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, 2017

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Risk-Managed Diversified Equity Income Fund

September 30, 2017

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 100.2%

 

                                                 
Security    Shares      Value  

Air Freight & Logistics — 2.7%

 

FedEx Corp.

      75,575      $ 17,048,209  
     

 

 

  
   $ 17,048,209  
     

 

 

  

Auto Components — 2.0%

 

Delphi Automotive PLC

      131,206      $ 12,910,670  
     

 

 

  
   $ 12,910,670  
     

 

 

  

Banks — 7.5%

 

Bank of America Corp.

      692,497      $ 17,547,874  

First Republic Bank

      66,666        6,963,931  

JPMorgan Chase & Co.

      238,569        22,785,725  
     

 

 

  
   $ 47,297,530  
     

 

 

  

Beverages — 1.2%

 

Constellation Brands, Inc., Class A

      37,681      $ 7,515,475  
     

 

 

  
   $ 7,515,475  
     

 

 

  

Biotechnology — 4.4%

 

Celgene Corp.(1)

      116,836      $ 17,037,025  

Gilead Sciences, Inc.

      133,099        10,783,681  
     

 

 

  
   $ 27,820,706  
     

 

 

  

Capital Markets — 3.1%

 

Charles Schwab Corp. (The)

      265,533      $ 11,614,413  

Credit Suisse Group AG(1)

      520,117        8,241,040  
     

 

 

  
   $ 19,855,453  
     

 

 

  

Containers & Packaging — 2.9%

 

International Paper Co.

      211,258      $ 12,003,679  

Sealed Air Corp.

      147,169        6,287,060  
     

 

 

  
   $ 18,290,739  
     

 

 

  

Diversified Telecommunication Services — 3.5%

 

AT&T, Inc.

      351,346      $ 13,762,223  

Zayo Group Holdings, Inc.(1)

      246,551        8,486,285  
     

 

 

  
   $ 22,248,508  
     

 

 

  

Electric Utilities — 1.6%

 

NextEra Energy, Inc.

      70,555      $ 10,339,835  
     

 

 

  
   $ 10,339,835  
     

 

 

  

Energy Equipment & Services — 0.9%

 

Oceaneering International, Inc.

      207,554      $ 5,452,444  
     

 

 

  
   $ 5,452,444  
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Equity Real Estate Investment Trusts (REITs) — 2.8%

 

Equity Residential

      105,072      $ 6,927,397  

Simon Property Group, Inc.

      68,163        10,974,925  
     

 

 

  
   $ 17,902,322  
     

 

 

  

Food Products — 1.2%

 

Mondelez International, Inc., Class A

      184,661      $ 7,508,316  
     

 

 

  
   $ 7,508,316  
     

 

 

  

Health Care Equipment & Supplies — 2.3%

 

Danaher Corp.

      170,879      $ 14,658,001  
     

 

 

  
   $ 14,658,001  
     

 

 

  

Household Durables — 2.2%

 

Newell Brands, Inc.

      163,796      $ 6,989,176  

Whirlpool Corp.

      37,096        6,841,986  
     

 

 

  
   $ 13,831,162  
     

 

 

  

Household Products — 1.3%

 

Colgate-Palmolive Co.

      110,817      $ 8,073,018  
     

 

 

  
   $ 8,073,018  
     

 

 

  

Industrial Conglomerates — 1.2%

 

General Electric Co.

      321,353      $ 7,770,316  
     

 

 

  
   $ 7,770,316  
     

 

 

  

Insurance — 3.4%

 

American Financial Group, Inc.

      95,893      $ 9,920,131  

Chubb, Ltd.

      80,200        11,432,510  
     

 

 

  
   $ 21,352,641  
     

 

 

  

Internet & Direct Marketing Retail — 2.9%

 

Amazon.com, Inc.(1)

      18,930      $ 18,198,355  
     

 

 

  
   $ 18,198,355  
     

 

 

  

Internet Software & Services — 6.8%

 

Akamai Technologies, Inc.(1)

      128,460      $ 6,258,571  

Alphabet, Inc., Class C(1)

      26,432        25,351,196  

Facebook, Inc., Class A(1)

      31,058        5,306,880  

GoDaddy, Inc., Class A(1)

      138,670        6,033,532  
     

 

 

  
   $ 42,950,179  
     

 

 

  

IT Services — 3.3%

 

Visa, Inc., Class A

      198,548      $ 20,895,192  
     

 

 

  
   $ 20,895,192  
     

 

 

  

Machinery — 5.1%

 

Caterpillar, Inc.

