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, 2016

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Enhanced Equity Income Fund II

September 30, 2016

PORTFOLIO OF INVESTMENTS (Unaudited)

Common Stocks — 99.7%(1)

 

                                                 
Security    Shares      Value  

Aerospace & Defense — 1.5%

      

Raytheon Co.

      75,171       $ 10,233,028   
     

 

 

  
      $ 10,233,028   
     

 

 

  

Auto Components — 1.7%

      

Johnson Controls International PLC

      251,568       $ 11,705,459   
     

 

 

  
      $ 11,705,459   
     

 

 

  

Banks — 1.5%

      

JPMorgan Chase & Co.

      81,511       $ 5,427,818   

Wells Fargo & Co.

      103,355         4,576,559   
     

 

 

  
      $ 10,004,377   
     

 

 

  

Beverages — 3.5%

      

Constellation Brands, Inc., Class A

      65,073       $ 10,834,004   

PepsiCo, Inc.

      114,903         12,497,999   
     

 

 

  
      $ 23,332,003   
     

 

 

  

Biotechnology — 8.9%

      

Biogen, Inc.(2)

      55,787       $ 17,463,005   

Celgene Corp.(2)

      191,465         20,013,836   

Gilead Sciences, Inc.

      85,019         6,726,703   

Incyte Corp.(2)

      61,009         5,752,539   

Vertex Pharmaceuticals, Inc.(2)

      114,041         9,945,516   
     

 

 

  
      $ 59,901,599   
     

 

 

  

Building Products — 1.0%

      

Fortune Brands Home & Security, Inc.

      114,031       $ 6,625,201   
     

 

 

  
      $ 6,625,201   
     

 

 

  

Capital Markets — 2.7%

      

CBOE Holdings, Inc.

      63,150       $ 4,095,278   

Charles Schwab Corp. (The)

      222,369         7,020,189   

S&P Global, Inc.

      54,345         6,877,903   
     

 

 

  
      $ 17,993,370   
     

 

 

  

Chemicals — 2.7%

      

Ecolab, Inc.

      72,327       $ 8,803,643   

Monsanto Co.

      25,020         2,557,044   

RPM International, Inc.

      131,277         7,052,200   
     

 

 

  
      $ 18,412,887   
     

 

 

  

Communications Equipment — 1.8%

      

Palo Alto Networks, Inc.(2)

      78,193       $ 12,458,491   
     

 

 

  
      $ 12,458,491   
     

 

 

  

Distributors — 0.8%

      

LKQ Corp.(2)

      145,979       $ 5,176,415   
     

 

 

  
      $ 5,176,415   
     

 

 

  

Food & Staples Retailing — 3.4%

      

Costco Wholesale Corp.

      63,600       $ 9,699,636   

CVS Health Corp.

      73,415         6,533,201   

Sprouts Farmers Market, Inc.(2)

      336,288         6,944,347   
     

 

 

  
      $ 23,177,184   
     

 

 

  

 

1

 

 

                                                 
Security    Shares      Value  

Food Products — 3.4%

      

Blue Buffalo Pet Products, Inc.(2)

      422,141       $ 10,030,070   

Pinnacle Foods, Inc.

      261,633         13,126,128   
     

 

 

  
      $ 23,156,198   
     

 

 

  

Health Care Equipment & Supplies — 4.0%

      

Medtronic PLC

      189,453       $ 16,368,739   

Zimmer Biomet Holdings, Inc.

      82,194         10,686,864   
     

 

 

  
      $ 27,055,603   
     

 

 

  

Hotels, Restaurants & Leisure — 1.3%

      

Starbucks Corp.

      159,813       $ 8,652,276   
     

 

 

  
      $ 8,652,276   
     

 

 

  

Household Durables — 2.3%

      

Newell Brands, Inc.

