Notes to Financial Statements (Unaudited)
1 Significant Accounting Policies
Eaton Vance
Tax-Managed Buy-Write Income Fund (the Fund) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a
diversified, closed-end management investment company. The Fund’s primary investment objective is to provide current income and gains, with a secondary objective of capital appreciation.
The following is a summary of significant accounting policies of the Fund. The policies are in conformity with accounting principles generally accepted in the
United States of America (U.S. GAAP). The Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946.
A Investment Valuation — The following methodologies are used to determine the
market value or fair value of investments.
Equity Securities. Equity securities listed on a U.S. securities exchange generally are valued at the
last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and ask prices on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ
Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid
and ask prices.
Derivatives. U.S. exchange-traded options are valued at the mean between the bid and ask prices at valuation time as reported by
the Options Price Reporting Authority. Non-U.S. exchange-traded options and over-the-counter options are valued by a third party
pricing service using techniques that consider factors including the value of the underlying instrument, the volatility of the underlying instrument and the period of time until option expiration.
Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using
methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that most fairly reflects the security’s “fair value”, which is the amount that the Fund might reasonably expect to receive for the
security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type
of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information
obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial
statements, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement
purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income — Dividend income is recorded on the ex-dividend date for dividends received in
cash and/or securities.
D Federal Taxes — The Fund’s policy is
to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized
capital gains. Accordingly, no provision for federal income or excise tax is necessary.
As of June 30, 2021, the Fund had no uncertain tax
positions that would require financial statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal
year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Use of Estimates — The preparation of the financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those
estimates.
F Indemnifications — Under the Fund’s
organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Fund) could be deemed to have personal liability for the obligations of the Fund. However, the Fund’s Declaration of Trust contains an express disclaimer of liability on the part of Fund shareholders
and the By-laws provide that the Fund shall assume, upon request by the shareholder, the defense on behalf of any Fund shareholders. Moreover, the By-laws also provide
for indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Fund
enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet
occurred.
G Written Options — Upon the writing of a call or a put
option, the premium received by the Fund is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written, in accordance with the Fund’s policies on investment valuations discussed above.
Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine
the realized gain or loss. When an index option is exercised, the Fund is required to deliver an amount of cash determined by the excess of the exercise price of the option over the value of the index (in the case of a put) or the excess of the
value of the index over the exercise price of the option (in the case of a call) at contract termination. If a put option on a security is exercised, the premium reduces the cost basis of the securities purchased by the Fund.
Eaton Vance
Tax-Managed Buy-Write Income Fund
June 30, 2021
Notes to Financial Statements (Unaudited) — continued
The Fund, as a writer of an option, may have no control over whether the underlying securities or other assets may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change
in the price of the securities or other assets underlying the written option. The Fund may also bear the risk of not being able to enter into a closing transaction if a liquid secondary market does not exist.
H Interim Financial Statements — The interim financial statements relating to
June 30, 2021 and for the six months then ended have not been audited by an independent registered public accounting firm, but in the opinion of the Fund’s management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders and Income Tax
Information
Subject to its Managed Distribution Plan, the Fund makes monthly distributions from its cash available for distribution, which consists of
the Fund’s dividends and interest income after payment of Fund expenses, net option premiums and net realized and unrealized gains on stock investments. The Fund intends to distribute all or substantially all of its net realized capital gains.
Distributions are recorded on the ex-dividend date. Distributions to shareholders are determined in accordance with income tax regulations, which may differ from U.S. GAAP. As required by U.S. GAAP, only
distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income. Distributions in any year may include a substantial return of capital component. For the six
months ended June 30, 2021, the amount of distributions estimated to be a tax return of capital was approximately $5,165,000. The final determination of tax characteristics of the Fund’s distributions will occur at the end of the year, at
which time it will be reported to the shareholders.
At December 31, 2020, the Fund had a net capital loss of $5,394,687 attributable to security
transactions incurred after October 31, 2020 that it has elected to defer. This net capital loss is treated as arising on the first day of the Fund’s taxable year ending December 31, 2021.
The cost and unrealized appreciation (depreciation) of investments, including open derivative contracts, of the Fund at June 30, 2021, as determined on a
federal income tax basis, were as follows:
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Aggregate cost
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$
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92,764,972
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Gross unrealized appreciation
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$
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342,059,582
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Gross unrealized depreciation
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(2,002,652
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)
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Net unrealized appreciation
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$
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340,056,930
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3 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Eaton Vance Management (EVM) as compensation for investment advisory services rendered to the Fund. On March 1, 2021,
Morgan Stanley acquired Eaton Vance Corp. (the “Transaction”) and EVM became an indirect, wholly-owned subsidiary of Morgan Stanley. In connection with the Transaction, the Fund entered into a new investment advisory agreement (the
“New Agreement”) with EVM, which took effect on March 1, 2021. Pursuant to the New Agreement (and the Fund’s investment advisory agreement with EVM in effect prior to March 1, 2021), the fee is computed at an annual rate of
1.00% of the Fund’s average daily gross assets and is payable monthly. Gross assets as referred to herein represent net assets plus obligations attributable to investment leverage, if any. For the six months ended June 30, 2021, the
Fund’s investment adviser fee amounted to $2,022,136.