      122,323      $ 15,254,901  

Fortive Corp.

      235,403        16,664,179  
     

 

 

  
   $ 31,919,080  
     

 

 

  

Multi-Utilities — 1.4%

 

Sempra Energy

      78,730      $ 8,985,455  
     

 

 

  
   $ 8,985,455  
     

 

 

  

Oil, Gas & Consumable Fuels — 5.7%

 

Chevron Corp.

      116,542      $ 13,693,685  

ConocoPhillips

      169,488        8,482,875  

EOG Resources, Inc.

      83,787        8,105,554  

Phillips 66

      65,371        5,988,637  
     

 

 

  
   $ 36,270,751  
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Personal Products — 2.4%

 

Estee Lauder Cos., Inc. (The), Class A

      52,693      $ 5,682,413  

Unilever NV

      158,279        9,356,022  
     

 

 

  
   $ 15,038,435  
     

 

 

  

Pharmaceuticals — 7.1%

 

Allergan PLC

      39,741      $ 8,144,918  

Johnson & Johnson

      175,326        22,794,133  

Zoetis, Inc.

      216,859        13,826,930  
     

 

 

  
   $ 44,765,981  
     

 

 

  

Road & Rail — 2.4%

 

CSX Corp.

      280,989      $ 15,246,463  
     

 

 

  
   $ 15,246,463  
     

 

 

  

Semiconductors & Semiconductor Equipment — 3.6%

 

Intel Corp.

      366,049      $ 13,939,146  

QUALCOMM, Inc.

      169,057        8,763,915  
     

 

 

  
   $ 22,703,061  
     

 

 

  

Software — 4.4%

 

Microsoft Corp.

      374,643      $ 27,907,157  
     

 

 

  
   $ 27,907,157  
     

 

 

  

Specialty Retail — 3.1%

 

Home Depot, Inc. (The)

      120,889      $ 19,772,605  
     

 

 

  
   $ 19,772,605  
     

 

 

  

Technology Hardware, Storage & Peripherals — 4.3%

 

Apple, Inc.

      178,070      $ 27,444,148  
     

 

 

  
   $ 27,444,148  
     

 

 

  

Textiles, Apparel & Luxury Goods — 0.8%

 

NIKE, Inc., Class B

      95,735      $ 4,963,860  
     

 

 

  
   $ 4,963,860  
     

 

 

  

Tobacco — 2.7%

 

Altria Group, Inc.

      263,527      $ 16,712,882  
     

 

 

  
   $ 16,712,882  
     

 

 

  

Total Common Stocks
(identified cost $564,091,069)

 

    $ 633,648,949  
     

 

 

  

Short-Term Investments — 0.5%

 

Description    Units      Value  

Eaton Vance Cash Reserves Fund, LLC, 1.31%(2)

      2,793,264      $ 2,793,543  
     

 

 

  

Total Short-Term Investments
(identified cost $2,793,823)

 

    $ 2,793,543  
     

 

 

  

 

3

 

 

                                                 
            Value  

Total Put Options Purchased — 0.1%
(identified cost $1,991,662)

    $ 569,113  
     

 

 

  

Total Investments — 100.8%
(identified cost $568,876,554)

    $ 637,011,605  
     

 

 

  

Total Call Options Written — (0.7)%
(premiums received $2,346,571)

    $ (4,390,370 ) 
     

 

 

  

Other Assets, Less Liabilities — (0.1)%

    $ (436,631 ) 
     

 

 

  

Net Assets — 100.0%

    $ 632,184,604  
     

 

 

  

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

 

(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, 2017. Net income from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended September 30, 2017 was $57,972.

