UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21586
First Trust Enhanced Equity Income Fund
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
Registrant’s telephone number, including area code: (630) 765-8000
Date of fiscal year end: December 31
Date of reporting period: June 30, 2023
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) | The Report to Shareholders is attached herewith. |
Fund Statistics | |
Symbol on New York Stock Exchange | FFA |
Common Share Price | $17.53 |
Common Share Net Asset Value (“NAV”) | $18.18 |
Premium (Discount) to NAV | (3.58)% |
Net Assets Applicable to Common Shares | $363,448,907 |
Current Quarterly Distribution per Common Share(1) | $0.3150 |
Current Annualized Distribution per Common Share | $1.2600 |
Current Distribution Rate on Common Share Price(2) | 7.19% |
Current Distribution Rate on NAV(2) | 6.93% |
Performance | |||||
Average Annual Total Returns | |||||
6 Months Ended 6/30/23 | 1 Year Ended 6/30/23 | 5 Years Ended 6/30/23 | 10 Years Ended 6/30/23 | Inception (8/26/04) to 6/30/23 | |
Fund Performance(3) | |||||
NAV | 12.96% | 16.65% | 10.44% | 10.23% | 8.00% |
Market Value | 15.34% | 15.85% | 9.84% | 10.97% | 7.53% |
Index Performance | |||||
S&P 500® Index | 16.89% | 19.59% | 12.31% | 12.86% | 9.84% |
CBOE S&P 500 BuyWrite Monthly Index | 10.47% | 9.02% | 4.42% | 6.26% | 5.38% |
Top Ten Holdings | % of Total Investments |
Apple, Inc. | 11.3% |
Microsoft Corp. | 10.2 |
UnitedHealth Group, Inc. | 3.6 |
Alphabet, Inc., Class C | 3.4 |
JPMorgan Chase & Co. | 3.1 |
Merck & Co., Inc. | 2.5 |
Arthur J. Gallagher & Co. | 2.2 |
Coca-Cola (The) Co. | 2.1 |
Danaher Corp. | 2.0 |
AbbVie, Inc. | 1.9 |
Total | 42.3% |
Sector Allocation | % of Total Investments |
Information Technology | 29.4% |
Health Care | 14.6 |
Financials | 12.6 |
Consumer Discretionary | 8.1 |
Communication Services | 8.1 |
Consumer Staples | 7.5 |
Industrials | 6.0 |
Energy | 4.2 |
Materials | 3.1 |
Real Estate | 2.5 |
Utilities | 2.3 |
Other | 1.6 |
Total | 100.0% |
Fund Allocation | % of Net Assets |
Common Stocks | 92.9% |
Real Estate Investment Trusts | 2.5 |
Exchange - Traded Funds | 1.6 |
Common Stocks - Business Development Companies | 1.1 |
Call Options Written | (0.3) |
Net Other Assets and Liabilities | 2.2 |
Total | 100.0% |
(1) | Most recent distribution paid through June 30, 2023. Subject to change in the future. |
(2) | Distribution rates are calculated by annualizing the most recent distribution paid through the report date and then dividing by Common Share Price or NAV, as applicable, as of June 30, 2023. Subject to change in the future. |
(3) | Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
Average Annual Total Returns | |||||
6 Months Ended 6/30/23 | 1 Year Ended 6/30/23 | 5 Years Ended 6/30/23 | 10 Years Ended 6/30/23 | Inception (8/26/04) to 6/30/23 | |
Fund Performance(1) | |||||
NAV | 12.96% | 16.65% | 10.44% | 10.23% | 8.00% |
Market Value | 15.34% | 15.85% | 9.84% | 10.97% | 7.53% |
Index Performance | |||||
S&P 500® Index | 16.89% | 19.59% | 12.31% | 12.86% | 9.84% |
CBOE S&P 500 BuyWrite Monthly Index | 10.47% | 9.02% | 4.42% | 6.26% | 5.38% |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance.
