Tax-Managed Buy-Write Opportunities Fund

A Word On The Markets  as of Mar 31, 2013

Global equity markets surged ahead in the first quarter of 2013, as several major stock indexes set or neared record highs. Positive economic trends overcame headwinds ranging from recent tax hikes to renewed turmoil in Europe. In the U.S., encouraging news on the jobs front helped drive share prices upward. Unemployment fell to 7.7% in February, its lowest level in more than four years, as employers added 236,000 jobs. In addition, surprisingly strong U.S. retail sales helped ease concerns that consumers might spend less amid higher taxes and still-high energy prices. In the housing market, rising demand and more limited supply lifted home values, helping to boost consumer confidence and spending.

Mandatory government spending cuts under the so-called “sequester” barely hampered U.S. stocks’ advance. Equities continued to draw support from the U.S. Federal Reserve, which reiterated its intention to maintain stimulus policies until its unemployment and growth targets are met. Global equities also demonstrated a degree of resiliency, with European stocks declining only modestly in response to Cyprus’ banking crisis in late March.

Reflecting the breadth of the first-quarter rally, major stock market indexes recorded strong gains across geographies and equity categories. In the U.S., the Dow Jones Industrial Average⁶ returned 11.93% and hit an all-time closing high during the quarter. The broader S&P 500 Index⁷ also reached a new high on the quarter’s final trading day, rising 10.61% for the period. Globally, the MSCI EAFE Index⁸ gained 5.13%. Small-cap stocks generally fared better than their large-cap counterparts during the quarter. Among large caps, value stocks outpaced growth stocks, while the reverse was true among small caps.

The equity option indexes underperformed their underlying indexes for the quarter. The CBOE S&P 500 BuyWrite Index⁹ returned 4.82% for the quarter ended March 31, 2013, versus 10.61% for the S&P 500 Index.⁷ The CBOE NASDAQ 100 BuyWrite Index¹⁰ returned 5.55% for the quarter, versus 6.25% for the NASDAQ 100 Index.¹¹ Equity market volatility decreased during the quarter, as the S&P 500 hit a historic high at the end of March 2013. The Chicago Board Options Exchange Volatility Index (the VIX)¹² started the quarter at 18.02 in early January and ended the quarter at 12.70 in late March. Average volatility during the quarter was 13.63.

Performance Summary 

Eaton Vance Tax-Managed Buy-Write Opportunities Fund (ETV) underperformed its primary equity benchmark, the S&P 500 Index,⁷ and outperformed its secondary equity benchmark, the NASDAQ 100 Index,¹¹ at net asset value (NAV) for the quarter ended March 31, 2013. The Fund’s equity portfolio underperformed the S&P 500 and outperformed the NASDAQ 100. The performance of the equity portfolio was driven primarily by the Fund’s weighting and stock selection in the information technology sector. The Fund’s option portfolio detracted from relative performance for the quarter. Security selection in the health care and industrials sectors aided relative performance.

Investment Outlook And Fund Positioning 

To some extent, the equity market rally during the first quarter reflects mounting investor confidence in longer-term economic prospects. In contrast to the persistent volatility of recent years, markets worldwide have been demonstrating a greater ability to absorb the impact of periodic macro crises such as Cyprus – a possible sign of investors’ optimism that the global economic recovery is on firmer footing. The U.S. economy appears to be in better shape than much of the rest of the world, but is still growing at a fairly slow pace.

Ongoing commitment by the Federal Reserve and other central banks to keep easy-money policies in place should continue to support economic growth and equity markets. However, investors are likely to keep a wary eye on upcoming U.S. budget negotiations, as well as further developments out of Europe.

Globally, growth may remain a potentially scarce characteristic. We believe companies delivering solid growth independent of the economy may warrant a premium price.

The views expressed in this report are those of portfolio manager(s) and are current only through the date stated at the top of this page. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. This commentary may contain statements that are not historical facts, referred to as "forward looking statements". The Fund's actual future results may differ significantly from those stated in any forward-looking statement, depending on factors such as changes in securities or financial markets or general economic conditions, the volume of sales and purchases of Fund shares, the continuation of investment advisory, administrative and service contracts, and other risks discussed from time to time in the Fund's filings with the Securities and Exchange Commission.

The information contained herein is provided for informational purposes only and does not constitute a solicitation of an offer to buy or sell Fund shares. Common shares of the Fund are only available for purchase and sale at current market price on a stock exchange. There is no assurance that the Fund will achieve its investment objective. The Fund is subject to investment risks, including possible loss of principal invested. The Fund is not a complete investment program and you may lose money investing in the Fund. An investment in the Fund may not be appropriate for all investors.

The premium/discount is calculated as [(market price/NAV)-1].

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