Eaton Vance Tax-Advantage 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, 2018

Date of Reporting Period

 

 

 

Item 1. Schedule of Investments

Eaton Vance

Tax-Advantaged Bond and Option Strategies Fund

September 30, 2018

PORTFOLIO OF INVESTMENTS (Unaudited)

Tax-Exempt Municipal Securities — 90.5%

 

                                                 
Security    Principal
Amount
(000’s omitted)		      Value  

Bond Bank — 3.6%

      

New York State Environmental Facilities Corp., (New York City Municipal Water Finance Authority), 5.00%, 6/15/25

    $ 1,000      $ 1,163,420  

New York State Environmental Facilities Corp., (New York City Municipal Water Finance Authority), 5.00%, 6/15/27

      1,500        1,704,075  

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

      705        729,774  
     

 

 

  
      $ 3,597,269  
     

 

 

  

Education — 3.8%

      

New York Dormitory Authority, (School Districts), 5.00%, 10/1/25

    $ 1,000      $ 1,155,410  

Southwest Higher Education Authority, TX, (Southern Methodist University),
5.00%, 10/1/21

      425        458,949  

Texas A&M University, 5.00%, 7/1/24

      2,000        2,199,540  
     

 

 

  
      $ 3,813,899  
     

 

 

  

Electric Utilities — 2.6%

      

San Antonio, TX, Electric and Gas Systems Revenue, 5.00%, 2/1/22

    $ 600      $ 654,660  

Southern California Public Power Authority, (Canyon Power Project), 1.81%, (SIFMA + 0.25%), 5/1/21 (Put Date), 7/1/40(1)

      2,000        1,997,520  
     

 

 

  
      $ 2,652,180  
     

 

 

  

Escrowed/Prerefunded — 4.4%

      

Leander Independent School District, TX, (PSF Guaranteed), Prerefunded to 8/15/24,
0.00%, 8/15/44

    $ 9,500      $ 2,797,465  

Pennsylvania, Prerefunded to 6/15/24, 5.00%, 6/15/29

      1,000        1,144,650  

Virginia College Building Authority, (21st Century College and Equipment Programs), Prerefunded to 2/1/23, 5.00%, 2/1/24

      435        486,373  
     

 

 

  
      $ 4,428,488  
     

 

 

  

General Obligations — 50.1%

      

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

    $ 5,000      $ 5,384,350  

Austin, TX, 5.00%, 9/1/23

      2,500        2,811,900  

Beaufort County School District, SC, 5.00%, 3/1/19(2)

      5,370        5,438,843  

Colorado Springs School District No. 11, CO, 4.00%, 12/1/25

      500        530,490  

Denton Independent School District, TX, (PSF Guaranteed), 0.00%, 8/15/24

      2,000        1,723,900  

Florida Board of Education, 5.00%, 6/1/22(2)

      2,700        2,836,377  

Irving, TX, 4.00%, 9/15/26

      1,190        1,307,191  

King County, WA, 5.00%, 1/1/27

      1,000        1,096,370  

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

      315        294,925  

Maryland, 5.00%, 3/1/22

      2,000        2,190,760  

Massachusetts, 5.00%, 7/1/23(2)

      2,000        2,249,140  

Minnesota, 5.00%, 8/1/23

      500        563,565  

Mississippi, 5.00%, 10/1/25

      1,735        2,011,854  

Montgomery County, MD, 5.00%, 11/1/26

      2,000        2,287,660  

Montgomery County, PA, 5.00%, 8/15/23

      2,000        2,256,220  

 

1

 

 

                                                 
Security    Principal
Amount
(000’s omitted)		      Value  

Montgomery County, PA, 5.00%, 8/15/24

    $ 1,000      $ 1,146,240  

New York, 5.00%, 2/15/27

      1,000        1,195,220  

North Carolina, 5.00%, 6/1/24

      4,000        4,584,080  

North Ridgeville City School District, OH, 0.00%, 12/1/23

      530        468,329  

Northside Independent School District, TX, (PSF Guaranteed), 4.00%, 6/1/31

      2,000        2,086,500  

Plano Independent School District, TX, (PSF Guaranteed), 5.00%, 2/15/25

      365        419,108  

Poudre School District R-1, CO, 5.00%, 12/15/26

      1,750        2,068,325  

Santa Monica Community College District, CA, (Election of 2016), 5.00%, 8/1/22

      500        556,795  

Texas, 4.10%, 8/1/22

      1,425        1,449,254  

Washington, 5.00%, 8/1/27

      1,000        1,168,240  

Wisconsin, 5.00%, 5/1/20(2)

      2,255        2,361,143  
     

 

 

  
      $ 50,486,779  
     

 

 

  

Hospital — 7.7%

      

Allen County, OH, Hospital Facilities, (Catholic Healthcare Partners), 5.00%, 9/1/20(2)

    $ 5,000      $ 5,242,600  

Massachusetts Development Finance Agency, (Partners HealthCare System), 2.06%, (SIFMA + 0.50%), 1/26/23 (Put Date), 7/1/38(1)

      1,000        1,005,020  

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

      380        379,996  

Wisconsin Health and Educational Facilities Authority, (Advocate Aurora Health Credit Group), 5.00% to 1/31/24 (Put Date), 8/15/54

      1,000        1,121,360  
     

 

 

  
      $ 7,748,976  
     

 

 

  

Lease Revenue/Certificates of Participation — 1.7%

      

Colorado, (Building Excellent Schools Today), 5.00%, 3/15/26

    $ 1,500      $ 1,744,665  
     

 

 

  
      $ 1,744,665  
     

 

 

  

Other Revenue — 3.1%

      

California Infrastructure and Economic Development Bank, (The J. Paul Getty Trust), Series 2011A 3, 1.995%, (70% of 3 mo. USD LIBOR + 0.37%), 4/1/20 (Put Date), 4/1/38(1)

    $ 1,300      $ 1,302,743  

California Infrastructure and Economic Development Bank, (The J. Paul Getty Trust), Series 2011A 4, 1.995%, (70% of 3 mo. USD LIBOR + 0.37%), 4/1/20 (Put Date), 4/1/38(1)

      1,000        1,002,110  

Johnson County Public Building Commission, KS, (Courthouse and Medical Examiner’s Facility), 5.00%, 9/1/25

      750        868,358  
     

 

 

  
      $ 3,173,211  
     

 

 

  

Transportation — 2.5%

      

Bay Area Toll Authority, CA, (San Francisco Bay Area), 2.186%, (70% of 3 mo. USD LIBOR + 0.55%), 4/1/21 (Put Date), 4/1/45(1)

    $ 2,500      $ 2,515,275  
     

 

 

  
      $ 2,515,275  
     

 

 

  

Water and Sewer — 11.0%

      

California Department of Water Resources, (Central Valley Project), 1.78%, (SIFMA+ 0.22%), 12/1/20 (Put Date), 12/1/35(1)

    $ 2,275      $ 2,276,137  

Charlotte, NC, Water and Sewer System Revenue, 5.00%, 7/1/24

      3,000        3,437,100  

New York City Municipal Water Finance Authority, NY, (Water and Sewer System),
5.00%, 6/15/27

      1,500        1,728,045  

Oklahoma City Water Utilities Trust, OK, 4.00%, 7/1/25

      2,000        2,145,500  

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

      1,415        1,528,370  
     

 

 

  
      $ 11,115,152  
     

 

 

  

Total Tax-Exempt Municipal Securities — 90.5%
(identified cost $91,385,761)

       $ 91,275,894  
     

 

 

  

 

2

 

 

                                                 

Taxable Municipal Securities — 6.3%

      
Security    Principal
Amount
(000’s omitted)		      Value  

Education — 1.6%

      

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

    $ 1,135      $ 1,127,555  

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

      500        492,185  
     

 

 

  
      $ 1,619,740  
     

 

 

  

Special Tax Revenue — 4.7%

      

New York City Transitional Finance Authority, NY, Future Tax Revenue, 2.86%, 8/1/25(2)

    $ 5,000      $ 4,768,600  
     

 

 

  
      $ 4,768,600  
     

 

 

  

