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, 2013

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Advantaged Bond and Option Strategies Fund

September 30, 2013

PORTFOLIO OF INVESTMENTS (Unaudited)

Tax-Exempt Municipal Securities — 91.4%

 

                                                 
Security    Principal
Amount
(000’s omitted)		      Value  

Bond Bank — 2.2%

      

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

    $ 2,515       $ 2,814,737   

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

      705         830,737   
     

 

 

  
      $ 3,645,474   
     

 

 

  

Education — 2.2%

      

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

    $ 2,000       $ 2,410,380   

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

      1,000         1,181,780   

University of Arkansas, 3.00%, 11/1/19

      195         203,399   
     

 

 

  
      $ 3,795,559   
     

 

 

  

Electric Utilities — 2.4%

      

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

    $ 1,000       $ 1,163,920   

Energy Northwest, WA, (Columbia Generating Station), 5.00%, 7/1/19

      2,500         2,939,850   
     

 

 

  
      $ 4,103,770   
     

 

 

  

Escrowed/Prerefunded — 2.2%

      

Columbus, OH, Prerefunded to 7/1/14, 5.00%, 7/1/20

    $ 1,000       $ 1,035,500   

Harris County, TX, Flood Control District, Prerefunded to 10/1/14, 5.25%, 10/1/20

      2,545         2,673,014   
     

 

 

  
      $ 3,708,514   
     

 

 

  

General Obligations — 47.2%

      

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

    $ 2,980       $ 3,257,915   

Arkansas, 5.00%, 6/15/21(2)

      5,000         5,991,150   

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

      2,385         2,877,216   

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

      5,370         6,296,164   

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

      1,380         1,513,763   

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

      100         104,891   

Charleston County, SC, School District, 5.00%, 2/1/19

      7,020         8,247,588   

Dakota County, MN, Community Development Agency, 3.00%, 1/1/14

      500         503,565   

Florida Board of Education, 5.00%, 6/1/17

      2,010         2,305,711   

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

      555         582,511   

Georgia, 5.00%, 7/1/17

      600         692,148   

Georgia, 5.00%, 7/1/19

      3,070         3,650,844   

Hoover, AL, Board of Education Capital Outlay Warrants, 5.00%, 2/15/14

      2,815         2,865,698   

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

      240         261,348   

Lexington County, SC, School District No. 1, 5.00%, 3/1/21

      2,000         2,379,520   

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

      315         256,303   

Loudoun County, VA, 5.00%, 12/1/17

      2,015         2,346,971   

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

      1,605         1,725,776   

Maryland, 5.00%, 8/1/20

      5,000         5,872,650   

Massachusetts, 5.50%, 10/1/15

      400         441,244   

Mississippi, 5.00%, 10/1/21

      500         569,520   

Morris County, NJ, 5.00%, 2/15/14

      1,650         1,679,750   

New York, 5.00%, 4/15/15

      500         537,355   

North Carolina, 4.00%, 6/1/14

      5,000         5,128,950   

Ohio, 5.00%, 8/1/22

      1,000         1,191,550   

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

      2,890         3,345,666   

St. Louis County, MO, Parkway C-2 School District, 4.00%, 3/1/20

      1,700         1,916,461   

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

      3,300         3,924,360   

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

      2,000         2,405,280   

Washington, 5.00%, 7/1/20

      1,095         1,300,389   

 

1

 

 

                                                 
Security    Principal
Amount
(000’s omitted)		      Value  

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

    $ 2,500       $ 3,001,025   

Wisconsin, 5.00%, 5/1/20

      2,255         2,667,485   
     

 

 

  
      $ 79,840,767   
     

 

 

  

Insured-General Obligations — 0.5%

      

Houston, TX, (NPFG), 5.25%, 3/1/14

    $ 785       $ 801,885   
     

 

 

  
      $ 801,885   
     

 

 

  

Insured-Transportation — 0.6%

      

New York State Thruway Authority, (AGM), 5.00%, 3/15/14

    $ 1,000       $ 1,022,410   
     

 

 

  
      $ 1,022,410   
     

 

 

  

Lease Revenue/Certificates of Participation — 0.7%

      

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

    $ 500       $ 556,325   

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

      500         578,475   
     

 

 

  
      $ 1,134,800   
     

 

 

  

Other Revenue — 0.7%

      

New Jersey Environmental Infrastructure Trust, 4.00%, 9/1/19

    $ 1,000       $ 1,128,370   
     

 

 

  
      $ 1,128,370   
     

 

 

  

Special Tax Revenue — 13.1%

      

