Eaton Vance Tax-Advantaged Bond & Option Strategies Fund

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

811-22380

Investment Company Act File Number

Eaton Vance Tax-Advantaged Bond and Option Strategies 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)

December 31

Date of Fiscal Year End

March 31, 2016

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Advantaged Bond and Option Strategies Fund

March 31, 2016

PORTFOLIO OF INVESTMENTS (Unaudited)

Tax-Exempt Municipal Securities — 84.2%

 

                                                 
Security    Principal
Amount
(000’s omitted)		      Value  

Bond Bank — 3.2%

      

Oklahoma Water Resources Board, 2.00%, 4/1/19

    $ 750       $ 775,613   

Vermont Municipal Bond Bank, 4.00%, 12/1/17(1)

      2,515         2,653,400   

Vermont Municipal Bond Bank, 5.00%, 12/1/19

      705         806,767   
     

 

 

  
   $ 4,235,780   
     

 

 

  

Education — 3.4%

      

Massachusetts Development Finance Agency, (Harvard University), 5.00%, 10/15/20

    $ 2,000       $ 2,352,680   

University of North Texas, 5.00%, 4/15/17

      305         318,508   

University of North Texas, 5.00%, 4/15/18

      290         313,922   

University of North Texas, 5.00%, 4/15/21

      300         354,126   

University of Texas, 5.00%, 7/1/20

      1,000         1,165,110   
     

 

 

  
   $ 4,504,346   
     

 

 

  

Electric Utilities — 4.6%

      

California Department of Water Resources, Power Supply Revenue, 5.00%, 5/1/22

    $ 5,000       $ 6,106,000   
     

 

 

  
   $ 6,106,000   
     

 

 

  

Escrowed/Prerefunded — 4.3%

      

Maryland, Prerefunded to 8/1/19, 5.00%, 8/1/20

    $ 5,000       $ 5,664,550   
     

 

 

  
   $ 5,664,550   
     

 

 

  

General Obligations — 37.0%

      

Acalanes Union High School District, CA, 5.00%, 8/1/21(2)

    $ 1,000       $ 1,203,080   

Allen Independent School District, TX, (PSF Guaranteed), 5.00%, 2/15/22

      400         482,376   

Arkansas, 5.00%, 6/15/21

      5,000         5,976,950   

Beaufort County, SC, School District, 5.00%, 3/1/19(1)

      5,370         6,016,172   

Birdville, Independent School District, TX, (PSF Guaranteed), 0.00%, 2/15/19

      635         616,115   

Florida Board of Education, Full Faith and Credit, Capital Outlay, 5.00%, 6/1/17

      2,010         2,112,812   

Florida Board of Education, Full Faith and Credit, Capital Outlay, 5.00%, 6/1/22

      3,050         3,545,167   

Georgia, 5.00%, 7/1/17

      600         632,976   

Georgia, 5.00%, 7/1/19

      3,070         3,479,630   

Hopkinton, MA, 4.00%, 7/15/16

      240         242,340   

Liberty Hill, TX, Independent School District, (PSF Guaranteed), 0.00%, 8/1/21

      315         292,125   

Maryland, 5.00%, 3/1/22

      2,000         2,436,700   

New Hampshire, 5.00%, 12/1/23

      3,050         3,845,470   

Northwest Independent School District, TX, (PSF Guaranteed), 0.00%, 2/15/18

      1,445         1,422,501   

Pennsylvania Economic Development Financing Authority, (Unemployment Compensation Revenue), 5.00%, 1/1/20

      875         992,355   

Richardson, TX, 5.00%, 2/15/18

      2,890         3,120,304   

Rose Tree Media School District, PA, 3.00%, 2/1/20

      500         536,045   

St. Tammany Parish Wide School District No. 12, LA, 4.00%, 3/1/21

      1,070         1,205,826   

Texas Public Finance Authority, 5.00%, 10/1/20

      2,500         2,932,325   

Utah, Series 2011A, 5.00%, 7/1/19

      3,300         3,741,441   

Wisconsin, 5.00%, 5/1/20

      2,255         2,612,711   

Wisconsin, 5.00%, 5/1/21

      1,040         1,236,217   
     

 

 

  
   $ 48,681,638   
     

 

 

  

Hospital — 6.2%

      

