Eaton Vance Tax-Managed Diversified Equity Income
Table of Contents

 
 
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
January 31, 2009
Date of Reporting Period
 
 

 

TABLE OF CONTENTS

Item 1. Schedule of Investments
Item 2. Controls and Procedures
Signatures
EX-99.CERT Section 302 Certifications

Table of Contents

Item 1. Schedule of Investments

 

Table of Contents

     
Eaton Vance Tax-Managed Diversified Equity Income Fund   as of January 31, 2009
PORTFOLIO OF INVESTMENTS (Unaudited)
Common Stocks — 93.1%
                 
Security   Shares     Value  
Aerospace & Defense — 4.9%
                
General Dynamics Corp.
     362,188     $ 20,546,925  
Lockheed Martin Corp.
     271,765       22,295,601  
Raytheon Co.
     341,979       17,310,977  
United Technologies Corp.
     534,507       25,650,991  
 
              
 
           $ 85,804,494  
 
              
Auto Components — 0.4%
                
Johnson Controls, Inc.
     498,752     $ 6,239,387  
 
              
 
           $ 6,239,387  
 
              
Beverages — 2.5%
                
Coca-Cola Co. (The)
     418,283     $ 17,869,050  
PepsiCo, Inc.
     515,673       25,902,255  
 
              
 
           $ 43,771,305  
 
              
Biotechnology — 2.5%
                
Amgen, Inc.(1)
     236,712     $ 12,983,653  
Biogen Idec, Inc.(1)
     172,845       8,408,909  
Genzyme Corp.(1)
     331,555       22,850,771  
 
              
 
           $ 44,243,333  
 
              
Capital Markets — 2.9%
                
Bank of New York Mellon Corp. (The)
     342,331     $ 8,811,600  
Credit Suisse Group
     368,122       9,395,036  
Goldman Sachs Group, Inc.
     131,166       10,589,031  
Invesco, Ltd.
     508,607       5,996,477  
Julius Baer Holding AG
     363,391       10,776,519  
T. Rowe Price Group, Inc.
     194,233       5,356,946  
 
              
 
           $ 50,925,609  
 
              
Chemicals — 0.7%
                
E.I. Du Pont de Nemours & Co.
     529,290     $ 12,152,498  
 
              
 
           $ 12,152,498  
 
              
Commercial Banks — 1.6%
                
Banco Bradesco SA ADR
     1     $ 4  
Banco Santander Central Hispano SA
     585,659       4,739,228  
HSBC Holdings PLC
     1,144,104       8,876,857  
Wells Fargo & Co.
     793,710       15,001,119  
 
              
 
           $ 28,617,208  
 
              
Commercial Services & Supplies — 0.9%
                
Waste Management, Inc.
     498,002     $ 15,532,682  
 
              
 
           $ 15,532,682  
 
              
Communications Equipment — 3.2%
                
Cisco Systems, Inc.(1)
     1,812,593     $ 27,134,517  
Nokia Oyj ADR
     300,000       3,681,000  
QUALCOMM, Inc.
     734,207       25,366,852  
 
              
 
           $ 56,182,369  
 
              
Computers & Peripherals — 5.1%
                
Apple, Inc.(1)
     194,590     $ 17,538,397  
Hewlett-Packard Co.
     959,803       33,353,154  
International Business Machines Corp.
     431,798       39,574,287  
 
              
 
           $ 90,465,838  
 
              
Diversified Financial Services — 1.8%
                
Bank of America Corp.
     548,955     $ 3,612,124  
Citigroup, Inc.
     827,389       2,937,231  
JPMorgan Chase & Co.
     997,650       25,450,051  
 
              
 
           $ 31,999,406  
 
              

1

 

Table of Contents

                 
Security   Shares     Value  
Diversified Telecommunication Services — 2.9%
                
AT&T, Inc.
     821,020     $ 20,213,512  
BCE, Inc.
     500,000       10,230,000  
Verizon Communications, Inc.
     691,682       20,660,541  
 
              
 
           $ 51,104,053  
 
              
Electric Utilities — 2.8%
                
E.ON AG
     564,258     $ 18,175,317  
Edison International
     484,150       15,768,765  
FirstEnergy Corp.
     235,932       11,794,241  
Iberdrola SA
     538,537       4,192,420  
 
              
 