(1) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. |
Shares | Description | Value | ||
COMMON STOCKS – 92.9% | ||||
Air Freight & Logistics – 1.4% | ||||
21,000 | FedEx Corp. (a) (b) | $5,205,900 | ||
Automobiles – 0.8% | ||||
75,000 | General Motors Co. (a) | 2,892,000 | ||
Banks – 5.5% | ||||
350,000 | Huntington Bancshares, Inc. (a) | 3,773,000 | ||
76,000 | JPMorgan Chase & Co. (a) (b) | 11,053,440 | ||
17,500 | PNC Financial Services Group (The), Inc. (a) | 2,204,125 | ||
100,000 | Truist Financial Corp. (a) | 3,035,000 | ||
20,065,565 | ||||
Beverages – 3.3% | ||||
125,000 | Coca-Cola (The) Co. (a) | 7,527,500 | ||
18,500 | Constellation Brands, Inc., Class A (a) | 4,553,405 | ||
12,080,905 | ||||
Biotechnology – 1.9% | ||||
51,000 | AbbVie, Inc. (a) | 6,871,230 | ||
Broadline Retail – 1.5% | ||||
40,500 | Amazon.com, Inc. (a) (c) | 5,279,580 | ||
Capital Markets – 1.2% | ||||
52,500 | Morgan Stanley (a) | 4,483,500 | ||
Chemicals – 2.4% | ||||
15,000 | Air Products and Chemicals, Inc. (a) | 4,492,950 | ||
16,500 | Sherwin-Williams (The) Co. (a) | 4,381,080 | ||
8,874,030 | ||||
Communications Equipment – 1.7% | ||||
117,500 | Cisco Systems, Inc. (a) | 6,079,450 | ||
Consumer Staples Distribution & Retail – 2.3% | ||||
9,800 | Costco Wholesale Corp. (a) | 5,276,124 | ||
22,500 | Target Corp. (a) | 2,967,750 | ||
8,243,874 | ||||
Diversified Telecommunication Services – 1.4% | ||||
112,500 | AT&T, Inc. (a) | 1,794,375 | ||
85,000 | Verizon Communications, Inc. | 3,161,150 | ||
4,955,525 | ||||
Electric Utilities – 2.3% | ||||
100,000 | Exelon Corp. (a) | 4,074,000 | ||
155,000 | PPL Corp. (a) | 4,101,300 | ||
8,175,300 | ||||
Entertainment – 2.3% | ||||
62,000 | Activision Blizzard, Inc. (a) (b) | 5,226,600 | ||
90,000 | Cinemark Holdings, Inc. (a) (c) | 1,485,000 | ||
200,000 | Lions Gate Entertainment Corp., Class B (c) | 1,670,000 | ||
8,381,600 | ||||
Financial Services – 0.6% | ||||
31,500 | PayPal Holdings, Inc. (a) (b) (c) | 2,101,995 |
Shares | Description | Value | ||
COMMON STOCKS (Continued) | ||||
Ground Transportation – 1.6% | ||||
70,000 | Canadian Pacific Kansas City, Ltd. | $5,653,900 | ||
Health Care Equipment & Supplies – 0.8% | ||||
53,626 | Boston Scientific Corp. (c) | 2,900,630 | ||
Health Care Providers & Services – 3.6% | ||||
27,000 | UnitedHealth Group, Inc. (a) | 12,977,280 | ||
Hotels, Restaurants & Leisure – 4.3% | ||||
85,000 | Carnival Corp. (a) (b) (c) | 1,600,550 | ||
10,000 | Domino’s Pizza, Inc. (b) | 3,369,900 | ||
90,000 | Las Vegas Sands Corp. (b) (c) | 5,220,000 | ||
52,000 | Restaurant Brands International, Inc. | 4,031,040 | ||
47,500 | Six Flags Entertainment Corp. (a) (b) (c) | 1,234,050 | ||
15,455,540 | ||||
Industrial Conglomerates – 1.7% | ||||
29,000 | Honeywell International, Inc. | 6,017,500 | ||
Insurance – 3.9% | ||||
35,000 | Arthur J. Gallagher & Co. (a) (b) | 7,684,950 | ||
34,500 | Chubb, Ltd. (a) | 6,643,320 | ||
14,328,270 | ||||
Interactive Media & Services – 3.3% | ||||
100,000 | Alphabet, Inc., Class C (a) (c) | 12,097,000 | ||
IT Services – 1.2% | ||||
31,500 | International Business Machines Corp. (a) | 4,215,015 | ||
Life Sciences Tools & Services – 3.7% | ||||
29,800 | Danaher Corp. (a) | 7,152,000 | ||
