Eaton Vance Tax-Advantaged Bond and 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

September 30, 2014

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Advantaged Bond and Option Strategies Fund

September 30, 2014

PORTFOLIO OF INVESTMENTS (Unaudited)

Tax-Exempt Municipal Securities — 88.0%

 

                                                 
Security    Principal
Amount
(000’s omitted)		      Value  

Bond Bank — 2.3%

  

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

    $ 2,515       $ 2,780,785   

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

      705         837,117   
     

 

 

  
   $ 3,617,902   
     

 

 

  

Education — 2.3%

      

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

    $ 2,000       $ 2,414,320   

New York State Dormitory Authority, 5.00%, 7/1/21

      1,000         1,197,350   
     

 

 

  
   $ 3,611,670   
     

 

 

  

Electric Utilities — 0.8%

      

North Carolina Municipal Power Agency No.1, (Catawba Electric), 5.00%, 1/1/20

    $ 1,000       $ 1,171,990   
     

 

 

  
   $ 1,171,990   
     

 

 

  

Escrowed/Prerefunded — 3.8%

      

Frederick County, MD, Escrowed to Maturity, 4.00%, 2/1/15

    $ 50       $ 50,652   

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

      5,000         5,910,200   
     

 

 

  
   $ 5,960,852   
     

 

 

  

General Obligations — 46.0%

      

Alexandria, VA, 4.00%, 7/1/16

    $ 2,980       $ 3,172,329   

Arkansas, 5.00%, 6/15/21

      5,000         6,066,450   

Baltimore County, MD, 5.00%, 8/1/21

      2,385         2,898,204   

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

      5,370         6,275,812   

Bedford, MA, 4.00%, 8/15/16

      1,380         1,474,254   

Carrollton, TX, 3.00%, 8/15/15

      100         102,469   

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

      2,010         2,246,497   

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

      3,050         3,625,931   

Frederick County, MD, 4.00%, 2/1/15

      505         511,656   

Georgia, 5.00%, 7/1/17

      600         672,930   

Georgia, 5.00%, 7/1/19

      3,070         3,623,674   

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

      240         255,187   

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

      315         275,030   

Maricopa County, AZ, Community College District, 3.00%, 7/1/18

      1,605         1,730,623   

Massachusetts, 5.50%, 10/1/15

      400         421,560   

New York, 5.00%, 4/15/15

      500         513,250   

Pennsylvania Economic Development Financing Authority, (Unemployment Compensation Revenue), 5.00%, 7/1/18

      5,000         5,759,750   

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

      875         1,024,389   

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

      2,890         3,295,438   

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

      2,500         3,008,425   

Utah, 5.00%, 7/1/19(1)

      3,300         3,896,838   

Wake County, NC, 5.00%, 3/1/21

      2,000         2,417,460   

Washington, 5.00%, 8/1/21

      10,000         12,044,200   

Washington Suburban Sanitary District, MD, (Montgomery and Prince George’s Counties), 5.00%, 6/1/20

      2,500         2,996,000   

Wisconsin, 5.00%, 5/1/20

      2,255         2,685,976   

Wisconsin, 5.00%, 5/1/21

      1,000         1,201,040   
     

 

 

  
      $ 72,195,372   
     

 

 

  

Hospital — 4.8%

      

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

    $ 6,500       $ 7,581,275   
     

 

 

  
      $ 7,581,275   
     

 

 

  

 

1

 

 

                                                                                                   
Security                    Principal
Amount
(000’s omitted)		      Value  

Lease Revenue/Certificates of Participation — 4.1%

  

         

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

          $ 4,470       $ 5,342,142   

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

            500         539,945   

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

            500         582,510   
           

 

 

  
            $ 6,464,597   
           

 

 

  

Other Revenue — 2.0%

            

Texas Public Finance Authority, (Unemployment Compensation), 4.00%, 1/1/18

  

    $ 3,000       $ 3,186,690   
           

 

 

  
            $ 3,186,690   
           

 

 

  

Special Tax Revenue — 0.9%

            

New York Urban Development Corp., Personal Income Tax Revenue, 5.00%, 3/15/19

  

    $ 1,160       $ 1,355,669   
           

 

 

  
            $ 1,355,669   
           

 

 

  

Transportation — 15.6%

            

Massachusetts Bay Transportation Authority, Sales Tax Revenue, 5.25%, 7/1/21

  

    $ 1,350       $ 1,654,546   

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

            20,000         22,810,400   
           

 

