UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-Q

811-22044

Eaton Vance Risk-Managed Diversified Equity Income Fund

(Exact Name of Registrant as Specified in Charter)

(Address of Principal Executive Offices)

Maureen A. Gemma
Two International Place, Boston, Massachusetts 02110

(Name and Address of Agent for Services)

(617) 482-8260

December 31

March 31, 2011

 

 

Item 1.		Schedule of Investments

Eaton Vance
Risk-Managed Diversified Equity Income Fund
March 31, 2011

 

PORTFOLIO OF INVESTMENTS (Unaudited)

 

Common Stocks — 99.5%

 

 

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2

 

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Call Options Purchased — 0.1%

 

 

Put Options Purchased — 1.1%

 

 

Short-Term Investments — 1.7%

 

 

Call Options Written — (1.7)%

 

 

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Put Options Written — (0.2)%

 

 

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

 

 

The cost and unrealized appreciation (depreciation) of investments of the Fund at March 31, 2011, as determined on a federal income tax basis, were as follows:

 

Aggregate cost		$	840,257,972
Gross unrealized appreciation		$	243,549,165
Gross unrealized depreciation			(17,875,125	)
Net unrealized appreciation		$	225,674,040

 

Written call and put options activity for the fiscal year to date ended March 31, 2011 was as follows:

 

		Number of				Premiums
		Contracts				Received
Outstanding, beginning of period			23,015			$	9,489,435
Options written			61,255				26,860,163
Options terminated in closing purchase transactions			(33,180	)			(19,289,180	)
Options expired			(12,220	)			(2,336,647	)
Outstanding, end of period			38,870			$	14,723,771

 

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

 

At March 31, 2011, 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 generally intends to purchase call options on individual stocks at or above the current value of the stock to enhance return. In buying call options on individual stocks, the Fund in effect, acquires potential appreciation in the value of the applicable stock above the exercise price in exchange for the option premium paid. The Fund generally intends to purchase index put options below the current value of the index to reduce the Fund’s exposure to market risk and volatility. In buying index put options, 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. The Fund generally intends to write 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. The Fund generally intends to write put options on individual stocks below the current value of

 

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the individual stock to generate premium income. In writing put options on individual stocks, the Fund in effect, sells protection against decline in the value of the applicable individual stock below 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 stock decline below the exercise price.

 

At March 31, 2011, the aggregate fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in an asset position and in a liability position and whose primary underlying risk exposure is equity price risk was $12,813,898 and $19,598,714, respectively.

 

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.

 

 

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, 2011, the hierarchy of inputs used in valuing the Fund’s investments, which are carried at value, were as follows:

 

Asset Description		Level 1				Level 2				Level 3				Total
Common Stocks
Consumer Discretionary		$	101,638,992			$	—			$	—			$	101,638,992
Consumer Staples			96,218,982				—				—				96,218,982
Energy			173,337,545				—				—				173,337,545
Financials			151,673,270				—				—				151,673,270
Health Care			126,420,461				—				—				126,420,461
Industrials			107,780,308				—				—				107,780,308
Information Technology			197,765,099				—				—				197,765,099
Materials			38,446,703				—				—				38,446,703
Telecommunication Services			27,697,772				—				—				27,697,772
Utilities			14,610,930				—				—				14,610,930
Total Common Stocks		$	1,035,590,062			$	—			$	—			$	1,035,590,062
Call Options Purchased		$	1,380,898			$	—			$	—			$	1,380,898
Put Options Purchased			11,433,000				—				—				11,433,000
Short-Term Investments			—				17,528,052				—				17,528,052
Total Investments		$	1,048,403,960			$	17,528,052			$	—			$	1,065,932,012
Liability Description
Call Options Written		$	(17,744,000	)		$	—			$	—			$	(17,744,000	)
Put Options Written			—				(1,854,714	)			—				(1,854,714	)
Total		$	(17,744,000	)		$	(1,854,714	)		$	—			$	(19,598,714	)

 

The Fund held no investments or other financial instruments as of December 31, 2010 whose fair value was determined using Level 3 inputs. At March 31, 2011, the value of investments transferred between Level 1 and Level 2, if any, during the fiscal year to date then ended was not significant.

 

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.

 

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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.

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 25, 2011

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 25, 2011
By:		/s/ Barbara E. Campbell   Barbara E. Campbell
		Treasurer
Date:		May 25, 2011