Total Taxable Municipal Securities — 6.3%
(identified cost $6,635,000)

       $ 6,388,340  
     

 

 

  

Short-Term Investments — 3.1%

      
Description    Units      Value  

Eaton Vance Cash Reserves Fund, LLC, 2.19%(3)

      3,078,327      $ 3,078,327  
     

 

 

  

Total Short-Term Investments — 3.1%
(identified cost $3,078,337)

       $ 3,078,327  
     

 

 

  

Total Purchased Options — 0.1%
(identified cost $264,212)

       $ 123,565  
     

 

 

  

Total Investments — 100.0%
(identified cost $101,363,310)

       $ 100,866,126  
     

 

 

  

Total Written Options — (0.7)%
(premiums received $1,208,193)

       $ (680,235 ) 
     

 

 

  

Other Assets, Less Liabilities — 0.7%

       $ 695,090  
     

 

 

  

Net Assets — 100.0%

       $ 100,880,981  
     

 

 

  

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

At September 30, 2018, the concentration of the Fund’s investments in the various states, determined as a percentage of net assets, is as follows:

 

                        

Texas

      16.1 % 

New York

      11.6 % 

Others, representing less than 10% individually

      69.1 % 

 

3

 

 

                                                                                                                            

Purchased Call Options — 0.0%(4)

               

Exchange-Traded Options — 0.0%(4)

               
Description    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      55      $ 16,026,890      $ 3,075        10/1/18      $ 138  

S&P 500 Index

      56        16,318,288        3,075        10/3/18        140  

S&P 500 Index

      56        16,318,288        3,070        10/5/18        420  

S&P 500 Index

      56        16,318,288        3,050        10/8/18        560  

S&P 500 Index

      56        16,318,288        3,050        10/10/18        980  

S&P 500 Index

      55        16,026,890        3,095        10/12/18        688  

S&P 500 Index

      56        16,318,288        3,075        10/15/18        1,120  

S&P 500 Index

      58        16,901,084        3,100        10/17/18        1,160  

S&P 500 Index

      56        16,318,288        3,125        10/19/18        980  

S&P 500 Index

      56        16,318,288        3,100        10/22/18        1,680  

S&P 500 Index

      56        16,318,288        3,100        10/24/18        1,960  

S&P 500 Index

      55        16,026,890        3,105        10/26/18        1,787  
              

 

 

  

Total

                $ 11,613  
              

 

 

  

Purchased Put Options — 0.1%

               

Exchange-Traded Options — 0.1%

               
Description    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      55      $ 16,026,890      $ 2,650        10/1/18      $ 550  

S&P 500 Index

      56        16,318,288        2,625        10/3/18        1,680  

S&P 500 Index

      56        16,318,288        2,610        10/5/18        2,660  

S&P 500 Index

      56        16,318,288        2,630        10/8/18        4,060  

S&P 500 Index

      56        16,318,288        2,630        10/10/18        5,880  

S&P 500 Index

      55        16,026,890        2,665        10/12/18        8,387  

S&P 500 Index

      56        16,318,288        2,660        10/15/18        9,800  

S&P 500 Index

      58        16,901,084        2,670        10/17/18        12,760  

S&P 500 Index

      56        16,318,288        2,695        10/19/18        15,540  

S&P 500 Index

      56        16,318,288        2,660        10/22/18        14,840  

S&P 500 Index

      56        16,318,288        2,675        10/24/18        17,920  

S&P 500 Index

      55        16,026,890        2,660        10/26/18        17,875  
              

 

 

  

Total

                $ 111,952  
              

 

 

  

Written Call Options — (0.4)%

               

Exchange-Traded Options — (0.4)%

               
Description    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      55      $ 16,026,890      $ 2,945        10/1/18      $ (550 ) 

S&P 500 Index

      56        16,318,288        2,935        10/3/18        (12,460 ) 

S&P 500 Index

      56        16,318,288        2,930        10/5/18        (33,040 ) 

S&P 500 Index

      56        16,318,288        2,920        10/8/18        (67,480 ) 

S&P 500 Index

      56        16,318,288        2,930        10/10/18        (51,240 ) 