 

  
            $ 24,464,946   
           

 

 

  

Water and Sewer — 5.4%

            

Denver City and County, CO, Board of Water Commissioners, 5.00%, 12/15/14

  

    $ 1,340       $ 1,353,829   

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

  

      2,985         3,445,884   

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

  

      1,860         2,039,658   

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

            1,415         1,699,641   
           

 

 

  
            $ 8,539,012   
           

 

 

  

Total Tax-Exempt Municipal Securities — 88.0%
(identified cost $132,531,288)

             $ 138,149,975   
           

 

 

  

Taxable Municipal Securities — 7.3%

            
Security                   

Principal
Amount

(000’s omitted)

      Value  

Education — 5.0%

  

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

          $ 2,395       $ 2,482,106   

University of North Carolina at Chapel Hill, 0.759%, 12/1/16(2)

            1,255         1,256,180   

University of North Carolina at Chapel Hill, 1.317%, 12/1/17(2)

            950         954,018   

University of North Carolina at Chapel Hill, 1.798%, 12/1/18(2)

            1,540         1,542,926   

University of North Carolina at Chapel Hill, 2.098%, 12/1/19(2)

            1,135         1,142,911   

University of North Carolina at Chapel Hill, 2.355%, 12/1/20(2)

            500         501,565   
           

 

 

  
   $ 7,879,706   
           

 

 

  

General Obligations — 2.3%

            

Texas, 1.666%, 10/1/18

          $ 3,500       $ 3,520,405   
           

 

 

  
            $ 3,520,405   
           

 

 

  

Total Taxable Municipal Securities — 7.3%
(identified cost $11,348,964)

             $ 11,400,111   
           

 

 

  

Call Options Purchased — 0.0%(3)

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      131       $ 2,125         10/3/14       $ 327   

S&P 500 Index

      133         2,110         10/10/14         997   

S&P 500 Index

      131         2,140         10/18/14         655   

S&P 500 Index

      131         2,105         10/24/14         1,965   

 

2

 

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index FLEX

      132       $ 2,140         10/1/14       $ —   

S&P 500 Index FLEX

      131         2,135         10/6/14         1   

S&P 500 Index FLEX

      133         2,115         10/8/14         19   

S&P 500 Index FLEX

      133         2,110         10/13/14         264   

S&P 500 Index FLEX

      132         2,132         10/15/14         213   

S&P 500 Index FLEX

      110         2,125         10/20/14         757   

S&P 500 Index FLEX

      130         2,120         10/22/14         1,506   

S&P 500 Index FLEX

      131         2,120         10/27/14         3,999   
           

 

 

  

Total Call Options Purchased
(identified cost $46,075)

             $ 10,703   
           

 

 

  

Put Options Purchased — 0.1%

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      131       $ 1,820         10/3/14       $ 2,947   

S&P 500 Index

      133         1,795         10/10/14         10,640   

S&P 500 Index

      131         1,840         10/18/14         40,610   

S&P 500 Index

      131         1,780         10/24/14         34,060   

S&P 500 Index FLEX

      132         1,825         10/1/14         —   

S&P 500 Index FLEX

      131         1,835         10/6/14         1,601   

S&P 500 Index FLEX

      133         1,800         10/8/14         1,541   

S&P 500 Index FLEX

      133         1,790         10/13/14         5,632   

S&P 500 Index FLEX

      132         1,820         10/15/14         15,164   

S&P 500 Index FLEX

      110         1,820         10/20/14         24,263   

S&P 500 Index FLEX

      130         1,795         10/22/14         24,268   

S&P 500 Index FLEX

      131         1,790         10/27/14         39,373   
           

 

 

  

Total Put Options Purchased
(identified cost $375,394)

             $ 200,099   
           

 

 

  

Short-Term Investments — 6.2%

            
Description                    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.14%(4)

          $ 9,790       $ 9,790,357   
           

 

 

  

Total Short-Term Investments — 6.2%
(identified cost $9,790,357)

             $ 9,790,357   
           

 

 

  

Total Investments — 101.6%
(identified cost $154,092,078)

             $ 159,551,245   
           

 

 

  

Call Options Written — (0.3)%

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      131       $ 2,030         10/3/14       $ (982 ) 

S&P 500 Index

      133         2,015         10/10/14         (25,935 ) 

S&P 500 Index

      131         2,040         10/18/14         (12,773 ) 

S&P 500 Index

      131         2,010         10/24/14         (110,695 ) 