      300,633       $ 15,831,334   
     

 

 

  
      $ 15,831,334   
     

 

 

  

Internet & Direct Marketing Retail — 6.7%

      

Amazon.com, Inc.(2)

      45,443       $ 38,049,878   

Priceline Group, Inc. (The)(2)

      4,749         6,988,106   
     

 

 

  
      $ 45,037,984   
     

 

 

  

Internet Software & Services — 13.4%

      

Alphabet, Inc., Class C(2)

      62,670       $ 48,712,764   

Facebook, Inc., Class A(2)

      264,505         33,928,057   

GoDaddy, Inc., Class A(2)

      226,221         7,811,411   
     

 

 

  
      $ 90,452,232   
     

 

 

  

IT Services — 4.4%

      

Genpact, Ltd.(2)

      214,409       $ 5,135,095   

Visa, Inc., Class A

      296,228         24,498,056   
     

 

 

  
      $ 29,633,151   
     

 

 

  

Media — 3.9%

      

Time Warner, Inc.

      212,516       $ 16,918,399   

Walt Disney Co. (The)

      99,784         9,265,942   
     

 

 

  
      $ 26,184,341   
     

 

 

  

Multiline Retail — 0.6%

      

Macy’s, Inc.

      110,470       $ 4,092,914   
     

 

 

  
      $ 4,092,914   
     

 

 

  

Oil, Gas & Consumable Fuels — 1.6%

      

Devon Energy Corp.

      170,158       $ 7,505,669   

EOG Resources, Inc.

      34,741         3,359,802   
     

 

 

  
      $ 10,865,471   
     

 

 

  

Personal Products — 0.7%

      

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

      54,110       $ 4,791,982   
     

 

 

  
      $ 4,791,982   
     

 

 

  

Pharmaceuticals — 5.7%

      

Allergan PLC(2)

      63,151       $ 14,544,307   

Bristol-Myers Squibb Co.

      91,953         4,958,106   

Johnson & Johnson

      162,089         19,147,573   
     

 

 

  
      $ 38,649,986   
     

 

 

  

Road & Rail — 3.2%

      

Norfolk Southern Corp.

      146,278       $ 14,197,743   

Union Pacific Corp.

      73,754         7,193,227   
     

 

 

  
      $ 21,390,970   
     

 

 

  

 

2

 

 

                                                 
Security    Shares      Value  

Semiconductors & Semiconductor Equipment — 4.4%

      

Broadcom, Ltd.

      62,433       $ 10,770,941   

NXP Semiconductors NV(2)

      90,037         9,184,674   

Texas Instruments, Inc.

      135,586         9,515,426   
     

 

 

  
      $ 29,471,041   
     

 

 

  

Software — 6.3%

      

Adobe Systems, Inc.(2)

      45,654       $ 4,955,285   

Fortinet, Inc.(2)

      134,659         4,972,957   

Intuit, Inc.

      40,279         4,431,093   

Microsoft Corp.

      222,060         12,790,656   

salesforce.com, inc.(2)

      216,616         15,451,219   
     

 

 

  
      $ 42,601,210   
     

 

 

  

Specialty Retail — 3.0%

      

Home Depot, Inc. (The)

      37,666       $ 4,846,861   

Lowe’s Cos., Inc.

      210,080         15,169,877   
     

 

 

  
      $ 20,016,738   
     

 

 

  

Technology Hardware, Storage & Peripherals — 3.4%

      

Apple, Inc.

      203,931       $ 23,054,400   
     

 

 

  
      $ 23,054,400   
     

 

 

  

Textiles, Apparel & Luxury Goods — 0.9%

      

NIKE, Inc., Class B

      115,596       $ 6,086,129   
     

 

 

  
      $ 6,086,129   
     

 

 

  

Tobacco — 1.0%

      

Philip Morris International, Inc.

      67,084       $ 6,521,906   
     

 

 

  
      $ 6,521,906   
     

 

 

  

Total Common Stocks
(identified cost $514,539,167)

       $ 672,565,880   
     

 

 

  

Short-Term Investments — 0.1%

      
Description    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.64%(3)

    $ 723       $ 722,752   
     

 

 

  

Total Short-Term Investments
(identified cost $722,752)

       $ 722,752   
     

 

 

  

Total Investments — 99.8%
(identified cost $515,261,919)

       $ 673,288,632   
     

 

 

  

Covered Call Options Written — (0.5)%

 

                                                                                                   
Security    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

Adobe Systems, Inc.

      225       $ 115.00         11/18/16       $ (16,087 ) 

Allergan PLC

      289         242.50         11/4/16         (96,229 ) 

Alphabet, Inc., Class C

      310         787.50         10/7/16         (58,900 ) 

Amazon.com, Inc.

      225         870.00         11/4/16         (436,500 ) 

Apple, Inc.

      1,070         120.00         10/21/16         (18,725 ) 

Biogen, Inc.

      235         322.50         10/14/16         (83,425 ) 

Blue Buffalo Pet Products, Inc.

      1,270         27.50         10/21/16         (6,350 ) 

Bristol-Myers Squibb Co.

      885         60.00         10/28/16         (22,568 ) 

Broadcom, Ltd.

      310         180.00         10/7/16         (6,200 ) 

CBOE Holdings, Inc.

      245         70.00         10/21/16         (2,450 ) 

Celgene Corp.

      780         113.00         10/14/16         (12,090 ) 

Charles Schwab Corp. (The)

      1,110         32.50         10/28/16         (58,275 ) 

 

3

 

 

                                                                                                   
Security    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

Constellation Brands, Inc., Class A

      325       $ 170.00         10/21/16       $ (80,438 ) 

Costco Wholesale Corp.

      315         160.00         11/4/16         (31,965 ) 

CVS Health Corp.

      365         94.50         10/14/16         (2,920 ) 

Devon Energy Corp.

      850         42.00         10/28/16         (265,625 ) 

Ecolab, Inc.

      360         125.00         10/21/16         (10,800 ) 

EOG Resources, Inc.

      170         100.00         10/14/16         (12,580 ) 

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

      270         95.00         10/21/16         (4,050 ) 

Facebook, Inc., Class A

      1,320         136.00         10/14/16         (6,600 ) 

Fortinet, Inc.

      670         39.00         10/21/16         (21,775 ) 

Fortune Brands Home & Security, Inc.

      570         60.00         11/18/16         (65,550 ) 

Genpact, Ltd.

      1,420         25.00         10/21/16         (28,400 ) 

Gilead Sciences, Inc.

      570         81.50         10/14/16         (24,225 ) 

GoDaddy, Inc., Class A

      1,130         35.00         10/21/16         (84,750 ) 

Home Depot, Inc. (The)

      185         131.00         10/28/16         (19,702 ) 

Incyte Corp.

      305         105.00         11/18/16         (90,738 ) 

Intuit, Inc.

      200         120.00         10/21/16         (1,000 ) 

Johnson & Johnson

      810         121.00         10/7/16         (8,100 ) 

Johnson Controls International PLC

      1,255         49.00         10/21/16         (20,080 ) 

JPMorgan Chase & Co.

      405         68.50         11/4/16         (24,875 ) 

LKQ Corp.

      725         37.50         10/21/16         (10,875 ) 

Lowe’s Cos., Inc.

      1,050         73.50         11/4/16         (76,102 ) 

Macy’s, Inc.

      550         39.00         11/4/16         (27,213 ) 

Medtronic PLC

      945         87.50         10/14/16         (38,273 ) 

Microsoft Corp.

      1,110         60.00         11/4/16         (65,211 ) 

Newell Brands, Inc.

      1,500         52.50         10/21/16         (168,750 ) 

NIKE, Inc., Class B

      575         55.50         11/4/16         (18,975 ) 

Norfolk Southern Corp.

      730         97.50         10/28/16         (167,900 ) 

Palo Alto Networks, Inc.