           $ 49,930,743  
 
              
Electrical Equipment — 1.8%
                
ABB, Ltd.(1)
     252,429     $ 3,277,953  
Emerson Electric Co.
     609,703       19,937,288  
Vestas Wind Systems A/S(1)
     184,627       8,891,665  
 
              
 
           $ 32,106,906  
 
              
Energy Equipment & Services — 1.7%
                
Diamond Offshore Drilling, Inc.
     205,096     $ 12,871,825  
Schlumberger, Ltd.
     430,344       17,562,339  
 
              
 
           $ 30,434,164  
 
              
Food & Staples Retailing — 2.2%
                
CVS Caremark Corp.
     624,937     $ 16,798,307  
Kroger Co. (The)
     204,381       4,598,572  
Wal-Mart Stores, Inc.
     349,620       16,474,094  
 
              
 
           $ 37,870,973  
 
              
Food Products — 3.3%
                
Groupe Danone
     84,641     $ 4,344,338  
Nestle SA
     861,427       29,770,320  
Nestle SA ADR
     319,837       11,018,385  
Unilever NV
     566,760       12,493,291  
 
              
 
           $ 57,626,334  
 
              
Health Care Equipment & Supplies — 2.2%
                
Baxter International, Inc.
     218,713     $ 12,827,517  
Becton, Dickinson & Co.
     93,781       6,815,065  
Boston Scientific Corp.(1)
     877,418       7,782,698  
Medtronic, Inc.
     356,536       11,940,391  
 
              
 
           $ 39,365,671  
 
              
Health Care Providers & Services — 1.3%
                
Aetna, Inc.
     299,251     $ 9,276,781  
Fresenius Medical Care AG & Co. KGaA ADR
     97,630       4,369,919  
UnitedHealth Group, Inc.
     323,476       9,164,075  
 
              
 
           $ 22,810,775  
 
              
Hotels, Restaurants & Leisure — 1.6%
                
McDonald’s Corp.
     477,077     $ 27,680,008  
 
              
 
           $ 27,680,008  
 
              
Household Durables — 2.0%
                
Centex Corp.
     514,627     $ 4,379,476  
D.R. Horton, Inc.
     858,770       5,118,269  
KB HOME
     387,851       4,138,370  
Lennar Corp., Class A
     660,357       5,078,145  
NVR, Inc.(1)
     10,335       4,403,640  
Pulte Homes, Inc.
     560,142       5,685,441  
Ryland Group, Inc.
     106,254       1,657,562  
Toll Brothers, Inc.(1)
     279,790       4,762,026  
 
              
 
           $ 35,222,929  
 
              
Household Products — 2.2%
                
Clorox Co.
     96,834     $ 4,856,225  
Colgate-Palmolive Co.
     291,647       18,968,721  
Procter & Gamble Co.
     283,641       15,458,434  
 
              
 
           $ 39,283,380  
 
              
Industrial Conglomerates — 1.7%
                
General Electric Co.
     1,862,318     $ 22,589,917  
Siemens AG
     145,329       8,183,765  
 
              
 
           $ 30,773,682  
 
              
Insurance — 4.6%
                
ACE, Ltd.
     129,307     $ 5,645,544  
Aflac, Inc.
     146,581       3,402,145  
Allianz SE
     110,480       9,263,146  
Chubb Corp.
     309,971       13,198,565  

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Table of Contents

                 
Security   Shares     Value  
MetLife, Inc.
     243,737     $ 7,002,564  
Travelers Companies, Inc. (The)
     571,396       22,078,741  
Zurich Financial Services AG
     115,592       20,842,598  
 
              
 
           $ 81,433,303  
 
              
Internet Software & Services — 1.6%
                
Google, Inc., Class A(1)
     83,054     $ 28,116,271  
 
              
 
           $ 28,116,271  
 
              
IT Services — 1.7%
                
Accenture, Ltd., Class A
     248,425     $ 7,840,293  
MasterCard, Inc., Class A
     97,580       13,249,412  
Visa, Inc., Class A
     169,114       8,345,776  
 
              
 
           $ 29,435,481  
 
              
Life Sciences Tools & Services — 0.5%
                
Thermo Fisher Scientific, Inc.(1)
     264,139     $ 9,490,514  
 
              
 
           $ 9,490,514  
 
              
Machinery — 1.5%
                
Danaher Corp.
     323,637     $ 18,101,017  
Illinois Tool Works, Inc.
     230,795       7,537,765  
 
              
 
