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

March 31, 2016

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Enhanced Equity Income Fund II

March 31, 2016

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 99.9%(1)

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 2.7%

      

Raytheon Co.

      90,772       $ 11,131,370   

Spirit AeroSystems Holdings, Inc., Class A(2)

      135,158         6,130,767   
     

 

 

  
      $ 17,262,137   
     

 

 

  

Banks — 1.8%

      

JPMorgan Chase & Co.

      64,666       $ 3,829,521   

PNC Financial Services Group, Inc. (The)

      36,483         3,085,367   

Wells Fargo & Co.

      103,355         4,998,248   
     

 

 

  
      $ 11,913,136   
     

 

 

  

Beverages — 4.0%

      

Constellation Brands, Inc., Class A

      75,914       $ 11,469,846   

PepsiCo, Inc.

      142,668         14,620,617   
     

 

 

  
      $ 26,090,463   
     

 

 

  

Biotechnology — 5.0%

      

Celgene Corp.(2)

      104,957       $ 10,505,146   

Gilead Sciences, Inc.

      144,867         13,307,483   

Incyte Corp.(2)

      45,956         3,330,431   

Vertex Pharmaceuticals, Inc.(2)

      64,856         5,155,404   
     

 

 

  
      $ 32,298,464   
     

 

 

  

Building Products — 1.9%

      

Fortune Brands Home & Security, Inc.

      216,813       $ 12,150,201   
     

 

 

  
      $ 12,150,201   
     

 

 

  

Capital Markets — 2.3%

      

Charles Schwab Corp. (The)

      352,459       $ 9,875,901   

Invesco, Ltd.

      167,048         5,140,067   
     

 

 

  
      $ 15,015,968   
     

 

 

  

Chemicals — 1.7%

      

Ecolab, Inc.

      72,327       $ 8,065,907   

Monsanto Co.

      37,485         3,288,934   
     

 

 

  
      $ 11,354,841   
     

 

 

  

Commercial Services & Supplies — 1.5%

      

Tyco International PLC

      263,422       $ 9,670,222   
     

 

 

  
      $ 9,670,222   
     

 

 

  

Communications Equipment — 1.5%

      

Palo Alto Networks, Inc.(2)

      61,769       $ 10,076,995   
     

 

 

  
      $ 10,076,995   
     

 

 

  

Diversified Financial Services — 0.5%

      

McGraw Hill Financial, Inc.

      35,108       $ 3,474,990   
     

 

 

  
      $ 3,474,990   
     

 

 

  

Food & Staples Retailing — 2.4%

      

Costco Wholesale Corp.

      31,461       $ 4,957,624   

CVS Health Corp.

      38,399         3,983,128   

Sprouts Farmers Market, Inc.(2)

      224,893         6,530,893   
     

 

 

  
      $ 15,471,645   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Food Products — 3.3%

      

Blue Buffalo Pet Products, Inc.(2)

      284,322       $ 7,295,702   

Mondelez International, Inc., Class A

      181,020         7,262,522   

Pinnacle Foods, Inc.

      58,254         2,602,789   

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

      103,745         4,216,197   
     

 

 

  
      $ 21,377,210   
     

 

 

  

Health Care Equipment & Supplies — 4.6%

      

Medtronic PLC

      222,479       $ 16,685,925   

Zimmer Biomet Holdings, Inc.

      125,205         13,350,609   
     

 

 

  
      $ 30,036,534   
     

 

 

  

Hotels, Restaurants & Leisure — 1.8%

      

Starbucks Corp.

      194,995       $ 11,641,202   
     

 

 

  
      $ 11,641,202   
     

 

 

  

Household Durables — 1.9%

      

Newell Rubbermaid, Inc.

      276,097       $ 12,228,336   
     

 

 

  
      $ 12,228,336   
     

 

 

  

Internet & Catalog Retail — 6.3%

      

Amazon.com, Inc.(2)

      50,445       $ 29,946,170   

Priceline Group, Inc. (The)(2)

      8,552         11,023,186   
     

 

 

  
      $ 40,969,356   
     

 

 

  

Internet Software & Services — 14.0%

      

Alphabet, Inc., Class C(2)

      62,670       $ 46,686,016   

Facebook, Inc., Class A(2)

      264,505         30,180,021   

GrubHub, Inc.(2)

      299,277         7,520,831   

Twitter, Inc.(2)

      386,849         6,402,351   
     

 

 

  
      $ 90,789,219   
     

 

 

  

IT Services — 3.8%

      

Genpact, Ltd.(2)

      69,359       $ 1,885,871   

Visa, Inc., Class A

      296,228         22,655,518   
     

 

 

  
      $ 24,541,389   
     

 

 

  

Leisure Products — 0.8%

      

Brunswick Corp.

      107,231       $ 5,144,943   
     

 

 

  
      $ 5,144,943   
     

 

 

  

Machinery — 2.1%

      

Toro Co. (The)

      74,974       $ 6,456,761   

WABCO Holdings, Inc.(2)

      65,864         7,042,179   
     

 

 

  
      $ 13,498,940   
     

 

 

  

Media — 2.6%

      

Walt Disney Co. (The)

      169,760       $ 16,858,866   
     

 

 

  
      $ 16,858,866   
     

 

 

  

Multiline Retail — 0.7%

      

Dollar General Corp.