S&P 500 Index FLEX

      132         2,040         10/1/14         —   

S&P 500 Index FLEX

      131         2,035         10/6/14         (2,720 ) 

S&P 500 Index FLEX

      133         2,020         10/8/14         (18,665 ) 

S&P 500 Index FLEX

      133         2,015         10/13/14         (54,822 ) 

S&P 500 Index FLEX

      132         2,032         10/15/14         (28,897 ) 

S&P 500 Index FLEX

      110         2,030         10/20/14         (42,079 ) 

S&P 500 Index FLEX

      130         2,025         10/22/14         (69,846 ) 

 

3

 

 

                                                                                                   
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index FLEX

      131       $ 2,025         10/27/14       $ (98,409 ) 
           

 

 

  

Total Call Options Written — (0.3)%
(premiums received $1,072,931)

             $ (465,823 ) 
           

 

 

  

Put Options Written — (0.5)%

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      131       $ 1,915         10/3/14       $ (21,288 ) 

S&P 500 Index

      133         1,890         10/10/14         (49,875 ) 

S&P 500 Index

      131         1,940         10/18/14         (185,365 ) 

S&P 500 Index

      131         1,875         10/24/14         (100,870 ) 

S&P 500 Index FLEX

      132         1,925         10/1/14         (75 ) 

S&P 500 Index FLEX

      131         1,935         10/6/14         (38,189 ) 

S&P 500 Index FLEX

      133         1,895         10/8/14         (21,052 ) 

S&P 500 Index FLEX

      133         1,885         10/13/14         (39,426 ) 

S&P 500 Index FLEX

      132         1,920         10/15/14         (90,913 ) 

S&P 500 Index FLEX

      110         1,915         10/20/14         (98,285 ) 

S&P 500 Index FLEX

      130         1,890         10/22/14         (91,987 ) 

S&P 500 Index FLEX

      131         1,885         10/27/14         (119,688 ) 
           

 

 

  

Total Put Options Written — (0.5)%
(premiums received $1,067,430)

             $ (857,013 ) 
           

 

 

  

Other Assets, Less Liabilities — (0.8)%

             $ (1,246,548 ) 
           

 

 

  

Net Assets — 100.0%

             $ 156,981,861   
           

 

 

  

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

 

FLEX

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

PSF

   -   Permanent School Fund

At September 30, 2014, the concentration of the Fund’s investments in the various states, determined as a percentage of net assets, is as follows:

 

                        

New York

      16.5 % 

Others, representing less than 10% individually

      78.8 % 

 

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

 

(2) When-issued security.

 

(3) Amount is less than 0.05%.

 

(4) 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 $16,650.

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

    $     153,605,708   
  

 

 

  

Gross unrealized appreciation

    $ 6,169,119   

Gross unrealized depreciation

      (223,582 ) 
  

 

 

  

Net unrealized appreciation

    $ 5,945,537   
  

 

 

  

 

4

 

 

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      3,602      $ 2,301,317   
Options written      32,566        21,369,689   
Options terminated in closing purchase transactions      (6,635 )      (4,638,611 ) 
Options expired      (26,417 )      (16,892,034 ) 
  

 

 

    

 

 

  
Outstanding, end of period      3,116      $ 2,140,361   
  

 

 

    

 

 

  

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 objective. The Fund enters into a series of S&P 500 written call and put option spread transactions to enhance return while limiting any potential loss. 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.

At September 30, 2014, 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 $210,802 and $1,322,836, 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.

 

•  

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  

Tax-Exempt Municipal Securities

    $ —      $ 138,149,975      $ —       $ 138,149,975   

Taxable Municipal Securities

      —        11,400,111        —         11,400,111   

Call Options Purchased

      3,944        6,759        —         10,703   

Put Options Purchased

      88,257        111,842        —         200,099   

Short-Term Investments

      —        9,790,357        —         9,790,357   

Total Investments

    $ 92,201      $     159,459,044      $     —       $     159,551,245   
Liability Description                              

Call Options Written

    $ (150,385 )    $ (315,438 )    $ —       $ (465,823 ) 

Put Options Written

      (357,398 )      (499,615 )      —         (857,013 ) 

Total

    $     (507,783 )    $ (815,053 )    $ —       $ (1,322,836 ) 

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.

 

5

 

 

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:   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/ Payson F. Swaffield
  Payson F. Swaffield
  President
Date:   November 24, 2014

 

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