           $ 25,638,782  
 
              
Media — 2.2%
                
Comcast Corp., Class A
     1,650,164     $ 24,174,903  
Time Warner, Inc.
     880,013       8,210,521  
Vivendi SA
     238,195       6,136,059  
 
              
 
           $ 38,521,483  
 
              
Metals & Mining — 2.6%
                
Anglo American PLC
     177,796     $ 3,198,296  
ArcelorMittal
     83,309       1,864,278  
BHP Billiton, Ltd. ADR
     225,872       8,479,235  
Goldcorp, Inc.
     1,089,666       32,221,424  
 
              
 
           $ 45,763,233  
 
              
Multi-Utilities — 1.4%
                
Public Service Enterprise Group, Inc.
     597,835     $ 18,873,651  
RWE AG
     64,864       5,039,784  
 
              
 
           $ 23,913,435  
 
              
Oil, Gas & Consumable Fuels — 9.9%
                
Anadarko Petroleum Corp.
     490,457     $ 18,019,390  
BP PLC
     997,257       7,062,659  
Chevron Corp.
     243,776       17,191,083  
ConocoPhillips
     317,824       15,106,175  
ENI SpA
     463,131       9,795,812  
Exxon Mobil Corp.
     633,804       48,473,330  
Hess Corp.
     355,292       19,757,788  
Occidental Petroleum Corp.
     285,634       15,581,335  
Royal Dutch Shell PLC, Class B
     278,455       6,610,397  
Total SA
     195,743       9,754,757  
XTO Energy, Inc.
     169,031       6,269,360  
 
              
 
           $ 173,622,086  
 
              
Pharmaceuticals — 5.8%
                
Bayer AG
     70,858     $ 3,761,406  
Johnson & Johnson
     491,604       28,360,635  
Merck & Co., Inc.
     670,235       19,135,209  
Novartis AG
     206,853       8,499,692  
Novo-Nordisk A/S, Class B
     116,072       6,183,583  
Roche Holding AG
     71,637       10,056,740  
Sanofi-Aventis SA
     179,473       10,094,153  
Schering-Plough Corp.
     477,778       8,389,782  
Teva Pharmaceutical Industries, Ltd. ADR
     163,785       6,788,888  
 
              
 
           $ 101,270,088  
 
              
Semiconductors & Semiconductor Equipment — 0.9%
                
ASML Holding NV
     918,083     $ 15,185,093  
 
              
 
           $ 15,185,093  
 
              
Software — 2.9%
                
Microsoft Corp.
     1,859,828     $ 31,803,059  
Oracle Corp.(1)
     1,141,867       19,217,622  
 
              
 
           $ 51,020,681  
 
              

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Table of Contents

                 
Security   Shares     Value  
Specialty Retail — 2.0%
                
Best Buy Co., Inc.
     536,445     $ 15,031,189  
Home Depot, Inc.
     282,080       6,073,182  
Staples, Inc.
     885,038       14,107,506  
 
              
 
           $ 35,211,877  
 
              
Tobacco — 2.4%
                
British American Tobacco PLC
     441,140     $ 12,095,992  
Philip Morris International, Inc.
     825,726       30,675,721  
 
              
 
           $ 42,771,713  
 
              
Wireless Telecommunication Services – 0.9%
                
Rogers Communications, Inc., Class B
     284,698     $ 8,017,096  
Vodafone Group PLC
     4,476,148       8,313,669  
 
              
 
           $ 16,330,765  
 
              
Total Common Stocks
(identified cost $2,336,195,378)
           $ 1,637,868,552  
 
              
Investment Funds — 0.4%
                 
Security   Shares     Value  
Capital Markets — 0.4%
                
SPDR S&P Homebuilders ETF
     630,303     $ 6,466,909  
 
              
 
Total Investment Funds
(identified cost $8,760,960)
           $ 6,466,909  
 
              
Call Options Purchased — 0.1%
                                 
    Number     Strike     Expiration        
Description   of Contracts     Price     Date     Value  
S&P 500 Index
     1,005     $ 855       2/21/09     $ 1,809,000  
 
                              
 
Total Call Options Purchased
(identified cost $2,715,409)
                           $ 1,809,000  
 
                              
Short-Term Investments — 7.5%
                 
    Interest        
Description   (000’s omitted)     Value  
Cash Management Portfolio, 0.23%(2)
   $ 131,172     $ 131,171,993  
 
              
 
Total Short-Term Investments
(identified cost $131,171,993)
           $ 131,171,993  
 