12,000 | Thermo Fisher Scientific, Inc. (a) | 6,261,000 | ||
13,413,000 | ||||
Machinery – 1.2% | ||||
18,000 | Caterpillar, Inc. | 4,428,900 | ||
Metals & Mining – 0.6% | ||||
54,000 | Freeport-McMoRan, Inc. (a) (b) | 2,160,000 | ||
Oil, Gas & Consumable Fuels – 4.1% | ||||
33,000 | Diamondback Energy, Inc. (a) | 4,334,880 | ||
50,000 | Exxon Mobil Corp. | 5,362,500 | ||
39,000 | Hess Corp. | 5,302,050 | ||
14,999,430 | ||||
Pharmaceuticals – 4.4% | ||||
5,000 | Eli Lilly & Co. (b) | 2,344,900 | ||
76,000 | Merck & Co., Inc. (a) | 8,769,640 | ||
28,000 | Zoetis, Inc. (a) | 4,821,880 | ||
15,936,420 | ||||
Semiconductors & Semiconductor Equipment – 2.7% | ||||
3,500 | Broadcom, Inc. (a) | 3,036,005 | ||
119,000 | Intel Corp. (a) (b) | 3,979,360 | ||
47,000 | Micron Technology, Inc. (a) (b) | 2,966,170 | ||
9,981,535 |
Shares | Description | Value | ||
COMMON STOCKS (Continued) | ||||
Software – 12.2% | ||||
7,000 | Adobe, Inc. (a) (b) (c) | $3,422,930 | ||
107,000 | Microsoft Corp. (a) | 36,437,780 | ||
10,000 | Synopsys, Inc. (a) (c) | 4,354,100 | ||
44,214,810 | ||||
Specialty Retail – 0.2% | ||||
32,500 | Foot Locker, Inc. (a) | 881,075 | ||
Technology Hardware, Storage & Peripherals – 11.0% | ||||
207,000 | Apple, Inc. (a) (b) | 40,151,790 | ||
Textiles, Apparel & Luxury Goods – 1.2% | ||||
41,000 | NIKE, Inc., Class B (a) (b) | 4,525,170 | ||
Tobacco – 1.7% | ||||
64,000 | Philip Morris International, Inc. (a) | 6,247,680 | ||
Wireless Telecommunication Services – 0.9% | ||||
23,500 | T-Mobile US, Inc. (a) (c) | 3,264,150 | ||
Total Common Stocks | 337,539,549 | |||
(Cost $242,577,538) | ||||
REAL ESTATE INVESTMENT TRUSTS – 2.5% | ||||
Specialized REITs – 2.5% | ||||
34,000 | Crown Castle, Inc. (a) | 3,873,960 | ||
107,000 | Gaming and Leisure Properties, Inc. | 5,185,220 | ||
Total Real Estate Investment Trusts | 9,059,180 | |||
(Cost $8,043,646) | ||||
EXCHANGE – TRADED FUNDS – 1.6% | ||||
Capital Markets – 1.6% | ||||
13,000 | SPDR® S&P 500® ETF Trust | 5,762,640 | ||
(Cost $5,691,946) | ||||
COMMON STOCKS – BUSINESS DEVELOPMENT COMPANIES – 1.1% | ||||
Capital Markets – 1.1% | ||||
215,000 | Ares Capital Corp. (a) | 4,039,850 | ||
(Cost $3,728,891) | ||||
Total Investments – 98.1% | 356,401,219 | |||
(Cost $260,042,021) |
Number of Contracts | Description | Notional Amount | Exercise Price | Expiration Date | Value | |||||
CALL OPTIONS WRITTEN – (0.3)% | ||||||||||
(200) | Activision Blizzard, Inc. | $(1,686,000) | $90.00 | 07/21/23 | (27,600) | |||||
(25) | Adobe, Inc. | (1,222,475) | 510.00 | 06/30/23 | (25) | |||||
(200) | Apple, Inc. | (3,879,400) | 200.00 | 08/18/23 | (69,000) | |||||
(35) | Arthur J. Gallagher & Co. | (768,495) | 220.00 | 08/18/23 | (21,000) | |||||
(100) | Carnival Corp. | (188,300) | 14.00 | 07/21/23 | (49,300) | |||||
(400) | Carnival Corp. | (753,200) | 18.00 | 07/21/23 | (54,400) | |||||
(250) | Carnival Corp. | (470,750) | 20.00 | 07/21/23 | (13,500) | |||||
(25) | Domino’s Pizza, Inc. | (842,475) | 360.00 | 08/18/23 | (14,125) | |||||
(25) | Eli Lilly & Co. | (1,172,450) | 480.00 | 07/21/23 | (13,250) | |||||
(35) | FedEx Corp. | (867,650) | 250.00 | 06/30/23 | (35) | |||||
(125) | Freeport-McMoRan, Inc. | (500,000) | 43.00 | 07/21/23 | (5,625) | |||||
