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, 2016

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Risk-Managed Diversified Equity Income Fund

March 31, 2016

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 101.0%

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 2.0%

      

United Technologies Corp.

      136,480       $ 13,661,648   
     

 

 

  
      $ 13,661,648   
     

 

 

  

Air Freight & Logistics — 1.1%

      

C.H. Robinson Worldwide, Inc.

      99,328       $ 7,373,118   
     

 

 

  
      $ 7,373,118   
     

 

 

  

Banks — 4.5%

      

JPMorgan Chase & Co.

      282,009       $ 16,700,573   

PNC Financial Services Group, Inc. (The)

      95,142         8,046,159   

Wells Fargo & Co.

      104,206         5,039,402   
     

 

 

  
      $ 29,786,134   
     

 

 

  

Beverages — 1.5%

      

Constellation Brands, Inc., Class A

      65,046       $ 9,827,800   
     

 

 

  
      $ 9,827,800   
     

 

 

  

Biotechnology — 1.7%

      

Celgene Corp.(1)

      110,729       $ 11,082,866   
     

 

 

  
      $ 11,082,866   
     

 

 

  

Capital Markets — 3.6%

      

Charles Schwab Corp. (The)

      345,534       $ 9,681,863   

Credit Suisse Group AG

      183,778         2,595,303   

Credit Suisse Group AG(2)

      62,139         877,523   

Goldman Sachs Group, Inc. (The)

      69,742         10,948,099   
     

 

 

  
      $ 24,102,788   
     

 

 

  

Chemicals — 1.8%

      

CF Industries Holdings, Inc.

      112,824       $ 3,535,904   

PPG Industries, Inc.

      78,069         8,703,913   
     

 

 

  
      $ 12,239,817   
     

 

 

  

Diversified Telecommunication Services — 3.1%

      

Verizon Communications, Inc.

      265,783       $ 14,373,545   

Zayo Group Holdings, Inc.(1)

      254,168         6,161,032   
     

 

 

  
      $ 20,534,577   
     

 

 

  

Electric Utilities — 1.8%

      

NextEra Energy, Inc.

      102,053       $ 12,076,952   
     

 

 

  
      $ 12,076,952   
     

 

 

  

Electrical Equipment — 1.1%

  

Rockwell Automation, Inc.

      67,489       $ 7,676,874   
     

 

 

  
   $ 7,676,874   
     

 

 

  

Electronic Equipment, Instruments & Components — 1.7%

      

Corning, Inc.

      537,163       $ 11,221,335   
     

 

 

  
   $ 11,221,335   
     

 

 

  

Energy Equipment & Services — 1.1%

      

Schlumberger, Ltd.

      98,821       $ 7,288,049   
     

 

 

  
   $ 7,288,049   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Food & Staples Retailing — 1.9%

      

Kroger Co. (The)

      329,985       $ 12,621,926   
     

 

 

  
   $ 12,621,926   
     

 

 

  

Food Products — 4.1%

      

General Mills, Inc.

      249,352       $ 15,796,449   

Mondelez International, Inc., Class A

      289,517         11,615,422   
     

 

 

  
   $ 27,411,871   
     

 

 

  

Health Care Equipment & Supplies — 2.7%

      

Medtronic PLC

      160,979       $ 12,073,425   

Zimmer Biomet Holdings, Inc.

      56,111         5,983,116   
     

 

 

  
   $ 18,056,541   
     

 

 

  

Household Durables — 1.2%

      

Newell Rubbermaid, Inc.

      177,990       $ 7,883,177   
     

 

 

  
   $ 7,883,177   
     

 

 

  

Industrial Conglomerates — 6.1%

      

Danaher Corp.

      172,900       $ 16,401,294   

General Electric Co.

      770,837         24,504,908   
     

 

 

  
   $ 40,906,202   
     

 

 

  

Insurance — 4.4%

      

Aflac, Inc.

      121,975       $ 7,701,501   

American Financial Group, Inc.

      75,904         5,341,364   

MetLife, Inc.

      196,356         8,627,883   

XL Group PLC

      202,092         7,436,986   
     

 

 

  
   $ 29,107,734   
     

 

 

  

Internet & Catalog Retail — 2.9%

      

Amazon.com, Inc.(1)

      32,981       $ 19,578,841   
     

 

 

  
   $ 19,578,841   
     

 

 

  

Internet Software & Services — 6.7%

  

Alphabet, Inc., Class C(1)

      38,606       $ 28,759,540   

Facebook, Inc., Class A(1)

      141,721         16,170,366   
     

 

 

  
   $ 44,929,906   
     

 

 

  

IT Services — 3.0%

      

Visa, Inc., Class A

      260,586       $ 19,929,617   
     

 

 

  
   $ 19,929,617   
     

 

 

  

Media — 3.0%

      

Walt Disney Co. (The)

      198,980       $ 19,760,704   
     

 

 

  
   $ 19,760,704   
     

 

 

  

Multi-Utilities — 1.7%

      

Sempra Energy

      107,708       $ 11,207,017   
     

 

 

  
   $ 11,207,017   
     

 

 

  

Multiline Retail — 2.7%

      

Dollar General Corp.