              
 
              
Total Investments — 101.1%
(identified cost $2,478,843,740)
           $ 1,777,316,454  
 
              
Covered Call Options Written — (1.2)%
                                 
    Number     Strike     Expiration        
Description   of Contracts     Price     Date     Value  
S&P 500 Index
     1,100     $ 825       2/21/09     $ (3,608,000 )
S&P 500 Index
     5,922       845       2/21/09       (12,436,200 )
S&P 500 Index
     3,098       875       2/21/09       (3,098,000 )
S&P 500 Index
     2,010       885       2/21/09       (1,708,500 )
 
                              
 
Total Covered Call Options Written
(premiums received $45,957,450)
                           $ (20,850,700 )
 
                              
 
                                
Other Assets, Less Liabilities — 0.1%
                           $ 1,699,390  
 
                              
 
                                
Net Assets — 100.0%
                           $ 1,758,165,144  
 
                              
 
ADR   - American Depository Receipt
               
 
(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 January 31, 2009. Net income allocated from the investment in Cash Management Portfolio for the fiscal year to date ended January 31, 2009 was $178,967.

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Table of Contents

Country Concentration of Portfolio
                 
    Percentage        
Country   of Net Assets     Value  
United States
     79.4 %   $ 1,396,153,369  
Switzerland
     6.2       109,282,786  
Canada
     2.9       50,468,519  
Germany
     2.8       48,793,337  
United Kingdom
     2.6       46,157,870  
France
     1.7       30,329,306  
Netherlands
     1.6       27,678,384  
Denmark
     0.9       15,075,248  
Bermuda
     0.8       13,836,770  
Italy
     0.5       9,795,812  
Spain
     0.5       8,931,648  
Australia
     0.5       8,479,235  
Israel
     0.4       6,788,888  
Finland
     0.2       3,681,000  
Luxembourg
     0.1       1,864,278  
Brazil
     0.0       4  
           
Total
     101.1 %   $ 1,777,316,454  
 
            

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The cost and unrealized appreciation (depreciation) of investments of the Fund at January 31, 2009, as determined on a federal income tax basis, were as follows:
         
Aggregate cost
   $ 2,478,922,808  
 
      
Gross unrealized appreciation
   $ 9,203,094  
Gross unrealized depreciation
     (710,809,448 )
 
      
Net unrealized depreciation
   $ (701,606,354 )
 
      
Written call options activity for the fiscal year to date ended January 31, 2009 was as follows:
                 
    Number of Contracts     Premiums Received  
             
Outstanding, beginning of period
     14,680     $ 70,390,742  
Options written
     38,060       160,913,895  
Options terminated in closing purchase transactions
     (32,730 )     (173,398,544 )
Options expired
     (7,880 )     (11,948,643 )
 
            
Outstanding, end of period
     12,130     $ 45,957,450  
 
            
All of the assets of the Fund are subject to segregation to satisfy the requirements of the escrow agent. At January 31, 2009, the Fund had sufficient cash and/or securities to cover commitments under these contracts.
The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157 (FAS 157), “Fair Value Measurements”, effective November 1, 2008. FAS 157 established a three-tier hierarchy to prioritize the assumptions, referred to as inputs, 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)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
At January 31, 2009, the inputs used in valuing the Fund’s investments, which are carried at value, were as follows:
                     
        Investments in     Other Financial  
    Valuation Inputs   Securities     Instruments*  
Level 1
   Quoted Prices   $ 1,532,742,139     $ (20,850,700 )
Level 2
   Other Significant Observable Inputs     244,574,315       —  
Level 3
   Significant Unobservable Inputs     —       —  
 
                
Total
       $ 1,777,316,454     $ (20,850,700 )
 
                
 
*   Other financial instruments include written call options.
The Fund held no investments or other financial instruments as of October 31, 2008 whose fair value was determined using Level 3 inputs.
For information on the Fund’s policy regarding 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.

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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.

 

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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/ Duncan W. Richardson    
 
       
 
  Duncan W. Richardson    
 
  President    
 
        
Date:
  March 25, 2009    
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/ Duncan W. Richardson    
 
       
 
  Duncan W. Richardson    
 
  President    
 
        
Date:
  March 25, 2009    
 
        
By:
  /s/ Barbara E. Campbell    
 
       
 
  Barbara E. Campbell    
 
  Treasurer    
 
        
Date:
  March 25, 2009