Michigan Finance Authority, (Unemployment Obligation Assessment), 5.00%, 1/1/20

    $ 6,000       $ 6,952,140   

New York Urban Development Corp., Personal Income Tax Revenue, 5.00%, 3/15/18

      12,000         13,897,800   

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

      1,160         1,360,309   
     

 

 

  
      $ 22,210,249   
     

 

 

  

Transportation — 15.4%

      

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

    $ 1,350       $ 1,633,459   

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

      20,000         23,181,800   

Washington Federal Highway Grant Anticipation Revenue, 5.00%, 9/1/22

      1,000         1,161,690   
     

 

 

  
      $ 25,976,949   
     

 

 

  

Water and Sewer — 4.2%

      

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

    $ 2,985       $ 3,402,273   

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

      1,860         2,077,248   

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

      1,415         1,668,979   
     

 

 

  
      $ 7,148,500   
     

 

 

  

Total Tax-Exempt Municipal Securities — 91.4%
(identified cost $150,849,928)

       $ 154,517,247   
     

 

 

  

 

                                                                                                   

Call Options Purchased — 0.0%(3)

            
Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      171       $ 1,770         10/4/13       $ 855   

S&P 500 Index

      167         1,800         10/11/13         1,252   

S&P 500 Index

      157         1,840         10/19/13         1,178   

S&P 500 Index

      164         1,810         10/25/13         40,180   

S&P 500 Index FLEX

      171         1,765         10/1/13         —   

S&P 500 Index FLEX

      171         1,775         10/2/13         —   

S&P 500 Index FLEX

      171         1,790         10/7/13         9   

S&P 500 Index FLEX

      168         1,800         10/9/13         21   

S&P 500 Index FLEX

      166         1,815         10/14/13         113   

S&P 500 Index FLEX

      165         1,825         10/16/13         145   

S&P 500 Index FLEX

      162         1,825         10/21/13         536   

S&P 500 Index FLEX

      164         1,810         10/23/13         1,409   
           

 

 

  

Total Call Options Purchased
(identified cost $55,306)

             $ 45,698   
           

 

 

  

 

2

 

 

                                                                                                   

Put Options Purchased — 0.1%

            
Description    Number of
Contracts		      Strike
Price		     

Expiration
Date

      Value  

S&P 500 Index

      171       $ 1,480         10/4/13       $ 3,420   

S&P 500 Index

      167         1,530         10/11/13         18,370   

S&P 500 Index

      157         1,565         10/19/13         49,455   

S&P 500 Index

      164         1,535         10/25/13         52,480   

S&P 500 Index FLEX

      171         1,470         10/1/13         —   

S&P 500 Index FLEX

      171         1,490         10/2/13         —   

S&P 500 Index FLEX

      171         1,505         10/7/13         453   

S&P 500 Index FLEX

      168         1,530         10/9/13         2,472   

S&P 500 Index FLEX

      166         1,545         10/14/13         12,760   

S&P 500 Index FLEX

      165         1,540         10/16/13         15,536   

S&P 500 Index FLEX

      162         1,540         10/21/13         28,272   

S&P 500 Index FLEX

      164         1,540         10/23/13         34,691   
           

 

 

  

Total Put Options Purchased
(identified cost $415,141)

             $ 217,909   
           

 

 

  

Short-Term Investments — 12.1%

            

 

                                                 
Description    Interest
(000’s omitted)		      Value  

Eaton Vance Cash Reserves Fund, LLC, 0.11%(4)

   $ 20,412       $ 20,411,962   
     

 

 

  

Total Short-Term Investments — 12.1%
(identified cost $20,411,962)

       $ 20,411,962   
     

 

 

  

Total Investments — 103.6%
(identified cost $171,732,337)

       $ 175,192,816   
     

 

 

  

 

                                                                                                   

Call Options Written — (0.3)%

  

Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      171       $ 1,690         10/4/13       $ (138,510 ) 

S&P 500 Index

      167         1,720         10/11/13         (50,518 ) 

S&P 500 Index

      157         1,755         10/19/13         (16,877 ) 

S&P 500 Index

      164         1,730         10/25/13         (91,020 ) 

S&P 500 Index FLEX

      171         1,685         10/1/13         (34,919 ) 

S&P 500 Index FLEX

      171         1,695         10/2/13         (19,545 ) 

S&P 500 Index FLEX

      171         1,710         10/7/13         (29,713 ) 

S&P 500 Index FLEX

      168         1,720         10/9/13         (21,647 ) 

S&P 500 Index FLEX

      166         1,735         10/14/13         (18,982 ) 

S&P 500 Index FLEX

      165         1,740         10/16/13         (18,603 ) 

S&P 500 Index FLEX

      162         1,740         10/21/13         (32,311 ) 