      89,457       $ 7,657,519   

Target Corp.

      123,709         10,178,777   
     

 

 

  
   $ 17,836,296   
     

 

 

  

Oil, Gas & Consumable Fuels — 5.6%

      

Chevron Corp.

      129,425       $ 12,347,145   

EOG Resources, Inc.

      115,045         8,349,966   

Occidental Petroleum Corp.

      136,160         9,317,429   

Royal Dutch Shell PLC, Class B

      304,457         7,408,888   
     

 

 

  
   $ 37,423,428   
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Pharmaceuticals — 8.9%

      

Allergan PLC(1)

      43,702       $ 11,713,447   

Bristol-Myers Squibb Co.

      166,983         10,666,874   

Eli Lilly & Co.

      150,187         10,814,966   

Johnson & Johnson

      181,114         19,596,535   

Teva Pharmaceutical Industries, Ltd. ADR

      124,256         6,648,938   
     

 

 

  
   $ 59,440,760   
     

 

 

  

Real Estate Investment Trusts (REITs) — 2.2%

      

Equity Residential

      102,486       $ 7,689,524   

Federal Realty Investment Trust

      45,156         7,046,594   
     

 

 

  
   $ 14,736,118   
     

 

 

  

Semiconductors & Semiconductor Equipment — 3.6%

      

Intel Corp.

      287,008       $ 9,284,709   

NXP Semiconductors NV(1)

      179,951         14,588,627   
     

 

 

  
   $ 23,873,336   
     

 

 

  

Software — 5.6%

  

Microsoft Corp.

      369,656       $ 20,416,101   

Oracle Corp.

      420,788         17,214,437   
     

 

 

  
   $ 37,630,538   
     

 

 

  

Specialty Retail — 1.5%

      

Lowe’s Cos., Inc.

      131,061       $ 9,927,871   
     

 

 

  
   $ 9,927,871   
     

 

 

  

Technology Hardware, Storage & Peripherals — 3.5%

      

Apple, Inc.

      212,615       $ 23,172,909   
     

 

 

  
   $ 23,172,909   
     

 

 

  

Textiles, Apparel & Luxury Goods — 2.8%

      

Hanesbrands, Inc.

      255,537       $ 7,241,919   

NIKE, Inc., Class B

      189,067         11,621,948   
     

 

 

  
   $ 18,863,867   
     

 

 

  

Tobacco — 1.9%

      

Altria Group, Inc.

      208,496       $ 13,064,359   
     

 

 

  
   $ 13,064,359   
     

 

 

  

Total Common Stocks
(identified cost $545,166,999)

   

    $ 674,234,976   
     

 

 

  

Put Options Purchased — 0.1%

      

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      267       $ 1,930         4/1/16       $ 2,003   

S&P 500 Index

      264         1,935         4/8/16         12,540   

S&P 500 Index

      259         1,975         4/15/16         73,815   

S&P 500 Index

      259         1,950         4/22/16         91,945   

S&P 500 Index FLEX

      269         1,900         4/4/16         12   

S&P 500 Index FLEX

      265         1,900         4/6/16         245   

S&P 500 Index FLEX

      268         1,935         4/11/16         15,858   

S&P 500 Index FLEX

      262         1,945         4/13/16         31,801   

S&P 500 Index FLEX

      258         1,970         4/18/16         101,835   

S&P 500 Index FLEX

      258         1,975         4/20/16         131,284   

S&P 500 Index FLEX

      259         1,955         4/25/16         137,274   

S&P 500 Index FLEX

      255         2,000         4/27/16         280,515   
           

 

 

  

Total Put Options Purchased
(identified cost $3,716,354)

   

    $ 879,127   
           

 

 

  

 

3

 

 

                                                 

Short-Term Investments — 0.1%

      
Description    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.52%(3)

    $ 768       $ 767,604   
     

 

 

  

Total Short-Term Investments
(identified cost $767,604)

       $ 767,604   
     

 

 

  

Total Investments — 101.2%
(identified cost $549,650,957)