 

                                                                                                                            

Put Options Purchased — 0.1%

 

Exchange-Traded Options — 0.1%

 

Description    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      200      $ 50,387,200      $ 2,400        10/2/17      $ 1,500  

S&P 500 Index

      198        49,883,328        2,395        10/4/17        3,960  

S&P 500 Index

      201        50,639,136        2,390        10/6/17        6,030  

S&P 500 Index

      199        50,135,264        2,420        10/9/17        12,935  

S&P 500 Index

      201        50,639,136        2,430        10/11/17        23,618  

S&P 500 Index

      202        50,891,072        2,440        10/13/17        37,875  

S&P 500 Index

      200        50,387,200        2,450        10/16/17        52,500  

S&P 500 Index

      201        50,639,136        2,450        10/18/17        66,330  

S&P 500 Index

      200        50,387,200        2,435        10/20/17        67,000  

S&P 500 Index

      200        50,387,200        2,435        10/23/17        73,000  

S&P 500 Index

      200        50,387,200        2,445        10/25/17        98,000  

S&P 500 Index

      199        50,135,264        2,455        10/27/17        126,365  
              

 

 

  

Total

 

    $ 569,113  
              

 

 

  

 

4

 

 

                                                                                                                            

Call Options Written — (0.7)%

 

Exchange-Traded Options — (0.7)%

 

Description    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      200      $ 50,387,200        2,495        10/2/17      $ (473,000 ) 

S&P 500 Index

      198        49,883,328        2,490        10/4/17        (594,000 ) 

S&P 500 Index

      201        50,639,136        2,485        10/6/17        (703,500 ) 

S&P 500 Index

      199        50,135,264        2,500        10/9/17        (441,780 ) 

S&P 500 Index

      201        50,639,136        2,515        10/11/17        (251,250 ) 

S&P 500 Index

      202        50,891,072        2,515        10/13/17        (283,810 ) 

S&P 500 Index

      200        50,387,200        2,520        10/16/17        (233,000 ) 

S&P 500 Index

      201        50,639,136        2,525        10/18/17        (209,040 ) 

S&P 500 Index

      200        50,387,200        2,515        10/20/17        (356,000 ) 

S&P 500 Index

      200        50,387,200        2,515        10/23/17        (370,000 ) 

S&P 500 Index

      200        50,387,200        2,525        10/25/17        (274,000 ) 

S&P 500 Index

      199        50,135,264        2,535        10/27/17        (200,990 ) 
              

 

 

  

Total

 

    $ (4,390,370 ) 
              

 

 

  

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, 2017, 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 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, 2017 was as follows:

 

     Fair Value  

Derivative

    Asset
Derivative		      Liability
Derivative		  

Purchased options

    $ 569,113      $ —  

Written options

      —        (4,390,370 ) 
  

 

 

     

 

 

  

Total

    $     569,113      $     (4,390,370 ) 
  

 

 

     

 

 

  

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)

 

5

 

 

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, 2017, 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

    $ 69,676,652      $ —      $ —      $ 69,676,652  

Consumer Staples

      45,492,104        9,356,022        —        54,848,126  

Energy

      41,723,195        —        —        41,723,195  

Financials

      80,264,584        8,241,040        —        88,505,624  

Health Care

      87,244,688        —        —        87,244,688  

Industrials

      71,984,068        —        —        71,984,068  

Information Technology

      141,899,737        —            —        141,899,737  

Materials

      18,290,739        —        —        18,290,739  

Real Estate

      17,902,322        —        —        17,902,322  

Telecommunication Services

      22,248,508        —        —        22,248,508  

Utilities

      19,325,290        —        —        19,325,290  

Total Common Stocks

    $     616,051,887      $     17,597,062 *     $ —      $     633,648,949  

Short-Term Investments

    $ —      $ 2,793,543      $ —      $ 2,793,543  

Put Options Purchased

      569,113        —        —        569,113  

Total Investments

    $ 616,621,000      $ 20,390,605      $ —      $ 637,011,605  
Liability Description                                

Call Options Written

    $ (4,390,370 )     $ —      $ —      $ (4,390,370 ) 

Total

    $ (4,390,370 )     $ —      $ —      $ (4,390,370 ) 

 

* 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, 2016 whose fair value was determined using Level 3 inputs. At September 30, 2017, 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.

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 Risk-Managed Diversified Equity Income Fund

 

By:   /s/ Edward J. Perkin
  Edward J. Perkin
  President
Date:   November 27, 2017

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:   November 27, 2017

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   November 27, 2017