Allen County, OH, Hospital Facilities, (Catholic Health Partners), 5.00%, 9/1/20(1)

    $ 6,500       $ 7,499,635   

Middlesex County, NJ, 2.00%, 6/1/21

      630         654,526   
     

 

 

  
   $ 8,154,161   
     

 

 

  

 

1

 

 

                                                 
Security    Principal
Amount
(000’s omitted)		      Value  

Lease Revenue/Certificates of Participation — 7.4%

      

Arizona School Facilities Board, 5.00%, 9/1/20

    $ 2,900       $ 3,364,435   

California Public Works Board, 5.00%, 9/1/20

      4,470         5,227,844   

Orange County, FL, School Board, 5.00%, 8/1/16

      500         507,640   

Orange County, FL, School Board, 5.00%, 8/1/19

      500         566,630   
     

 

 

  
   $ 9,666,549   
     

 

 

  

Transportation — 8.3%

      

New York State Thruway Authority, 5.00%, 4/1/18(1)

    $ 10,000       $ 10,857,800   
     

 

 

  
   $ 10,857,800   
     

 

 

  

Water and Sewer — 9.8%

      

Charlotte, NC, Water and Sewer Revenue, 5.00%, 7/1/22

    $ 1,810       $ 2,219,295   

Honolulu City and County, HI, Wastewater System Revenue, 5.00%, 7/1/22

      2,985         3,367,378   

Massachusetts Water Pollution Abatement Trust, 4.00%, 8/1/17

      1,860         1,944,091   

Metropolitan Water District of Southern California, 0.78%, 3/27/18 (Put Date), 7/1/36(3)

      3,750         3,735,225   

Seattle, WA, Solid Waste Revenue, 5.00%, 8/1/21

      1,415         1,682,690   
     

 

 

  
   $ 12,948,679   
     

 

 

  

Total Tax-Exempt Municipal Securities — 84.2%
(identified cost $106,651,283)

       $ 110,819,503   
     

 

 

  

Taxable Municipal Securities — 7.6%

      
Security    Principal
Amount
(000’s omitted)		      Value  

Education — 5.8%

      

University of California, 3.154%, 5/15/21

    $ 2,395       $ 2,577,954   

University of North Carolina at Chapel Hill, 0.759%, 12/1/16

      1,255         1,258,527   

University of North Carolina at Chapel Hill, 1.778%, 12/1/21

      500         501,050   

University of North Carolina at Chapel Hill, 1.798%, 12/1/18

      1,540         1,581,903   

University of North Carolina at Chapel Hill, 2.098%, 12/1/19

      1,135         1,173,579   

University of North Carolina at Chapel Hill, 2.355%, 12/1/20

      500         521,280   
     

 

 

  
   $ 7,614,293   
     

 

 

  

General Obligations — 1.8%

      

Mississippi, 2.859%, 11/1/23

    $ 1,000       $ 1,055,080   

Olentangy Local School District, OH, Series A, 5.00%, 12/1/19

      1,200         1,363,140   
     

 

 

  
   $ 2,418,220   
     

 

 

  

Total Taxable Municipal Securities — 7.6%
(identified cost $9,724,728)

       $ 10,032,513   
     

 

 

  

U.S. Treasury Obligations — 7.9%

  

Security    Principal
Amount
(000’s omitted)		      Value  

U.S. Treasury Note, 1.625%, 11/15/22

    $ 1,950       $ 1,965,463   

U.S. Treasury Note, 1.875%, 11/30/21

      650         667,888   

U.S. Treasury Note, 1.875%, 5/31/22

      1,090         1,117,442   

U.S. Treasury Note, 2.00%, 2/28/21

      1,025         1,062,797   

U.S. Treasury Note, 2.00%, 7/31/22

      2,000         2,063,398   

U.S. Treasury Note, 2.25%, 7/31/21

      3,300         3,462,743   
  

 

 

  

Total U.S. Treasury Obligations — 7.9%
(identified cost $10,114,224)

       $ 10,339,731   
  

 

 

  

 

2

 

 

                                                 

Call Options Purchased — 0.0%(4)

      

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		     

Expiration
Date

      Value  

S&P 500 Index

      114       $ 2,140         4/1/16       $ 285   

S&P 500 Index

      113         2,160         4/8/16         848   

S&P 500 Index

      108         2,190         4/15/16         540   

S&P 500 Index

      108         2,175         4/22/16         1,890   

S&P 500 Index FLEX

      113         2,145         4/4/16         0   

S&P 500 Index FLEX

      115         2,135         4/6/16         17   

S&P 500 Index FLEX

      111         2,170         4/11/16         27   

S&P 500 Index FLEX

      111         2,160         4/13/16         247   

S&P 500 Index FLEX

      109         2,190         4/18/16         180   

S&P 500 Index FLEX

      100         2,185         4/20/16         415   

S&P 500 Index FLEX

      107         2,180         4/25/16         1,687   

S&P 500 Index FLEX

      105         2,205         4/27/16         942   
           

 

 

  

Total Call Options Purchased
(identified cost $46,606)

             $ 7,078   
           

 

 

  

Put Options Purchased — 0.0%(4)

  

  
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      114       $ 1,785         4/1/16       $ 285   

S&P 500 Index

      113         1,800         4/8/16         1,977   

S&P 500 Index

      108         1,860         4/15/16         6,210   

S&P 500 Index

      108         1,820         4/22/16         8,640   

S&P 500 Index FLEX

      113         1,800         4/4/16         0   

S&P 500 Index FLEX

      115         1,775         4/6/16         3   

S&P 500 Index FLEX

      111         1,805         4/11/16         159   

S&P 500 Index FLEX

      111         1,820         4/13/16         474   

S&P 500 Index FLEX

      109         1,855         4/18/16         3,704   

S&P 500 Index FLEX

      100         1,845         4/20/16         4,137   

S&P 500 Index FLEX

      107         1,835         4/25/16         8,106   

S&P 500 Index FLEX

      105         1,870         4/27/16         19,640   
           

 

 

  

 

                                                                                                   

Total Put Options Purchased
(identified cost $342,556)

   

    $ 53,335   
           

 

 

  

Short-Term Investments — 2.0%

            
Description      Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.52%(5)

  

    $ 2,666       $ 2,666,271   
           

 

 

  

Total Short-Term Investments — 2.0%
(identified cost $2,666,271)

             $ 2,666,271   
           

 

 

  

Total Investments — 101.7%
(identified cost $129,545,668)

             $ 133,918,431   
           

 

 

  

Call Options Written — (1.3)%

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      114       $ 2,045         4/1/16       $ (185,250 ) 

S&P 500 Index

      113         2,060         4/8/16         (138,990 ) 

S&P 500 Index

      108         2,090         4/15/16         (51,840 ) 

S&P 500 Index

      108         2,075         4/22/16         (152,280 ) 

 

3

 

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index FLEX

      113       $ 2,050         4/4/16       $ (179,136 ) 

S&P 500 Index FLEX

      115         2,040         4/6/16         (294,456 ) 

S&P 500 Index FLEX

      111         2,070         4/11/16         (118,542 ) 

S&P 500 Index FLEX

      111         2,060         4/13/16         (194,116 ) 

S&P 500 Index FLEX

      109         2,090         4/18/16         (82,962 ) 

S&P 500 Index FLEX

      100         2,085         4/20/16         (103,601 ) 

S&P 500 Index FLEX

      107         2,080         4/25/16         (159,081 ) 

S&P 500 Index FLEX

      105         2,105         4/27/16         (78,013 ) 
           

 

 

  

Total Call Options Written — (1.3)%
(premiums received $1,130,343)

             $ (1,738,267 ) 
           

 

 

  

Put Options Written — (0.2)%

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      114       $ 1,880         4/1/16       $ (285 ) 

S&P 500 Index

      113         1,900         4/8/16         (3,955 ) 

S&P 500 Index

      108         1,960         4/15/16         (22,680 ) 

S&P 500 Index

      108         1,920         4/22/16         (24,840 ) 

S&P 500 Index FLEX

      113         1,895         4/4/16         (3 ) 

S&P 500 Index FLEX

      115         1,870         4/6/16         (17 ) 

S&P 500 Index FLEX

      111         1,905         4/11/16         (2,377 ) 

S&P 500 Index FLEX

      111         1,920         4/13/16         (6,728 ) 

S&P 500 Index FLEX

      109         1,955         4/18/16         (32,582 ) 

S&P 500 Index FLEX

      100         1,945         4/20/16         (30,180 ) 

S&P 500 Index FLEX

      107         1,935         4/25/16         (41,568 ) 

S&P 500 Index FLEX

      105         1,970         4/27/16         (84,352 ) 
           

 

 

  

 

                                                                                                                            

Total Put Options Written — (0.2)%
(premiums received $1,061,694)

             $ (249,567 ) 
              

 

 

  

Other Assets, Less Liabilities — (0.2)%

             $ (275,784 ) 
              

 

 

  

Net Assets — 100.0%

             $ 131,654,813   
              

 

 

  

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

At March 31, 2016, the concentration of the Fund’s investments in the various states, determined as a percentage of net assets, is as follows:

 

                        

California

      14.3 % 

Others, representing less than 10% individually

      77.5 % 

 

(1) Security (or a portion thereof) has been pledged as collateral for written option contracts.

 

(2) When-issued or delayed delivery security.

 

(3) Variable rate security. The stated interest rate represents the rate in effect at March 31, 2016.

 

(4) Amount is less than 0.05%.

 

(5) 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 $4,395.

Abbreviations:

FLEX

   -   FLexible EXchange traded option, representing a customized option contract with negotiated contract terms.

PSF

   -   Permanent School Fund

 

4

 

 

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

      2,704       $ 2,583,766   

Options written

      8,884         9,169,641   

Options exercised

      (2,378 )       (2,599,357 ) 

Options expired

      (6,582 )       (6,962,013 ) 
  

 

 

     

 

 

  

Outstanding, end of period

      2,628       $     2,192,037   
  

 

 

     

 

 

  

At March 31, 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 objective. The Fund enters into a series of S&P 500 written call and put option spread transactions to enhance return while limiting its maximum option loss potential. A written call option spread on a stock index consists of selling call options on the index and buying an equal number of call options on the same index and with the same expiration, but with a higher exercise price. A written put option spread on a stock index consists of selling put options on an index and buying an equal number of put options on the same index and with the same expiration, but with a lower exercise price. Any net premiums received are reduced by the premiums paid on the purchased options. The risk of loss if written options expire in the money is limited to the difference in exercise price of the written and purchased option positions. The Fund’s use of option spreads rather than stand alone options, staggering roll dates across the option position portfolio, and utilizing exchange-traded options guaranteed by the Options Clearing Corporation, a market clearinghouse, serve to mitigate risk in its option strategy.

The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) and whose primary underlying risk exposure is equity price risk at March 31, 2016 was as follows:

 

     Fair Value  

Derivative

    Asset
Derivative		      Liability
Derivative		  

Purchased options

    $ 60,413       $ —   

Written options

      —         (1,987,834 ) 
  

 

 

     

 

 

  

Total

    $     60,413       $     (1,987,834 ) 
  

 

 

     

 

 

  

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

    $     129,152,145   
  

 

 

  

Gross unrealized appreciation

    $ 4,707,163   

Gross unrealized depreciation

      (1,290 ) 
  

 

 

  

Net unrealized appreciation

    $ 4,705,873   
  

 

 

  

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.

 

5

 

 

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  

Tax-Exempt Municipal Securities

    $ —       $ 110,819,503       $ —       $ 110,819,503   

Taxable Municipal Securities

      —         10,032,513         —         10,032,513   

U.S. Treasury Obligations

      —         10,339,731         —         10,339,731   

Call Options Purchased

      3,563         3,515         —         7,078   

Put Options Purchased

      17,112         36,223         —         53,335   

Short-Term Investments

      —         2,666,271         —         2,666,271   

Total Investments

    $ 20,675       $     133,897,756       $ —       $     133,918,431   
Liability Description                                

Call Options Written

    $ (528,360 )     $ (1,209,907 )     $ —       $ (1,738,267 ) 

Put Options Written

      (51,760 )       (197,807 )       —         (249,567 ) 

Total

    $     (580,120 )     $ (1,407,714 )     $ —       $ (1,987,834 ) 

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 Tax-Advantaged Bond and Option Strategies Fund

 

By:   /s/ Payson F. Swaffield
  Payson F. Swaffield
  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/ Payson F. Swaffield
  Payson F. Swaffield
  President
Date:   May 23, 2016

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   May 23, 2016