(250) | Intel Corp. | (836,000) | 39.00 | 07/21/23 | (1,500) |
Number of Contracts | Description | Notional Amount | Exercise Price | Expiration Date | Value | |||||
CALL OPTIONS WRITTEN (Continued) | ||||||||||
(100) | JPMorgan Chase & Co. | $(1,454,400) | $150.00 | 08/18/23 | $(19,900) | |||||
(200) | Las Vegas Sands Corp. | (1,160,000) | 62.00 | 07/21/23 | (10,800) | |||||
(100) | Micron Technology, Inc. | (631,100) | 73.00 | 07/21/23 | (1,000) | |||||
(75) | NIKE, Inc., Class B | (827,775) | 118.00 | 06/30/23 | (75) | |||||
(150) | NIKE, Inc., Class B | (1,655,550) | 120.00 | 07/21/23 | (2,700) | |||||
(75) | PayPal Holdings, Inc. | (500,475) | 70.00 | 07/21/23 | (5,850) | |||||
(200) | S&P 500® Index (d) | (89,007,600) | 4,500.00 | 07/21/23 | (454,000) | |||||
(100) | S&P 500® Index (d) | (44,503,800) | 4,575.00 | 07/21/23 | (64,000) | |||||
(200) | S&P 500® Index (d) | (89,007,600) | 4,600.00 | 07/21/23 | (80,000) | |||||
(100) | Six Flags Entertainment Corp. | (259,800) | 30.00 | 07/21/23 | (1,000) | |||||
Total Call Options Written | (908,685) | |||||||||
(Premiums received $742,938) |
Net Other Assets and Liabilities – 2.2% | 7,956,373 | ||
Net Assets – 100.0% | $363,448,907 |
(a) | All or a portion of these securities are segregated to cover index call options written. At June 30, 2023, the segregated value of these securities amounts to $230,035,130. |
(b) | All or a portion of this security’s position represents cover for outstanding options written. |
(c) | Non-income producing security. |
(d) | Call options on securities indices were written on a portion of the common stock positions that were not used to cover call options written on individual equity securities held in the Fund’s portfolio. |
ASSETS TABLE | ||||
Total Value at 6/30/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Common Stocks* | $ 337,539,549 | $ 337,539,549 | $ — | $ — |
Real Estate Investment Trusts* | 9,059,180 | 9,059,180 | — | — |
Exchange - Traded Funds* | 5,762,640 | 5,762,640 | — | — |
Common Stocks - Business Development Companies* | 4,039,850 | 4,039,850 | — | — |
Total Investments | $ 356,401,219 | $ 356,401,219 | $— | $— |
LIABILITIES TABLE | ||||
Total Value at 6/30/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Call Options Written | $ (908,685) | $ (908,685) | $ — | $ — |
* | See Portfolio of Investments for industry breakout. |
ASSETS: | |
Investments, at value | $ 356,401,219 |
Cash | 10,852,072 |
Receivables: | |
Investment securities sold | 4,402,434 |
Dividends | 447,132 |
Dividend reclaims | 4,190 |
Prepaid expenses | 13,185 |
Total Assets | 372,120,232 |
LIABILITIES: | |
Options written, at value | 908,685 |
Payables: | |
Investment securities purchased | 7,393,625 |
Investment advisory fees | 297,223 |
Audit and tax fees | 26,525 |
Administrative fees | 18,288 |
Shareholder reporting fees | 13,387 |
Custodian fees | 6,381 |
Legal fees | 3,964 |
Transfer agent fees | 1,442 |
Financial reporting fees | 732 |
Trustees’ fees and expenses | 453 |
Other liabilities | 620 |
Total Liabilities | 8,671,325 |
NET ASSETS | $363,448,907 |
NET ASSETS consist of: | |
Paid-in capital | $ 263,987,224 |
Par value | 199,881 |
