7,470,538   

Enel SpA

      573,649         1,638,205   

PPL Corp.

      277,219         8,011,629   

Southern Co. (The)

      153,213         7,377,206   

SSE PLC

      319,852         6,569,637   
     

 

 

  
      $ 49,258,102   
     

 

 

  

Electrical Equipment — 0.5%

      

ABB, Ltd.(1)

      309,717       $ 5,384,875   

Schneider Electric SA

      44,819         2,527,011   
     

 

 

  
      $ 7,911,886   
     

 

 

  

Energy Equipment & Services — 2.2%

      

Halliburton Co.

      594,027       $ 19,680,115   

Schlumberger, Ltd.

      243,855         17,377,107   
     

 

 

  
      $ 37,057,222   
     

 

 

  

Food & Staples Retailing — 1.5%

      

Costco Wholesale Corp.

      229,498       $ 22,073,118   

Tesco PLC

      629,574         3,134,647   
     

 

 

  
      $ 25,207,765   
     

 

 

  

Food Products — 1.7%

      

Danone SA

      45,394       $ 2,759,201   

Nestle SA

      249,616         15,335,458   

Unilever NV

      286,140         9,934,152   
     

 

 

  
      $ 28,028,811   
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Health Care Equipment & Supplies — 2.5%

      

Covidien PLC

      436,615       $ 24,398,046   

St. Jude Medical, Inc.

      223,443         8,347,830   

Varian Medical Systems, Inc.(1)

      162,327         8,859,808   
     

 

 

  
      $ 41,605,684   
     

 

 

  

Health Care Providers & Services — 0.1%

      

UnitedHealth Group, Inc.

      25,412       $ 1,298,299   
     

 

 

  
      $ 1,298,299   
     

 

 

  

Hotels, Restaurants & Leisure — 1.7%

      

McDonald’s Corp.

      307,816       $ 27,506,438   
     

 

 

  
      $ 27,506,438   
     

 

 

  

Household Products — 2.1%

      

Colgate-Palmolive Co.

      142,561       $ 15,305,349   

Procter & Gamble Co.

      314,015         20,266,528   
     

 

 

  
      $ 35,571,877   
     

 

 

  

Industrial Conglomerates — 4.2%

      

Danaher Corp.

      685,952       $ 36,225,125   

General Electric Co.

      1,153,817         23,941,703   

Siemens AG

      104,342         8,841,831   
     

 

 

  
      $ 69,008,659   
     

 

 

  

Insurance — 1.9%

      

Aflac, Inc.

      208,202       $ 9,115,083   

AXA SA

      356,429         4,330,506   

MetLife, Inc.

      294,880         9,073,458   

Prudential PLC

      698,928         8,317,127   
     

 

 

  
      $ 30,836,174   
     

 

 

  

Internet & Catalog Retail — 1.7%

      

Amazon.com, Inc.(1)

      121,408       $ 28,324,486   
     

 

 

  
      $ 28,324,486   
     

 

 

  

Internet Software & Services — 1.6%

      

eBay, Inc.(1)

      243,638       $ 10,793,163   

Google, Inc., Class A(1)

      25,351         16,046,423   
     

 

 

  
      $ 26,839,586   
     

 

 

  

IT Services — 4.9%

      

Accenture PLC, Class A

      427,178       $ 25,758,833   

International Business Machines Corp.

      188,505         36,943,210   

Visa, Inc., Class A

      145,673         18,802,014   
     

 

 

  
      $ 81,504,057   
     

 

 

  

Machinery — 0.8%

      

Deere & Co.

      170,980       $ 13,134,684   
     

 

 

  
      $ 13,134,684   
     

 

 

  

Media — 1.6%

      

Comcast Corp., Class A

      409,157       $ 13,318,060   

Walt Disney Co. (The)

      270,840         13,309,078   
     

 

 

  
      $ 26,627,138   
     

 

 

  

 

3

 

 

                                                 
Security    Shares      Value  

Metals & Mining — 1.7%

      

Anglo American PLC

      128,438       $ 3,806,206   

ArcelorMittal

      258,275         4,111,696   

BHP Billiton, Ltd. ADR

      88,062         5,842,033   

Cliffs Natural Resources, Inc.

      169,192         6,918,261   

Freeport-McMoRan Copper & Gold, Inc.

      214,523         7,222,989   
     

 

 

  
      $ 27,901,185   
     

 

 

  

Multi-Utilities — 0.8%

      

National Grid PLC

      403,800       $ 4,188,536   

Sempra Energy

      119,017         8,379,987   
     

 

 

  
      $ 12,568,523   
     

 

 

  

Multiline Retail — 1.9%

      

Dollar General Corp.(1)

      352,792       $ 17,995,920   

Macy’s, Inc.

      378,647         13,570,708   
     

 

 

  
      $ 31,566,628   
     

 

 

  

Oil, Gas & Consumable Fuels — 9.5%

      

Anadarko Petroleum Corp.

      149,499       $ 10,381,210   

Apache Corp.

      150,217         12,936,688   

BG Group PLC

      241,074         4,745,609   

BP PLC

      1,332,877         8,850,209   

ConocoPhillips

      358,500         19,516,740   

Exxon Mobil Corp.

      563,101         48,905,322   

Occidental Petroleum Corp.

      133,829         11,647,138   

Phillips 66

      179,250         6,739,800   

Royal Dutch Shell PLC, Class B

      494,662         17,401,085   

Statoil ASA

      380,385         9,040,446   

Total SA

      170,001         7,833,007   
     

 

 

  
      $ 157,997,254   
     

 

 

  

Pharmaceuticals — 8.1%

      

Abbott Laboratories

      251,893       $ 16,703,025   

Allergan, Inc.

      144,827         11,885,952   

AstraZeneca PLC

      85,139         3,976,167   

Bayer AG

      138,165         10,493,971   

GlaxoSmithKline PLC

      364,935         8,397,061   

Johnson & Johnson

      239,147         16,553,755   

Novartis AG

      225,108         13,218,123   

Novo Nordisk A/S, Class B

      58,342         8,995,613   

Pfizer, Inc.

      1,322,306         31,788,236   

Sanofi

      141,378         11,534,676   
     

 

 

  
      $ 133,546,579   
     

 

 

  

Real Estate Investment Trusts (REITs) — 1.2%

      

AvalonBay Communities, Inc.

      54,184       $ 7,969,925   

Boston Properties, Inc.

      107,429         11,913,876   
     

 

 

  
      $ 19,883,801   
     

 

 

  

Road & Rail — 1.2%

      

Union Pacific Corp.

      165,349       $ 20,273,441   
     

 

 

  
      $ 20,273,441   
     

 

 

  

Software — 2.6%

      

Microsoft Corp.

      587,164       $ 17,303,723   

Oracle Corp.

      714,517         21,578,414   

SAP AG

      73,892         4,689,399   
     

 

 

  
      $ 43,571,536   
     

 

 

  

 

4

 

 

                                                 
Security    Shares      Value  

Specialty Retail — 1.4%

      

Home Depot, Inc. (The)

      149,833       $ 7,818,286   

Industria de Diseno Textil SA

      114,472         11,781,431   

Kingfisher PLC

      725,941         3,027,683   
     

 

 

  
      $ 22,627,400   
     

 

 

  

Textiles, Apparel & Luxury Goods — 1.5%

      

LVMH Moet Hennessy Louis Vuitton SA

      58,445       $ 8,791,913   

NIKE, Inc., Class B

      175,631         16,395,154   
     

 

 

  
      $ 25,187,067   
     

 

 

  

Tobacco — 2.4%

      

British American Tobacco PLC

      120,651       $ 6,408,319   

Philip Morris International, Inc.

      364,717         33,349,723   
     

 

 

  
      $ 39,758,042   
     

 

 

  

Wireless Telecommunication Services — 0.9%

      

Vodafone Group PLC

      4,962,479       $ 14,202,293   
     

 

 

  
      $ 14,202,293   
     

 

 

  

Total Common Stocks
(identified cost $1,395,939,181)

       $ 1,609,633,957   
     

 

 

  

Short-Term Investments — 3.0%

      
Description    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.11%(2)

    $ 49,896       $ 49,895,724   
     

 

 

  

Total Short-Term Investments
(identified cost $49,895,724)

       $ 49,895,724   
     

 

 

  

Total Investments — 100.1%
(identified cost $1,445,834,905)

       $ 1,659,529,681   
     

 

 

  

Call Options Written — (0.8)%

      

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      685       $ 1,360         8/18/12       $ (1,986,500 ) 

S&P 500 Index

      955         1,365         8/18/12         (2,454,350 ) 

S&P 500 Index

      1,480         1,370         8/18/12         (3,367,000 ) 

S&P 500 Index

      1,480         1,375         8/18/12         (2,937,800 ) 

S&P 500 Index

      1,440         1,380         8/18/12         (2,484,000 ) 
           

 

 

  

Total Call Options Written
(premiums received $9,859,359)

             $ (13,229,650 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.7%

             $ 10,909,763   
           

 

 

  

Net Assets — 100.0%

             $ 1,657,209,794   
           

 

 

  

 

5

 

 

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

 

ADR

   -   American Depositary Receipt

PFC Shares

   -   Preference Shares

 

(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 July 31, 2012. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended July 31, 2012 was $47,493.

Country Concentration of Portfolio

 

                                                 
Country    Percentage
of Net Assets		     Value  

United States

      77.3 %    $     1,280,239,019   

United Kingdom

      6.7        111,472,230   

France

      3.2        52,876,815   

Ireland

      3.0        50,156,879   

Germany

      2.5        41,577,243   

Switzerland

      2.2        35,904,669   

Spain

      1.1        18,738,157   

Canada

      0.7        10,829,895   

Netherlands

      0.6        9,934,152   

Norway

      0.5        9,040,446   

Denmark

      0.5        8,995,613   

Belgium

      0.5        8,459,436   

Brazil

      0.5        7,528,010   

Australia

      0.4        5,842,033   

Luxembourg

      0.2        4,111,696   

Italy

      0.2        3,823,388   
  

 

 

    

 

 

  

Total Investments

      100.1 %    $ 1,659,529,681   
  

 

 

    

 

 

  

The cost and unrealized appreciation (depreciation) of investments of the Fund at July 31, 2012, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $     1,446,757,357   
  

 

 

  

Gross unrealized appreciation

    $ 295,235,669   

Gross unrealized depreciation

      (82,463,345 ) 
  

 

 

  

Net unrealized appreciation

    $ 212,772,324   
  

 

 

  

Written options activity for the fiscal year to date ended July 31, 2012 was as follows:

 

     Number of
Contracts		     Premiums
Received		  
Outstanding, beginning of period      6,345      $ 23,069,562   
Options written      54,390        122,042,335   
Options terminated in closing purchase transactions      (51,790 )      (130,216,763 ) 
Options expired      (2,905 )      (5,035,775 ) 
  

 

 

    

 

 

  
Outstanding, end of period      6,040      $ 9,859,359   
  

 

 

    

 

 

  

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At July 31, 2012, the Fund had sufficient cash and/or securities to cover commitments under these 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, 2012, 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 $13,229,650.

 

 

6

 

 

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 July 31, 2012, 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

    $ 138,238,130      $ 31,961,363      $ —       $ 170,199,493   

Consumer Staples

      140,019,043        51,986,601        —         192,005,644   

Energy

      147,184,120        47,870,356        —         195,054,476   

Financials

      179,818,224        42,212,081        —         222,030,305   

Health Care

      159,910,586        56,615,611        —         216,526,197   

Industrials

      141,958,335        16,753,717        —         158,712,052   

Information Technology

      244,772,924        4,689,399        —         249,462,323   

Materials

      50,775,507        18,484,115        —         69,259,622   

Telecommunication Services

      52,592,996        21,964,224        —         74,557,220   

Utilities

      49,430,247        12,396,378        —         61,826,625   

Total Common Stocks

    $     1,304,700,112      $     304,933,845 *    $     —       $     1,609,633,957   

Short-Term Investments

    $ —      $ 49,895,724      $ —       $ 49,895,724   

Total Investments

    $ 1,304,700,112      $ 354,829,569      $ —       $ 1,659,529,681   
Liability Description                              

Call Options Written

    $ (13,229,650 )    $ —      $ —       $ (13,229,650 ) 

Total

    $ (13,229,650 )    $ —      $ —       $ (13,229,650 ) 

 

* 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 October 31, 2011 whose fair value was determined using Level 3 inputs. At July 31, 2012, 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.

 

7

 

 

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/ Walter A. Row, III
  Walter A. Row, III
  President
Date:   September 24, 2012

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:   September 24, 2012
By:   /s/ Barbara E. Campbell
  Barbara E. Campbell
  Treasurer
Date:   September 24, 2012