       $ 675,881,707   
     

 

 

  

Call Options Written — (0.9)%

      

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      267       $ 2,035         4/1/16       $ (678,180 ) 

S&P 500 Index

      264         2,055         4/8/16         (402,600 ) 

S&P 500 Index

      259         2,080         4/15/16         (207,200 ) 

S&P 500 Index

      259         2,065         4/22/16         (495,985 ) 

S&P 500 Index FLEX

      269         2,037         4/4/16         (712,692 ) 

S&P 500 Index FLEX

      265         2,026         4/6/16         (1,000,808 ) 

S&P 500 Index FLEX

      268         2,057         4/11/16         (473,261 ) 

S&P 500 Index FLEX

      262         2,057         4/13/16         (504,789 ) 

S&P 500 Index FLEX

      258         2,081         4/18/16         (278,668 ) 

S&P 500 Index FLEX

      258         2,073         4/20/16         (399,345 ) 

S&P 500 Index FLEX

      259         2,077         4/25/16         (420,276 ) 

S&P 500 Index FLEX

      255         2,097         4/27/16         (237,811 ) 
           

 

 

  

Total Call Options Written
(premiums received $3,870,300)

             $ (5,811,615 ) 
           

 

 

  

Other Assets, Less Liabilities — (0.3)%

  

    $ (2,449,702 ) 
           

 

 

  

Net Assets — 100.0%

  

    $ 667,620,390   
           

 

 

  

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

 

(1) Non-income producing security.

 

(2) Security was acquired in a private offering and may be resold on a designated offshore securities market pursuant to Regulation S under the Securities Act of 1933.

 

(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 March 31, 2016. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended March 31, 2016 was $4,502.

Abbreviations:

 

ADR

   -   American Depositary Receipt

FLEX

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

Written options activity for the fiscal year to date ended March 31, 2016 was as follows:

 

     Number of
Contracts		      Premiums
Received		  
Outstanding, beginning of period      3,313       $ 4,796,936   
Options written      10,282         15,517,678   
Options terminated in closing purchase transactions      (1,089 )       (1,689,893 ) 
Options exercised      (2,733 )       (4,623,885 ) 
Options expired      (6,630 )       (10,130,536 ) 
  

 

 

     

 

 

  
Outstanding, end of period      3,143       $     3,870,300   
  

 

 

     

 

 

  

 

4

 

 

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 March 31, 2016, 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 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 March 31, 2016 was as follows:

 

     Fair Value  

Derivative

    Asset
Derivative		      Liability
Derivative		  

Purchased options

    $ 879,127       $ —   

Written options

      —         (5,811,615 ) 
  

 

 

     

 

 

  

Total

    $     879,127       $     (5,811,615 ) 
  

 

 

     

 

 

  

The cost and unrealized appreciation (depreciation) of investments of the Fund at March 31, 2016, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $ 546,055,103   
  

 

 

  

Gross unrealized appreciation

    $ 147,696,608   

Gross unrealized depreciation

      (17,870,004 ) 
  

 

 

  

Net unrealized appreciation

    $     129,826,604   
  

 

 

  

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, 2016, 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

    $ 93,850,756       $ —       $ —       $ 93,850,756   

Consumer Staples

      62,925,956         —         —         62,925,956   

Energy

      37,302,589         7,408,888         —         44,711,477   

Financials

      94,259,948         3,472,826         —         97,732,774   

Health Care

      88,580,167         —         —         88,580,167   

Industrials

      69,617,842         —         —         69,617,842   

Information Technology

      160,757,641         —         —         160,757,641   

Materials

      12,239,817         —         —         12,239,817   

Telecommunication Services

      20,534,577         —         —         20,534,577   

Utilities

      23,283,969         —         —         23,283,969   

Total Common Stocks

    $     663,353,262       $     10,881,714 *     $     —       $     674,234,976   

 

5

 

 

Asset Description    Level 1      Level 2      Level 3      Total  

Put Options Purchased

    $ 180,303       $ 698,824       $ —       $ 879,127   

Short-Term Investments

      —         767,604         —         767,604   

Total Investments

    $     663,533,565       $     12,348,142       $ —       $     675,881,707   
Liability Description                                

Call Options Written

    $ (1,783,965 )     $ (4,027,650 )     $ —       $ (5,811,615 ) 

Total

    $     (1,783,965 )     $     (4,027,650 )     $ —       $ (5,811,615 ) 

 

* 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, 2015 whose fair value was determined using Level 3 inputs. At March 31, 2016, 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:   May 23, 2016

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:   May 23, 2016

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   May 23, 2016