Accumulated distributable earnings (loss) | 99,261,802 |
NET ASSETS | $363,448,907 |
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) | $18.18 |
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized) | |
Investments, at cost | $260,042,021 |
Premiums received on options written | $742,938 |
INVESTMENT INCOME: | ||
Dividends | $ 3,457,510 | |
Interest | 59,412 | |
Foreign withholding tax | (15,409) | |
Total investment income | 3,501,513 | |
EXPENSES: | ||
Investment advisory fees | 1,743,273 | |
Administrative fees | 81,376 | |
Shareholder reporting fees | 52,702 | |
Audit and tax fees | 26,987 | |
Legal fees | 22,683 | |
Custodian fees | 12,768 | |
Listing expense | 11,779 | |
Trustees’ fees and expenses | 9,831 | |
Transfer agent fees | 9,039 | |
Financial reporting fees | 4,587 | |
Other | 9,342 | |
Total expenses | 1,984,367 | |
NET INVESTMENT INCOME (LOSS) | 1,517,146 | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on: | ||
Investments | 17,110,712 | |
Written options contracts | (627,724) | |
Foreign currency transactions | 165 | |
Net realized gain (loss) | 16,483,153 | |
Net change in unrealized appreciation (depreciation) on: | ||
Investments | 24,630,032 | |
Written options contracts | (107,296) | |
Foreign currency translation | (18) | |
Net change in unrealized appreciation (depreciation) | 24,522,718 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | 41,005,871 | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ 42,523,017 |
Six Months Ended 6/30/2023 (Unaudited) | Year Ended 12/31/2022 | ||
OPERATIONS: | |||
Net investment income (loss) | $ 1,517,146 | $ 2,929,934 | |
Net realized gain (loss) | 16,483,153 | 18,412,142 | |
Net change in unrealized appreciation (depreciation) | 24,522,718 | (89,978,856) | |
Net increase (decrease) in net assets resulting from operations | 42,523,017 | (68,636,780) | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations | (12,592,494) | (25,183,334) | |
CAPITAL TRANSACTIONS: | |||
Proceeds from Common Shares reinvested | — | 105,150 | |
Net increase (decrease) in net assets resulting from capital transactions | — | 105,150 | |
Total increase (decrease) in net assets | 29,930,523 | (93,714,964) | |
NET ASSETS: | |||
Beginning of period | 333,518,384 | 427,233,348 | |
End of period | $ 363,448,907 | $ 333,518,384 | |
CAPITAL TRANSACTIONS were as follows: | |||
Common Shares at beginning of period | 19,988,085 | 19,982,838 | |
Common Shares issued as reinvestment under the Dividend Reinvestment Plan | — | 5,247 | |
Common Shares at end of period | 19,988,085 | 19,988,085 |
Six Months Ended 6/30/2023 (Unaudited) | Year Ended December 31, | |||||||||||
2022 | 2021 | 2020 | 2019 | 2018 | ||||||||
Net asset value, beginning of period | $ 16.69 | $ 21.38 | $ 18.29 | $ 16.92 | $ 13.89 | $ 16.51 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.08 (a) | 0.15 | 0.07 | 0.12 | 0.17 | 0.19 | ||||||
Net realized and unrealized gain (loss) | 2.04 | (3.58) | 4.28 (b) | 2.39 | 4.00 | (1.67) | ||||||
Total from investment operations | 2.12 | (3.43) | 4.35 | 2.51 | 4.17 | (1.48) | ||||||
Distributions paid to shareholders from: | ||||||||||||
Net investment income | (0.63) | — | (0.18) | (0.08) | (0.14) | (0.19) | ||||||