      390         165.00         11/4/16         (121,118 ) 

PepsiCo, Inc.

      570         108.00         10/28/16         (108,585 ) 

Philip Morris International, Inc.

      485         103.00         10/7/16         (11,882 ) 

Pinnacle Foods, Inc.

      1,305         52.50         10/21/16         (35,888 ) 

Priceline Group, Inc. (The)

      20         1,500.00         10/28/16         (39,900 ) 

Raytheon Co.

      375         140.00         10/21/16         (16,500 ) 

RPM International, Inc.

      655         55.00         10/21/16         (49,125 ) 

S&P Global, Inc.

      290         130.00         10/21/16         (23,200 ) 

salesforce.com, inc.

      1,080         74.50         11/4/16         (103,656 ) 

Sprouts Farmers Market, Inc.

      1,680         25.00         10/21/16         (4,200 ) 

Starbucks Corp.

      795         56.00         11/4/16         (49,670 ) 

Texas Instruments, Inc.

      675         71.50         10/7/16         (8,437 ) 

Time Warner, Inc.

      1,060         82.50         11/4/16         (109,231 ) 

Union Pacific Corp.

      365         98.00         10/28/16         (79,388 ) 

Vertex Pharmaceuticals, Inc.

      205         103.00         10/14/16         (5,125 ) 

Vertex Pharmaceuticals, Inc.

      365         91.50         11/4/16         (87,000 ) 

Visa, Inc., Class A

      1,480         85.50         10/14/16         (13,320 ) 

Walt Disney Co. (The)

      495         95.50         10/14/16         (6,682 ) 

Wells Fargo & Co.

      515         46.00         11/4/16         (24,967 ) 

Zimmer Biomet Holdings, Inc.

      410         130.00         10/21/16         (85,075 ) 
           

 

 

  

Total Covered Call Options Written
(premiums received $3,826,194)

             $ (3,178,220 ) 
           

 

 

  

Other Assets, Less Liabilities — 0.7%

             $ 4,241,021   
           

 

 

  

Net Assets — 100.0%

  

    $ 674,351,433   
           

 

 

  

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 September 30, 2016 has been pledged as collateral for such written option.

 

(2) Non-income producing security.

 

4

 

 

(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, 2016. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended September 30, 2016 was $27,890.

Written options activity for the fiscal year to date ended September 30, 2016 was as follows:

 

     Number of
Contracts		      Premiums
Received		  
Outstanding, beginning of period      33,125       $ 3,543,344   
Options written      306,556         32,522,062   
Options terminated in closing purchase transactions      (115,441 )       (12,509,884 ) 
Options expired      (185,391 )       (19,729,328 ) 
  

 

 

     

 

 

  
Outstanding, end of period      38,849       $     3,826,194   
  

 

 

     

 

 

  

At September 30, 2016, the Fund had sufficient cash and/or securities to cover commitments under open derivative 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, 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 $3,178,220.

The cost and unrealized appreciation (depreciation) of investments of the Fund at September 30, 2016, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $ 515,259,590   
  

 

 

  

Gross unrealized appreciation

    $ 168,760,064   

Gross unrealized depreciation

      (10,731,022 ) 
  

 

 

  

Net unrealized appreciation

    $     158,029,042   
  

 

 

  

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, 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    $ 672,565,880 *     $ —       $ —       $ 672,565,880   

Short-Term Investments

      —         722,752         —         722,752   

Total Investments

    $     672,565,880       $     722,752       $     —       $     673,288,632   
Liability Description                                

Covered Call Options Written

    $ (3,178,220 )     $ —       $ —       $ (3,178,220 ) 

Total

    $ (3,178,220 )     $ —       $ —       $ (3,178,220 ) 

 

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

 

5

 

 

The Fund held no investments or other financial instruments as of December 31, 2015 whose fair value was determined using Level 3 inputs. At September 30, 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:   November 21, 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:   November 21, 2016

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   November 21, 2016