      57,246       $ 4,900,258   
     

 

 

  
      $ 4,900,258   
     

 

 

  

Oil, Gas & Consumable Fuels — 1.7%

      

Devon Energy Corp.

      305,590       $ 8,385,389   

EOG Resources, Inc.

      34,741         2,521,502   
     

 

 

  
      $ 10,906,891   
     

 

 

  

Personal Products — 1.3%

      

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

      91,359       $ 8,616,067   
     

 

 

  
      $ 8,616,067   
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Pharmaceuticals — 6.5%

      

Allergan PLC(2)

      43,364       $ 11,622,853   

Bristol-Myers Squibb Co.

      177,987         11,369,809   

Johnson & Johnson

      177,484         19,203,769   
     

 

 

  
      $ 42,196,431   
     

 

 

  

Road & Rail — 1.8%

      

Union Pacific Corp.

      144,627       $ 11,505,078   
     

 

 

  
      $ 11,505,078   
     

 

 

  

Semiconductors & Semiconductor Equipment — 4.8%

      

Broadcom, Ltd.

      72,058       $ 11,132,961   

NXP Semiconductors NV(2)

      148,304         12,023,005   

Texas Instruments, Inc.

      135,586         7,785,348   
     

 

 

  
      $ 30,941,314   
     

 

 

  

Software — 5.0%

      

Fortinet, Inc.(2)

      138,197       $ 4,232,974   

Microsoft Corp.

      222,060         12,264,374   

salesforce.com, inc.(2)

      216,616         15,992,759   
     

 

 

  
      $ 32,490,107   
     

 

 

  

Specialty Retail — 4.0%

      

Home Depot, Inc. (The)

      37,666       $ 5,025,774   

Lowe’s Cos., Inc.

      273,192         20,694,294   
     

 

 

  
      $ 25,720,068   
     

 

 

  

Technology Hardware, Storage & Peripherals — 4.1%

      

Apple, Inc.

      246,163       $ 26,829,305   
     

 

 

  
      $ 26,829,305   
     

 

 

  

Textiles, Apparel & Luxury Goods — 2.0%

      

Hanesbrands, Inc.

      211,436       $ 5,992,096   

NIKE, Inc., Class B

      115,596         7,105,686   
     

 

 

  
      $ 13,097,782   
     

 

 

  

Tobacco — 1.5%

      

Philip Morris International, Inc.

      97,872       $ 9,602,222   
     

 

 

  
      $ 9,602,222   
     

 

 

  

Total Common Stocks
(identified cost $531,321,346)

       $ 648,670,580   
     

 

 

  

Short-Term Investments — 0.1%

      
Description    Interest
(000’s omitted)		      Value  

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

    $ 892       $ 891,733   
     

 

 

  

Total Short-Term Investments
(identified cost $891,733)

       $ 891,733   
     

 

 

  

Total Investments — 100.0%
(identified cost $532,213,079)

       $ 649,562,313   
     

 

 

  

 

3

 

 

                                                 

Covered Call Options Written — (0.6)%

 

                                                                                                   
Security/Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

Allergan PLC

      215       $ 290.00         5/6/16       $ (74,175 ) 

Alphabet, Inc., Class C

      310         790.00         5/6/16         (261,950 ) 

Amazon.com, Inc.

      250         650.00         5/6/16         (226,875 ) 

Apple, Inc.

      1,230         112.00         5/6/16         (281,670 ) 

Blue Buffalo Pet Products, Inc.

      1,450         25.00         4/15/16         (155,875 ) 

Bristol-Myers Squibb Co.

      885         66.50         4/8/16         (4,425 ) 

Broadcom, Ltd.

      360         155.00         4/8/16         (80,100 ) 

Brunswick Corp.

      535         50.00         5/20/16         (81,588 ) 

Celgene Corp.

      520         108.00         4/8/16         (3,900 ) 

Charles Schwab Corp. (The)

      1,760         31.00         5/20/16         (61,600 ) 

Constellation Brands, Inc., Class A

      375         155.00         5/20/16         (120,000 ) 

CVS Health Corp.

      160         103.00         4/22/16         (28,240 ) 

Devon Energy Corp.

      1,525         30.50         4/22/16         (96,838 ) 

Dollar General Corp.

      550         87.50         4/15/16         (30,250 ) 

Ecolab, Inc.

      145         115.00         4/15/16         (7,612 ) 

EOG Resources, Inc.

      340         80.00         4/22/16         (11,900 ) 

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

      455         95.00         4/15/16         (40,950 ) 

Facebook, Inc., Class A

      1,320         123.00         5/6/16         (192,060 ) 

Fortinet, Inc.

      575         30.00         4/15/16         (67,563 ) 

Fortune Brands Home & Security, Inc.

      1,000         55.00         4/15/16         (175,000 ) 

Gilead Sciences, Inc.

