Eaton Vance Enhanced Equity Income Fund II

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

811-21670

Investment Company Act File Number

Eaton Vance Enhanced Equity Income Fund II

(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, 2014

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Enhanced Equity Income Fund II

September 30, 2014

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 98.4%(1)

 

Security    Shares      Value  

Aerospace & Defense — 3.5%

      

Boeing Co. (The)

      112,000       $     14,266,560   

United Technologies Corp.

      89,848         9,487,949   
     

 

 

  
      $ 23,754,509   
     

 

 

  

Air Freight & Logistics — 1.3%

      

C.H. Robinson Worldwide, Inc.

      132,024       $ 8,755,832   
     

 

 

  
      $ 8,755,832   
     

 

 

  

Auto Components — 1.0%

      

Dana Holding Corp.

      180,543       $ 3,461,009   

TRW Automotive Holdings Corp.(2)

      35,954         3,640,343   
     

 

 

  
      $ 7,101,352   
     

 

 

  

Banks — 0.9%

      

PNC Financial Services Group, Inc. (The)

      36,483       $ 3,122,215   

Wells Fargo & Co.

      65,669         3,406,251   
     

 

 

  
      $ 6,528,466   
     

 

 

  

Beverages — 1.1%

      

Constellation Brands, Inc., Class A(2)

      85,053       $ 7,413,219   
     

 

 

  
      $ 7,413,219   
     

 

 

  

Biotechnology — 6.3%

      

Biogen Idec, Inc.(2)

      36,190       $ 11,972,014   

Celgene Corp.(2)

      117,598         11,145,938   

Gilead Sciences, Inc.(2)

      192,037         20,442,339   
     

 

 

  
      $ 43,560,291   
     

 

 

  

Capital Markets — 1.2%

      

Charles Schwab Corp. (The)

      97,951       $ 2,878,780   

Lazard, Ltd., Class A

      99,799         5,059,809   
     

 

 

  
      $ 7,938,589   
     

 

 

  

Chemicals — 4.5%

      

Cytec Industries, Inc.

      70,024       $ 3,311,435   

Ecolab, Inc.

      28,931         3,322,147   

LyondellBasell Industries NV, Class A

      79,331         8,620,106   

Monsanto Co.

      100,110         11,263,376   

PPG Industries, Inc.

      23,250         4,574,205   
     

 

 

  
      $ 31,091,269   
     

 

 

  

Communications Equipment — 2.3%

      

QUALCOMM, Inc.

      123,500       $ 9,234,095   

Telefonaktiebolaget LM Ericsson, Class B

      525,508         6,626,058   
     

 

 

  
      $ 15,860,153   
     

 

 

  

Consumer Finance — 1.5%

      

American Express Co.

      117,185       $ 10,258,375   
     

 

 

  
      $ 10,258,375   
     

 

 

  

Diversified Telecommunication Services — 2.1%

      

Verizon Communications, Inc.

      293,334       $ 14,663,767   
     

 

 

  
      $ 14,663,767   
     

 

 

  

 

1

 

 

Security    Shares      Value  

Electrical Equipment — 4.1%

      

Emerson Electric Co.

      220,000       $ 13,767,600   

Generac Holdings, Inc.(2)

      76,467         3,099,972   

Rockwell Automation, Inc.

      100,000         10,988,000   
     

 

 

  
      $ 27,855,572   
     

 

 

  

Electronic Equipment, Instruments & Components — 1.5%

      

Corning, Inc.

      520,597       $ 10,068,346   
     

 

 

  
      $ 10,068,346   
     

 

 

  

Energy Equipment & Services — 2.2%

      

Cameron International Corp.(2)

      46,291       $ 3,072,797   

FMC Technologies, Inc.(2)

      64,563         3,506,416   

Halliburton Co.

      128,633         8,298,115   
     

 

 

  
      $ 14,877,328   
     

 

 

  

Food & Staples Retailing — 1.6%

      

Costco Wholesale Corp.

      87,405       $ 10,953,595   
     

 

 

  
      $ 10,953,595   
     

 

 

  

Food Products — 6.7%

      

Hain Celestial Group, Inc. (The)(2)

      77,711       $ 7,953,721   

Hershey Co. (The)

      180,000         17,177,400   

Mondelez International, Inc., Class A

      310,000         10,622,150   

WhiteWave Foods Co. (The), Class A(2)

      277,920         10,096,833   
     

 

 

  
      $ 45,850,104   
     

 

 

  

Health Care Equipment & Supplies — 3.5%

      

Abbott Laboratories

      165,209       $ 6,871,042   

Covidien PLC

      49,041         4,242,537   

Medtronic, Inc.

      85,000         5,265,750   

Stryker Corp.

      91,419         7,382,084   
     

 

 

  
      $ 23,761,413   
     

 

 

  

Health Care Technology — 1.3%

      

Cerner Corp.(2)

      150,356       $ 8,956,707   
     

 

 

  
      $ 8,956,707   
     

 

 

  

Hotels, Restaurants & Leisure — 1.3%

      

Marriott International, Inc., Class A

      57,676       $ 4,031,552   

Starbucks Corp.

      68,800         5,191,648   
     

 

 

  
      $ 9,223,200   
     

 

 

  

Household Durables — 1.1%

      

Mohawk Industries, Inc.(2)

      56,856       $ 7,665,326   
     

 

 

  
      $ 7,665,326   
     

 

 

  

Industrial Conglomerates — 1.7%

      

Danaher Corp.

      150,000       $ 11,397,000   
     

 

 

  
      $ 11,397,000   
     

 

 

  

Insurance — 0.7%

      

AmTrust Financial Services, Inc.

      114,165       $ 4,546,050   
     

 

 

  
      $ 4,546,050   
     

 

 

  

Internet & Catalog Retail — 1.8%

      

Amazon.com, Inc.(2)

      39,035       $ 12,586,445   
     

 

 

  
      $     12,586,445   
     

 

 

  

 

2

 

 

Security    Shares      Value  

Internet Software & Services — 8.3%

      

Facebook, Inc., Class A(2)

      221,710       $ 17,523,958   

Google, Inc., Class C(2)

      68,390         39,485,651   
     

 

 

  
      $ 57,009,609   
     

 

 

  

IT Services — 1.5%

      

Visa, Inc., Class A

      48,000       $ 10,241,760   
     

 

 

  
      $ 10,241,760   
     

 

 

  

Machinery — 2.0%

      

Caterpillar, Inc.

      140,000       $ 13,864,200   
     

 

 

  
      $ 13,864,200   
     

 

 

  

Media — 4.6%

      

Comcast Corp., Class A

      254,258       $ 13,673,995   

Live Nation Entertainment, Inc.(2)

      225,000         5,404,500   

Walt Disney Co. (The)

      143,683         12,792,098   
     

 

 

  
      $ 31,870,593   
     

 

 

  

Multiline Retail — 2.3%

      

Dollar General Corp.(2)

      140,532       $ 8,587,911   

Macy’s, Inc.

      127,157         7,397,994   
     

 

 

  
      $ 15,985,905   
     

 

 

  

Oil, Gas & Consumable Fuels — 2.0%

      

Devon Energy Corp.

      158,227       $ 10,787,917   

Range Resources Corp.

      41,553         2,817,709   
     

 

 

  
      $ 13,605,626   
     

 

 

  

Pharmaceuticals — 3.2%

      

Merck & Co., Inc.

      90,000       $ 5,335,200   

Perrigo Co. PLC

      62,924         9,450,555   

Roche Holding AG PC

      24,995         7,381,097   
     

 

 

  
      $ 22,166,852   
     

 

 

  

Real Estate Investment Trusts (REITs) — 1.6%

      

American Tower Corp.

      46,913       $ 4,392,464   

AvalonBay Communities, Inc.

      13,100         1,846,707   

Public Storage, Inc.

      27,040         4,484,314   
     

 

 

  
      $ 10,723,485   
     

 

 

  

Semiconductors & Semiconductor Equipment — 1.8%

      

NXP Semiconductors NV(2)

      100,000       $ 6,843,000   

Teradyne, Inc.

      282,000         5,467,980   
     

 

 

  
      $ 12,310,980   
     

 

 

  

Software — 4.6%

      

Microsoft Corp.

      485,000       $ 22,484,600   

Oracle Corp.

      245,000         9,378,600   
     

 

 

  
      $ 31,863,200   
     

 

 

  

Specialty Retail — 4.8%

      

AutoNation, Inc.(2)

      64,443       $ 3,242,127   

Home Depot, Inc. (The)

      166,586         15,282,600   

Ross Stores, Inc.

      112,929         8,535,174   

TJX Cos., Inc. (The)

      96,030         5,682,095   
     

 

 

  
      $ 32,741,996   
     

 

 

  

Technology Hardware, Storage & Peripherals — 5.5%

      

Apple, Inc.

      375,500       $ 37,831,625   
     

 

 

  
      $     37,831,625   
     

 

 

  

 

3

 

 

Security    Shares      Value  

Textiles, Apparel & Luxury Goods — 1.3%

      

NIKE, Inc., Class B

      97,005       $ 8,652,846   
     

 

 

  
      $ 8,652,846   
     

 

 

  

Tobacco — 1.7%

      

Altria Group, Inc.

      250,000       $ 11,485,000   
     

 

 

  
      $ 11,485,000   
     

 

 

  

Total Common Stocks
(identified cost $560,692,908)

       $ 675,020,585   
     

 

 

  

Short-Term Investments — 1.9%

      
Description    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.14%(3)

    $ 13,000       $ 12,999,837   
     

 

 

  

Total Short-Term Investments
(identified cost $12,999,837)

       $ 12,999,837   
     

 

 

  

Total Investments — 100.3%
(identified cost $573,692,745)

       $     688,020,422   
     

 

 

  
                                                                                                   

Covered Call Options Written — (0.3)%

            
Security    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

Abbott Laboratories

      825       $ 45.00         11/22/14       $ (11,550 ) 

Altria Group, Inc.

      1,250         46.00         10/24/14         (92,500 ) 

Amazon.com, Inc.

      195         347.50         10/24/14         (81,413 ) 

American Express Co.

      585         92.00         10/24/14         (22,522 ) 

American Tower Corp.

      235         100.00         10/18/14         (1,175 ) 

Apple, Inc.

      1,875         106.00         10/24/14         (187,500 ) 

AvalonBay Communities, Inc.

      65         160.00         10/18/14         (162 ) 

Biogen Idec, Inc.

      180         342.50         10/24/14         (101,700 ) 

Boeing Co. (The)

      560         135.00         10/18/14         (4,760 ) 

C.H. Robinson Worldwide, Inc.

      660         72.50         11/22/14         (29,700 ) 

Caterpillar, Inc.

      700         105.00         10/24/14         (25,550 ) 

Celgene Corp.

      585         98.00         10/24/14         (109,688 ) 

Cerner Corp.

      750         65.00         11/22/14         (41,250 ) 

Charles Schwab Corp. (The)

      490         31.00         10/18/14         (8,575 ) 

Comcast Corp., Class A

      1,270         58.00         10/24/14         (18,415 ) 

Constellation Brands, Inc., Class A

      425         92.50         11/22/14         (39,313 ) 

Costco Wholesale Corp.

      435         127.00         10/24/14         (51,765 ) 

Dana Holding Corp.

      900         22.00         11/22/14         (11,250 ) 

Danaher Corp.

      750         82.50         10/18/14         (7,500 ) 

Devon Energy Corp.

      790         73.50         10/31/14         (34,760 ) 

Dollar General Corp.

      700         66.00         10/31/14         (33,250 ) 

Ecolab, Inc.

      145         115.00         10/18/14         (20,662 ) 

Emerson Electric Co.

      1,100         67.50         11/22/14         (16,500 ) 

Facebook, Inc., Class A

      1,105         82.00         10/24/14         (182,878 ) 

FMC Technologies, Inc.

      320         60.00         11/22/14         (14,400 ) 

Generac Holdings, Inc.

      380         50.00         10/18/14         (2,850 ) 

Gilead Sciences, Inc.

      960         110.00         10/18/14         (191,520 ) 

Google, Inc., Class C

      340         612.50         10/24/14         (122,400 ) 

Hain Celestial Group, Inc. (The)

      385         105.00         10/18/14         (36,575 ) 

Halliburton Co.

      640         69.00         10/24/14         (33,920 ) 

Hershey Co. (The)

      900         95.00         10/18/14         (128,700 ) 

Home Depot, Inc. (The)

      830         95.00         11/22/14         (107,070 ) 

 

4

 

 

                                                                                                   
Security    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

LyondellBasell Industries NV, Class A

      395       $ 120.00         10/18/14       $ (2,962 ) 

Macy’s, Inc.

      635         65.00         11/22/14         (16,192 ) 

Marriott International, Inc., Class A

      285         75.00         10/18/14         (1,425 ) 

Medtronic, Inc.

      425         67.50         10/18/14         (3,612 ) 

Merck & Co., Inc.

      450         62.50         10/18/14         (4,050 ) 

Microsoft Corp.

      2,425         49.00         11/22/14         (94,575 ) 

Mohawk Industries, Inc.

      280         150.00         10/18/14         (3,500 ) 

Mondelez International, Inc., Class A

      1,550         37.00         11/22/14         (24,025 ) 

Monsanto Co.

      500         120.00         11/22/14         (31,500 ) 

NIKE, Inc., Class B

      485         91.00         10/31/14         (55,533 ) 

NXP Semiconductors NV

      500         75.00         10/18/14         (15,000 ) 

Oracle Corp.

      1,225         40.50         10/31/14         (13,475 ) 

PNC Financial Services Group, Inc. (The)

      180         90.00         11/22/14         (8,820 ) 

PPG Industries, Inc.

      115         210.00         11/22/14         (15,237 ) 

QUALCOMM, Inc.

      615         80.00         11/22/14         (31,980 ) 

Rockwell Automation, Inc.

      500         130.00         10/18/14         (6,250 ) 

Ross Stores, Inc.

      565         77.50         11/22/14         (88,988 ) 

Starbucks Corp.

      340         80.00         11/22/14         (20,740 ) 

Teradyne, Inc.

      1,410         22.00         10/18/14         (3,525 ) 

TJX Cos., Inc. (The)

      480         62.50         10/18/14         (4,800 ) 

Verizon Communications, Inc.

      1,465         51.00         10/31/14         (38,823 ) 

Visa, Inc., Class A

      240         225.00         11/22/14         (42,120 ) 

Walt Disney Co. (The)

      715         95.00         11/22/14         (41,113 ) 

Wells Fargo & Co.

      325         54.00         10/24/14         (6,012 ) 
           

 

 

  

Total Covered Call Options Written
(premiums received $2,904,441)

             $ (2,346,030 ) 
           

 

 

  

Other Assets, Less Liabilities — (0.0)%(4)

             $ (133,704 ) 
           

 

 

  

Net Assets — 100.0%

             $ 685,540,688   
           

 

 

  

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

 

PC

   -   Participation Certificate

 

(1) A portion of each applicable common stock for which a written call option is outstanding at September 30, 2014 has been pledged as collateral for such written option.

 

(2) Non-income producing security.

 

(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 September 30, 2014. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended September 30, 2014 was $11,933.

 

(4) Amount is less than (0.05)%.

The cost and unrealized appreciation (depreciation) of investments of the Fund at September 30, 2014, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $     573,907,453   
  

 

 

  

Gross unrealized appreciation

    $ 117,738,302   

Gross unrealized depreciation

      (3,625,333 ) 
  

 

 

  

Net unrealized appreciation

    $ 114,112,969   
  

 

 

  

 

5

 

 

Written options activity for the fiscal year to date ended September 30, 2014 was as follows:

 

     Number of
Contracts		     Premiums
Received		  
Outstanding, beginning of period      41,585      $ 4,572,251   
Options written      253,805        21,942,614   
Options terminated in closing purchase transactions      (113,825 )          (10,680,346 ) 
Options expired      (144,130 )      (12,930,078 ) 
  

 

 

    

 

 

  

Outstanding, end of period

      37,435      $ 2,904,441   
  

 

 

    

 

 

  

At September 30, 2014, 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 writes covered call options on individual stocks above the current value of the stock to generate premium income. In writing call options on individual stocks, the Fund in effect, sells potential appreciation in the value of the applicable stock 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 stock decline.

At September 30, 2014, the aggregate fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in a liability position and whose primary underlying risk exposure is equity price risk was $2,346,030.

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 September 30, 2014, 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

    $ 125,827,663      $ —      $ —       $ 125,827,663   

Consumer Staples

      75,701,918        —        —         75,701,918   

Energy

      28,482,954        —        —         28,482,954   

Financials

      39,994,965        —        —         39,994,965   

Health Care

      91,064,166        7,381,097        —         98,445,263   

Industrials

      85,627,113        —        —         85,627,113   

Information Technology

      168,559,615        6,626,058        —         175,185,673   

Materials

      31,091,269        —        —         31,091,269   

Telecommunication Services

      14,663,767        —        —         14,663,767   

Total Common Stocks

    $     661,013,430      $     14,007,155 *    $ —       $     675,020,585   

Short-Term Investments

    $ —      $ 12,999,837      $ —       $ 12,999,837   

Total Investments

    $ 661,013,430      $ 27,006,992      $ —       $ 688,020,422   
Liability Description                              

Covered Call Options Written

    $ (2,346,030 )    $ —      $ —       $ (2,346,030 ) 

Total

    $     (2,346,030 )    $ —      $     —       $ (2,346,030 ) 

 

* 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.

 

6

 

 

The Fund held no investments or other financial instruments as of December 31, 2013 whose fair value was determined using Level 3 inputs. At September 30, 2014, 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.

 

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 Enhanced Equity Income Fund II

 

By:   /s/ Walter A. Row, III
  Walter A. Row, III
  President
Date:   November 24, 2014

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:   November 24, 2014

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   November 24, 2014