S&P 500 Index FLEX

      164         1,730         10/23/13         (61,812 ) 
           

 

 

  

Total Call Options Written — (0.3)%
(premiums received $1,348,554)

   

    $ (534,457 ) 
           

 

 

  

 

3

 

 

                                                                                                   

Put Options Written — (0.5)%

  

Description    Number of
Contracts		      Strike
Price		      Expiration
Date		      Value  

S&P 500 Index

      171       $ 1,560         10/4/13       $ (8,123 ) 

S&P 500 Index

      167         1,610         10/11/13         (61,790 ) 

S&P 500 Index

      157         1,650         10/19/13         (190,755 ) 

S&P 500 Index

      164         1,615         10/25/13         (150,880 ) 

S&P 500 Index FLEX

      171         1,550         10/1/13         —   

S&P 500 Index FLEX

      171         1,570         10/2/13         (5 ) 

S&P 500 Index FLEX

      171         1,585         10/7/13         (8,489 ) 

S&P 500 Index FLEX

      168         1,610         10/9/13         (29,972 ) 

S&P 500 Index FLEX

      166         1,625         10/14/13         (84,211 ) 

S&P 500 Index FLEX

      165         1,625         10/16/13         (98,659 ) 

S&P 500 Index FLEX

      162         1,625         10/21/13         (132,981 ) 

S&P 500 Index FLEX

      164         1,620         10/23/13         (136,753 ) 
           

 

 

  

Total Put Options Written — (0.5)%
(premiums received $1,328,034)

   

    $ (902,618 ) 
           

 

 

  

Other Assets, Less Liabilities — (2.8)%

  

    $ (4,666,450 ) 
           

 

 

  

Net Assets — 100.0%

  

    $ 169,089,291   
           

 

 

  

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

 

AGM

   -   Assured Guaranty Municipal Corp.

FLEX

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

NPFG

   -   National Public Finance Guaranty Corp.

PSF

   -   Permanent School Fund

At September 30, 2013, the concentration of the Fund’s investments in the various states, determined as a percentage of net assets, is as follows:

 

                        

New York

      24.4 % 

South Carolina

      10.0 % 

Others, representing less than 10% individually

      57.0 % 

The Fund invests primarily in debt securities issued by municipalities. The ability of the issuers of the debt securities to meet their obligations may be affected by economic developments in a specific industry or municipality. In order to reduce the risk associated with such economic developments, at September 30, 2013, 1.0% of total investments are backed by bond insurance of various financial institutions and financial guaranty assurance agencies. The aggregate percentage insured by an individual financial institution or financial guaranty assurance agency ranged from 0.5% to 0.6% of total investments.

 

(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, 2013. Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended September 30, 2013 was $13,048.

The cost and unrealized appreciation (depreciation) of investments of the Fund at September 30, 2013, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

    $ 170,936,873   
  

 

 

  

Gross unrealized appreciation

    $ 4,885,670   

Gross unrealized depreciation

      (629,727 ) 
  

 

 

  

Net unrealized appreciation

    $ 4,255,943   
  

 

 

  

 

4

 

 

Written options activity for the fiscal year to date ended September 30, 2013 was as follows:

 

     Number of
Contracts		     Premiums
Received		  
Outstanding, beginning of period      5,480      $ 3,866,443   
Options written      43,530        25,974,207   
Options terminated in closing purchase transactions      (12,600 )      (8,040,230 ) 
Options expired      (32,416 )      (19,123,832 ) 
  

 

 

    

 

 

  
Outstanding, end of period      3,994      $ 2,676,588   
  

 

 

    

 

 

  

At September 30, 2013, 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, 2013, 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 $263,607 and $1,437,075, 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, 2013, 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

    $ —      $     154,517,247      $ —       $     154,517,247   

Call Options Purchased

      43,465        2,233        —         45,698   

Put Options Purchased

      123,725        94,184        —         217,909   

Short-Term Investments

      —        20,411,962        —         20,411,962   

Total Investments

    $ 167,190      $ 175,025,626      $ —       $ 175,192,816   
Liability Description                              

Call Options Written

    $     (296,925 )    $ (237,532 )    $ —       $ (534,457 ) 

Put Options Written

      (411,548 )      (491,070 )      —         (902,618 ) 

Total

    $ (708,473 )    $ (728,602 )    $ —       $ (1,437,075 ) 

The Fund held no investments or other financial instruments as of December 31, 2012 whose fair value was determined using Level 3 inputs. At September 30, 2013, 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 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 25, 2013

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 25, 2013

 

By:  

/s/ James F. Kirchner

  James F. Kirchner
  Treasurer
Date:   November 25, 2013