Pursuant to an investment sub-advisory agreement, EVM
has delegated a portion of the investment management to Parametric Portfolio Associates LLC (Parametric), an affiliate of EVM and, effective March 1, 2021, an indirect, wholly-owned subsidiary of Morgan Stanley. In connection with the
Transaction, EVM entered into a new sub-advisory agreement with Parametric, which took effect on March 1, 2021. EVM pays Parametric a portion of its investment adviser fee for sub-advisory services provided to the Fund. EVM also serves as administrator of the Fund, but receives no compensation.
Trustees and officers of the Fund who are members of EVM’s organization receive remuneration for their services to the Fund out of the investment adviser fee.
Trustees of the Fund who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months ended June 30, 2021, no
significant amounts have been deferred. Certain officers and Trustees of the Fund are officers of EVM.
4 Purchases and Sales
of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $11,766,479 and $24,166,081, respectively, for the six
months ended June 30, 2021.
Eaton Vance
Tax-Managed Buy-Write Income Fund
June 30, 2021
Notes to Financial Statements (Unaudited) — continued
5 Common Shares of Beneficial Interest and Shelf Offering
Common shares issued by the Fund
pursuant to its dividend reinvestment plan for the six months ended June 30, 2021 and the year ended December 31, 2020 were 18,404 and 39,078, respectively.
In August 2012, the Board of Trustees initially approved a share repurchase program for the Fund. Pursuant to the reauthorization of the share repurchase program by the Board of Trustees in March 2019, the Fund is
authorized to repurchase up to 10% of its common shares outstanding as of the last day of the prior calendar year at market prices when shares are trading at a discount to net asset value. The share repurchase program does not obligate the Fund to
purchase a specific amount of shares. There were no repurchases of common shares by the Fund for the six months ended June 30, 2021 and the year ended December 31, 2020.
The Fund is authorized to issue common shares through an equity shelf offering program (the “shelf offering”). Under the shelf offering, the Fund, subject to market conditions, may raise additional
capital from time to time and in varying amounts and offering methods at a net price at or above the Fund’s net asset value per common share. As of April 5, 2017, the Fund was authorized to issue an additional 2,965,949 common shares and
as of July 22, 2021, pursuant to its most recent registration statement filed with the SEC, the Fund is authorized to issue an additional 4,509,162 common shares.
During the six months ended June 30, 2021, the Fund sold 729,979 common shares and received proceeds (net of offering costs) of $11,735,729 through its shelf offering. The net proceeds in excess of the net
asset value of the shares sold were $346,759 for the six months ended June 30, 2021. Offering costs (other than the applicable sales commissions) incurred in connection with the shelf offering were borne directly by EVM. Eaton Vance
Distributors, Inc. (EVD), an affiliate of EVM, is the distributor of the Fund’s shares and is entitled to receive a sales commission from the Fund of 1.00% of the gross sales price per share, a portion of which is
re-allowed to sales agents. The Fund was informed that the sales commissions retained by EVD during the six months ended June 30, 2021 was $23,709. There were no common shares sold by the Fund pursuant to
its shelf offering for the year ended December 31, 2020.
6 Financial Instruments
The Fund may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities.
These financial instruments may include written options and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. The notional or contractual amounts of these instruments represent
the investment the Fund has in particular classes of financial instruments and do not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related
and offsetting transactions are considered. A summary of obligations under these financial instruments at June 30, 2021 is included in the Portfolio of Investments. At June 30, 2021, 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 objectives. The Fund writes
index call options above the current value of the index to generate premium income. In writing index call options, the Fund in effect, sells potential appreciation in the value of the applicable index above the exercise price in exchange for the
option premium received. The Fund retains the risk of loss, minus the premium received, should the value of the underlying index decline.
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 June 30, 2021 was as follows:
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Fair Value
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Derivative
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Asset Derivative
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Liability Derivative(1)
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Written options
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$
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—
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$
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(5,367,540
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)
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(1)
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Statement of Assets and Liabilities location: Written options outstanding, at value.
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The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Statement of Operations and whose primary underlying risk exposure is equity price risk for
the six months ended June 30, 2021 was as follows: