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

March 31, 2013

Date of Reporting Period

 

 

 


Item 1. Schedule of Investments


Eaton Vance

Risk-Managed Diversified Equity Income Fund

March 31, 2013

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 100.7%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 2.8%

     

Boeing Co. (The)

     166,130       $ 14,262,261   

United Technologies Corp.

     103,866         9,704,200   
     

 

 

 
      $ 23,966,461   
     

 

 

 

Automobiles — 0.7%

     

Honda Motor Co., Ltd.

     147,278       $ 5,671,743   
     

 

 

 
      $ 5,671,743   
     

 

 

 

Beverages — 2.2%

     

Beam, Inc.

     84,050       $ 5,340,537   

Coca-Cola Co. (The)

     335,932         13,585,090   
     

 

 

 
      $ 18,925,627   
     

 

 

 

Biotechnology — 4.9%

     

Celgene Corp.(1)

     157,419       $ 18,246,436   

Gilead Sciences, Inc.(1)

     496,010         24,269,770   
     

 

 

 
      $ 42,516,206   
     

 

 

 

Capital Markets — 1.4%

     

Charles Schwab Corp. (The)

     192,774       $ 3,410,172   

Goldman Sachs Group, Inc. (The)

     58,027         8,538,673   
     

 

 

 
      $ 11,948,845   
     

 

 

 

Chemicals — 3.1%

     

LyondellBasell Industries NV, Class A

     139,045       $ 8,800,158   

Monsanto Co.

     156,779         16,560,566   

PPG Industries, Inc.

     13,561         1,816,360   
     

 

 

 
      $ 27,177,084   
     

 

 

 

Commercial Banks — 4.2%

     

PNC Financial Services Group, Inc.

     151,102       $ 10,048,283   

Regions Financial Corp.

     982,098         8,043,383   

Wells Fargo & Co.

     486,077         17,979,988   
     

 

 

 
      $ 36,071,654   
     

 

 

 

Communications Equipment — 1.0%

     

QUALCOMM, Inc.

     129,395       $ 8,662,995   
     

 

 

 
      $ 8,662,995   
     

 

 

 

Computers & Peripherals — 2.4%

     

Apple, Inc.

     47,035       $ 20,819,102   
     

 

 

 
      $ 20,819,102   
     

 

 

 

Consumer Finance — 1.5%

     

American Express Co.

     190,953       $ 12,881,689   
     

 

 

 
      $ 12,881,689   
     

 

 

 

 

1

 

 


                                                 
Security    Shares      Value  

Diversified Financial Services — 5.3%

     

Bank of America Corp.

     1,074,076       $ 13,082,246   

Citigroup, Inc.

     373,190         16,509,926   

JPMorgan Chase & Co.

     343,986         16,325,575   
     

 

 

 
      $ 45,917,747   
     

 

 

 

Diversified Telecommunication Services — 2.2%

     

AT&T, Inc.

     118,985       $ 4,365,560   

Verizon Communications, Inc.

     293,157         14,408,666   
     

 

 

 
      $ 18,774,226   
     

 

 

 

Electric Utilities — 2.8%

     

American Electric Power Co., Inc.

     48,419       $ 2,354,616   

Duke Energy Corp.

     65,511         4,755,443   

Edison International

     103,463         5,206,258   

PPL Corp.

     162,448         5,086,247   

Southern Co. (The)

     153,691         7,211,182   
     

 

 

 
      $ 24,613,746   
     

 

 

 

Electrical Equipment — 1.4%

     

Emerson Electric Co.

     210,973       $ 11,787,062   
     

 

 

 
      $ 11,787,062   
     

 

 

 

Electronic Equipment, Instruments & Components — 0.4%

     

Corning, Inc.

     240,517       $ 3,206,092   
     

 

 

 
      $ 3,206,092   
     

 

 

 

Energy Equipment & Services — 1.7%

     

Cameron International Corp.(1)

     53,741       $ 3,503,913   

Halliburton Co.

     280,534         11,336,379   
     

 

 

 
      $ 14,840,292   
     

 

 

 

Food & Staples Retailing — 1.0%

     

Costco Wholesale Corp.

     84,923       $ 9,011,180   
     

 

 

 
      $ 9,011,180   
     

 

 

 

Food Products — 2.8%

     

Hershey Co. (The)

     86,446       $ 7,566,618   

Kraft Foods Group, Inc.

     137,608         7,090,940   

Mondelez International, Inc., Class A

     313,380         9,592,562   
     

 

 

 
      $ 24,250,120   
     

 

 

 

Health Care Equipment & Supplies — 1.9%

     

Abbott Laboratories

     190,727       $ 6,736,478   

Covidien PLC

     147,025         9,974,176   
     

 

 

 
      $ 16,710,654   
     

 

 

 

Health Care Providers & Services — 0.6%

     

Express Scripts Holding Co.(1)

     92,895       $ 5,355,397   
     

 

 

 
      $ 5,355,397   
     

 

 

 

Hotels, Restaurants & Leisure — 1.5%

     

McDonald’s Corp.

     129,361       $ 12,895,998   
     

 

 

 
      $ 12,895,998   
     

 

 

 

 

2

 

 


                                                 
Security    Shares      Value  

Household Products — 3.5%

     

Colgate-Palmolive Co.

     127,405       $ 15,037,612   

Procter & Gamble Co.

     199,928         15,406,452   
     

 

 

 
      $ 30,444,064   
     

 

 

 

Industrial Conglomerates — 3.7%

     

Danaher Corp.

     233,877       $ 14,535,456   

General Electric Co.

     750,112         17,342,589   
     

 

 

 
      $ 31,878,045   
     

 

 

 

Insurance — 2.0%

     

ACE, Ltd.

     94,373       $ 8,396,366   

Aflac, Inc.

     164,378         8,550,943   
     

 

 

 
      $ 16,947,309   
     

 

 

 

Internet & Catalog Retail — 2.2%

     

Amazon.com, Inc.(1)

     67,425       $ 17,968,088   

Netflix, Inc.(1)

     6,882         1,303,520   
     

 

 

 
      $ 19,271,608   
     

 

 

 

Internet Software & Services — 4.4%

     

eBay, Inc.(1)

     274,615       $ 14,889,625   

Google, Inc., Class A(1)

     29,033         23,053,073   
     

 

 

 
      $ 37,942,698   
     

 

 

 

IT Services — 6.5%

     

Accenture PLC, Class A

     210,160       $ 15,965,855   

International Business Machines Corp.

     110,453         23,559,625   

Teradata Corp.(1)

     134,812         7,887,850   

Visa, Inc., Class A

     53,170         9,030,393   
     

 

 

 
      $ 56,443,723   
     

 

 

 

Machinery — 1.0%

     

Deere & Co.

     104,137       $ 8,953,699   
     

 

 

 
      $ 8,953,699   
     

 

 

 

Media — 3.7%

     

Comcast Corp., Class A

     381,345       $ 16,020,303   

Walt Disney Co. (The)

     287,907         16,353,118   
     

 

 

 
      $ 32,373,421   
     

 

 

 

Metals & Mining — 0.4%

     

Freeport-McMoRan Copper & Gold, Inc.

     105,470       $ 3,491,057   
     

 

 

 
      $ 3,491,057   
     

 

 

 

Multi-Utilities — 0.6%

     

Sempra Energy

     69,500       $ 5,555,830   
     

 

 

 
      $ 5,555,830   
     

 

 

 

Multiline Retail — 2.5%

     

Dollar General Corp.(1)

     280,141       $ 14,169,532   

Macy’s, Inc.

     179,029         7,490,573   
     

 

 

 
      $ 21,660,105   
     

 

 

 

 

3

 

 


                                                 
Security    Shares      Value  

Oil, Gas & Consumable Fuels — 9.2%

     

Alpha Natural Resources, Inc.(1)

     594,902       $ 4,884,145   

Anadarko Petroleum Corp.

     79,015         6,909,862   

Chevron Corp.

     101,277         12,033,733   

ConocoPhillips

     152,165         9,145,117   

EOG Resources, Inc.

     55,743         7,139,006   

Exxon Mobil Corp.

     73,547         6,627,320   

HollyFrontier Corp.

     62,476         3,214,390   

Marathon Oil Corp.

     162,714         5,486,716   

Occidental Petroleum Corp.

     152,613         11,960,281   

Phillips 66

     182,012         12,735,380   
     

 

 

 
      $ 80,135,950   
     

 

 

 

Pharmaceuticals — 6.0%

     

AbbVie, Inc.

     154,944       $ 6,318,616   

Allergan, Inc.

     131,661         14,697,318   

Johnson & Johnson

     139,372         11,362,999   

Pfizer, Inc.

     681,966         19,681,539   
     

 

 

 
      $ 52,060,472   
     

 

 

 

Real Estate Investment Trusts (REITs) — 1.6%

     

AvalonBay Communities, Inc.

     54,354       $ 6,885,021   

Boston Properties, Inc.

     65,336         6,602,856   
     

 

 

 
      $ 13,487,877   
     

 

 

 

Road & Rail — 1.6%

     

Union Pacific Corp.

     97,312       $ 13,858,202   
     

 

 

 
      $ 13,858,202   
     

 

 

 

Semiconductors & Semiconductor Equipment — 0.3%

     

Broadcom Corp., Class A

     63,776       $ 2,211,114   
     

 

 

 
      $ 2,211,114   
     

 

 

 

Software — 2.6%

     

Microsoft Corp.

     526,642       $ 15,067,228   

Oracle Corp.

     243,690         7,880,934   
     

 

 

 
      $ 22,948,162   
     

 

 

 

Specialty Retail — 0.7%

     

Home Depot, Inc. (The)

     85,761       $ 5,984,403   
     

 

 

 
      $ 5,984,403   
     

 

 

 

Textiles, Apparel & Luxury Goods — 1.2%

     

NIKE, Inc., Class B

     171,616       $ 10,127,060   
     

 

 

 
      $ 10,127,060   
     

 

 

 

Tobacco — 1.2%

     

Philip Morris International, Inc.

     115,251       $ 10,684,922   
     

 

 

 
      $ 10,684,922   
     

 

 

 

Total Common Stocks
(identified cost $618,027,257)

      $ 872,463,641   
     

 

 

 

 

4

 

 


                                                 
Put Options Purchased — 0.2%      
                                                                                                   
Description   

Number of

Contracts

     Strike
Price
     Expiration
Date
     Value  

S&P 500 Index

     443       $ 1,500         4/5/13       $ 35,440   

S&P 500 Index

     446         1,515         4/12/13         130,455   

S&P 500 Index

     438         1,500         4/20/13         151,110   

S&P 500 Index

     439         1,510         4/26/13         272,180   

S&P 500 Index FLEX

     444         1,455         4/1/13         11   

S&P 500 Index FLEX

     443         1,490         4/3/13         2,904   

S&P 500 Index FLEX

     445         1,500         4/8/13         34,537   

S&P 500 Index FLEX

     445         1,505         4/10/13         60,742   

S&P 500 Index FLEX

     447         1,500         4/15/13         100,498   

S&P 500 Index FLEX

     438         1,510         4/17/13         153,712   

S&P 500 Index FLEX

     439         1,510         4/22/13         216,244   

S&P 500 Index FLEX

     442         1,510         4/24/13         243,083   
           

 

 

 

Total Put Options Purchased
(identified cost $3,519,692)

            $ 1,400,916   
           

 

 

 

Total Investments — 100.9%
(identified cost $621,546,949)

            $ 873,864,557   
           

 

 

 
Call Options Written — (0.6)%            
Description   

Number of

Contracts

    

Strike

Price

    

Expiration

Date

     Value  

S&P 500 Index

     443       $ 1,570         4/5/13       $ (327,820

S&P 500 Index

     446         1,580         4/12/13         (280,980

S&P 500 Index

     438         1,575         4/20/13         (516,840

S&P 500 Index

     439         1,590         4/26/13         (331,445

S&P 500 Index FLEX

     444         1,546         4/1/13         (1,045,861

S&P 500 Index FLEX

     443         1,567         4/3/13         (392,857

S&P 500 Index FLEX

     445         1,572         4/8/13         (418,984

S&P 500 Index FLEX

     445         1,580         4/10/13         (311,442

S&P 500 Index FLEX

     447         1,574         4/15/13         (529,596

S&P 500 Index FLEX

     438         1,580         4/17/13         (435,585

S&P 500 Index FLEX

     439         1,586         4/22/13         (406,916

S&P 500 Index FLEX

     442         1,587         4/24/13         (419,897

Total Call Options Written
(premiums received $3,684,668)

            $ (5,418,223
           

 

 

 

Other Assets, Less Liabilities — (0.3)%

            $ (2,330,215
           

 

 

 

Net Assets — 100.0%

            $ 866,116,119   
           

 

 

 

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

 

FLEX

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

 

(1) Non-income producing security.