      720         95.50         4/22/16         (46,440 ) 

GrubHub, Inc.

      1,495         25.00         4/15/16         (145,763 ) 

Hanesbrands, Inc.

      1,055         29.00         4/15/16         (36,925 ) 

Home Depot, Inc. (The)

      185         134.00         4/22/16         (30,710 ) 

Incyte Corp.

      225         85.00         4/15/16         (7,875 ) 

Invesco, Ltd.

      835         33.00         5/20/16         (27,137 ) 

Johnson & Johnson

      885         111.00         4/29/16         (57,082 ) 

Lowe’s Cos., Inc.

      1,365         77.50         5/20/16         (190,418 ) 

McGraw Hill Financial, Inc.

      175         100.00         4/15/16         (22,312 ) 

Medtronic PLC

      1,110         77.00         4/8/16         (7,215 ) 

Microsoft Corp.

      1,110         57.50         5/6/16         (87,690 ) 

Mondelez International, Inc., Class A

      1,345         43.00         5/20/16         (61,870 ) 

Newell Rubbermaid, Inc.

      1,380         46.00         5/20/16         (158,700 ) 

NIKE, Inc., Class B

      670         64.00         4/8/16         (5,025 ) 

NXP Semiconductors NV

      740         82.50         4/15/16         (103,600 ) 

Palo Alto Networks, Inc.

      355         160.00         4/15/16         (228,975 ) 

PepsiCo, Inc.

      710         104.00         4/22/16         (54,670 ) 

Philip Morris International, Inc.

      485         98.50         4/22/16         (64,990 ) 

PNC Financial Services Group, Inc. (The)

      180         90.00         4/15/16         (1,710 ) 

Priceline Group, Inc. (The)

      40         1,400.00         4/22/16         (7,500 ) 

Raytheon Co.

      450         130.00         4/15/16         (2,925 ) 

salesforce.com, inc.

      1,080         74.50         4/8/16         (86,940 ) 

Spirit AeroSystems Holdings, Inc., Class A

      675         50.00         5/20/16         (45,562 ) 

Sprouts Farmers Market, Inc.

      1,415         30.00         4/15/16         (67,213 ) 

Starbucks Corp.

      970         61.50         4/22/16         (56,260 ) 

Texas Instruments, Inc.

      675         60.00         5/6/16         (36,450 ) 

Toro Co. (The)

      370         90.00         5/20/16         (40,700 ) 

Twitter, Inc.

      1,620         21.50         4/8/16         (8,100 ) 

Tyco International PLC

      1,315         38.00         5/20/16         (71,010 ) 

Union Pacific Corp.

      720         88.00         4/22/16         (10,440 ) 

Vertex Pharmaceuticals, Inc.

      320         88.00         4/29/16         (69,600 ) 

Visa, Inc., Class A

      1,480         80.00         5/6/16         (99,900 ) 

WABCO Holdings, Inc.

      285         105.00         4/15/16         (92,625 ) 

Walt Disney Co. (The)

      660         102.00         4/8/16         (8,250 ) 

 

4

 

 

                                                                                                   
Security/Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

Wells Fargo & Co.

      515       $ 50.50         4/1/16       $ (1,545 ) 

WhiteWave Foods Co. (The), Class A

      515         42.50         4/15/16         (25,750 ) 

Zimmer Biomet Holdings, Inc.

      625         110.00         5/20/16         (90,625 ) 
           

 

 

  

Total Covered Call Options Written
(premiums received $4,804,673)

             $ (4,163,073 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.6%

             $ 3,957,399   
           

 

 

  

Net Assets — 100.0%

             $ 649,356,639   
           

 

 

  

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

 

(1) A portion of each applicable common stock for which a written call option is outstanding at March 31, 2016 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 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 $8,630.

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      33,125       $ 3,543,344   
Options written      107,490         12,640,390   
Options terminated in closing purchase transactions      (29,916 )       (3,558,756 ) 
Options exercised      (59 )       (1,535 ) 
Options expired      (67,925 )       (7,818,770 ) 
  

 

 

     

 

 

  
Outstanding, end of period      42,715       $ 4,804,673   
  

 

 

     

 

 

  

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 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 March 31, 2016, 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 $4,163,073.

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

    $ 532,210,750   
  

 

 

  

Gross unrealized appreciation

    $ 140,320,410   

Gross unrealized depreciation

      (22,968,847 ) 
  

 

 

  

Net unrealized appreciation

    $     117,351,563   
  

 

 

  

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

 

5

 

 

•  

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

    $ 648,670,580 *     $ —       $ —       $ 648,670,580   

Short-Term Investments

      —         891,733         —         891,733   

Total Investments

    $     648,670,580       $     891,733       $ —       $     649,562,313   
Liability Description                                

Covered Call Options Written

    $ (4,163,073 )     $ —       $ —       $ (4,163,073 ) 

Total

    $ (4,163,073 )     $ —       $ —       $ (4,163,073 ) 

 

* The level classification by major category of investments is the same as the category presentation in the Portfolio of Investments.

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 Enhanced Equity Income Fund II

 

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