S&P 500 Index

      55        16,026,890        2,950        10/12/18        (25,300 ) 

S&P 500 Index

      56        16,318,288        2,940        10/15/18        (46,480 ) 

S&P 500 Index

      58        16,901,084        2,955        10/17/18        (32,190 ) 

 

4

 

 

                                                                                                                            
Description    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      56      $ 16,318,288      $ 2,980        10/19/18      $ (15,260 ) 

S&P 500 Index

      56        16,318,288        2,960        10/22/18        (35,280 ) 

S&P 500 Index

      56        16,318,288        2,965        10/24/18        (33,880 ) 

S&P 500 Index

      55        16,026,890        2,960        10/26/18        (43,725 ) 
              

 

 

  

Total

                $ (396,885 ) 
              

 

 

  

 

                                                                                                                            

Written Put Options — (0.3)%

               

Exchange-Traded Options — (0.3)%

               
Description    Number of
Contracts		      Notional
Amount		      Exercise
Price		      Expiration
Date		      Value  

S&P 500 Index

      55      $ 16,026,890      $ 2,790        10/1/18      $ (1,375 ) 

S&P 500 Index

      56        16,318,288        2,765        10/3/18        (3,640 ) 

S&P 500 Index

      56        16,318,288        2,750        10/5/18        (5,740 ) 

S&P 500 Index

      56        16,318,288        2,770        10/8/18        (8,680 ) 

S&P 500 Index

      56        16,318,288        2,770        10/10/18        (12,320 ) 

S&P 500 Index

      55        16,026,890        2,810        10/12/18        (22,000 ) 

S&P 500 Index

      56        16,318,288        2,800        10/15/18        (23,240 ) 

S&P 500 Index

      58        16,901,084        2,810        10/17/18        (31,610 ) 

S&P 500 Index

      56        16,318,288        2,840        10/19/18        (46,480 ) 

S&P 500 Index

      56        16,318,288        2,805        10/22/18        (36,680 ) 

S&P 500 Index

      56        16,318,288        2,820        10/24/18        (46,760 ) 

S&P 500 Index

      55        16,026,890        2,805        10/26/18        (44,825 ) 
              

 

 

  

Total

                $ (283,350 ) 
              

 

 

  

 

(1)

Floating rate security. The stated interest rate represents the rate in effect at September 30, 2018.

 

(2)

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

 

(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, 2018. Net income from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended September 30, 2018 was $62,454.

 

(4)

Amount is less than 0.05%.

Abbreviations:

 

LIBOR

   -   London Interbank Offered Rate

PSF

   -   Permanent School Fund

SIFMA

   -   Securities Industry and Financial Markets Association Municipal Swap Index

USD

   -   United States Dollar

At September 30, 2018, the Fund had sufficient cash and/or securities to cover commitments under open derivative contracts.

 

5

 

 

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 September 30, 2018 was as follows:

 

     Fair Value  

Derivative

    Asset
Derivative		      Liability
Derivative		  

Purchased options

    $ 123,565      $ —  

Written options

      —        (680,235 ) 
  

 

 

     

 

 

  

Total

    $     123,565      $     (680,235 ) 
  

 

 

     

 

 

  

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, 2018, 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

    $ —      $ 91,275,894      $ —      $ 91,275,894  

Taxable Municipal Securities

      —        6,388,340        —        6,388,340  

Short-Term Investments

      —        3,078,327        —        3,078,327  

Purchased Call Options

      11,613        —        —        11,613  

Purchased Put Options

      111,952        —        —        111,952  

Total Investments

    $ 123,565      $     100,742,561      $     —      $     100,866,126  
Liability Description                          

Written Call Options

    $ (396,885 )     $ —      $ —      $ (396,885 ) 

Written Put Options

      (283,350 )       —        —        (283,350 ) 

Total

    $     (680,235 )     $ —      $ —      $ (680,235 ) 

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.

Item 3. Exhibits

A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act is attached hereto.

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 26, 2018

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 26, 2018

 

By:   /s/ James F. Kirchner
  James F. Kirchner
  Treasurer
Date:   November 26, 2018