 

5

 

 


The cost and unrealized appreciation (depreciation) of investments of the Fund at March 31, 2013, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

   $ 625,757,350   
  

 

 

 

Gross unrealized appreciation

   $ 252,369,302   

Gross unrealized depreciation

     (4,262,095
  

 

 

 

Net unrealized appreciation

   $     248,107,207   
  

 

 

 

A summary of obligations under these financial instruments at March 31, 2013 is as follows:

Forward Foreign Currency Exchange Contracts

Sales

 

Settlement
Date
    

Deliver

  

In Exchange For

  

Counterparty

   Net  Unrealized
Depreciation
 
4/30/13     

Japanese Yen

540,338,688

   United States Dollar
5,720,291
   Credit Suisse International    $     (20,831

Written options activity for the fiscal year to date ended March 31, 2013 was as follows:

 

     Number of
Contracts
    Premiums
Received
 
Outstanding, beginning of period      5,562      $ 4,805,536   
Options written      17,138        12,016,521   
Options terminated in closing purchase transactions      (14,630     (11,309,393
Options expired      (2,761     (1,827,996
  

 

 

   

 

 

 
Outstanding, end of period      5,309      $ 3,684,668   
  

 

 

   

 

 

 

All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent.

At March 31, 2013, the Fund had sufficient cash and/or securities to cover commitments under these contracts.

In the normal course of pursuing its investment objective, the Fund is subject to the following risks:

Foreign Exchange Risk: Because the Fund holds foreign currency denominated investments, the value of these investments and related receivables and payables may change due to future changes in foreign currency exchange rates. To hedge against this risk, the Fund enters into forward foreign currency exchange contracts. The Fund also enters into such contracts to hedge the currency risk of investments it anticipates purchasing.

Equity Price: 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) by risk exposure at March 31, 2013 was as follows:

 

          Fair Value  

Risk

  

Derivative

   Asset
Derivative
     Liability
Derivative
 
Equity Price    Options Purchased    $ 1,400,916       $   
Equity Price    Options Written              (5,418,223
     

 

 

    

 

 

 
      $ 1,400,916       $ (5,418,223
     

 

 

    

 

 

 
        
Foreign Exchange    Forward Foreign Currency Exchange Contracts    $       $ (20,831
     

 

 

    

 

 

 
      $     —       $     (20,831
     

 

 

    

 

 

 

 

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 March 31, 2013, 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

   $ 102,312,595      $ 5,671,743      $       $ 107,984,338   

Consumer Staples

     93,315,913                       93,315,913   

Energy

     94,976,242                       94,976,242   

Financials

     137,255,121                       137,255,121   

Health Care

     116,642,729                       116,642,729   

Industrials

     90,443,469                       90,443,469   

Information Technology

     152,233,886                       152,233,886   

Materials

     30,668,141                       30,668,141   

Telecommunication Services

     18,774,226                       18,774,226   

Utilities

     30,169,576                       30,169,576   

Total Common Stocks

   $ 866,791,898      $ 5,671,743   $       $ 872,463,641   

Put Options Purchased

   $ 589,185      $ 811,731      $       $ 1,400,916   

Total Investments

   $     867,381,083      $     6,483,474      $       $     873,864,557   
Liability Description                              

Call Options Written

   $ (1,457,085   $ (3,961,138   $       $ (5,418,223

Forward Foreign Currency Exchange Contracts

            (20,831             (20,831

Total

   $ (1,457,085   $ (3,981,969   $       $ (5,439,054

 

* 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 December 31, 2012 whose fair value was determined using Level 3 inputs. At March 31, 2013, there were no investments transferred between Level 1 and Level 2 during the fiscal year to date then ended.

Forward foreign currency exchange contracts are generally valued at the mean of the average bid and average asked prices that are reported by currency dealers to a third party pricing service at the valuation time. Such third party pricing service valuations are supplied for specific settlement periods and the Fund’s forward foreign currency exchange contracts are valued at an interpolated rate between the closest preceding and subsequent settlement period reported by the third party pricing service. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from movements in the value of a foreign currency relative to the U.S. dollar.

For additional 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 Risk-Managed Diversified Equity Income Fund

 

By:   /s/ Walter A. Row, III
  Walter A. Row, III
  President
Date:   May 24, 2013

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:   May 24, 2013

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   May 24, 2013