Net realized gain | — | (1.26) | (1.08) | (1.06) | (1.00) | (0.95) | ||||||
Total distributions paid to Common Shareholders | (0.63) | (1.26) | (1.26) | (1.14) | (1.14) | (1.14) | ||||||
Net asset value, end of period | $ | $16.69 | $21.38 | $18.29 | $16.92 | $13.89 | ||||||
Market value, end of period | $ | $15.76 | $21.29 | $17.62 | $17.25 | $12.92 | ||||||
Total return based on net asset value (c) | 12.96% | (15.84)% | 24.38% (b) | 16.84% | 30.78% | (9.19)% | ||||||
Total return based on market value (c) | 15.34% | (20.19)% | 28.56% | 10.41% | 43.34% | (13.86)% | ||||||
Ratios to average net assets/supplemental data: | ||||||||||||
Net assets, end of period (in 000’s) | $ 363,449 | $ 333,518 | $ 427,233 | $ 365,432 | $ 338,198 | $ 277,443 | ||||||
Ratio of total expenses to average net assets | 1.14% (d) | 1.13% | 1.12% | 1.15% | 1.14% | 1.14% | ||||||
Ratio of net investment income (loss) to average net assets | 0.87% (d) | 0.81% | 0.39% | 0.77% | 1.08% | 1.13% | ||||||
Portfolio turnover rate | 18% | 21% | 14% | 20% | 37% | 45% |
(a) | Based on average shares outstanding. |
(b) | The Fund received a reimbursement from Chartwell in the amount of $52,217, which represents less than $0.01 per share. Since the Fund was reimbursed, there was no effect on the Fund’s total return. |
(c) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and changes in net asset value per share for net asset value returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
(d) | Annualized. |
1) | the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; |
2) | the type of security; |
3) | the size of the holding; |
4) | the initial cost of the security; |
5) | transactions in comparable securities; |
6) | price quotes from dealers and/or third-party pricing services; |
7) | relationships among various securities; |
8) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
9) | an analysis of the issuer’s financial statements; |
10) | the existence of merger proposals or tender offers that might affect the value of the security; and |
11) | other relevant factors. |
• | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
• | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
o | Quoted prices for similar investments in active markets. |
o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
Distributions paid from: | |
Ordinary income | $132,172 |
Capital gains | 25,051,162 |
Return of capital | — |
Undistributed ordinary income | $3,418,584 |
Undistributed capital gains | — |
Total undistributed earnings | 3,418,584 |
Accumulated capital and other losses | — |
Net unrealized appreciation (depreciation) | 65,912,695 |
Total accumulated earnings (losses) | 69,331,279 |
Other | — |
Paid-in capital | 264,187,105 |
Total net assets | $333,518,384 |
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||
$259,299,083 | $115,058,868 | $(18,865,417) | $96,193,451 |
Asset Derivatives | Liability Derivatives | |||||||||
Derivative Instrument | Risk Exposure | Statement of Assets and Liabilities Location | Value | Statement of Assets and Liabilities Location | Value | |||||
Written Options | Equity Risk | — | $ — | Options written, at value | $ 908,685 |
Statement of Operations Location | |
Equity Risk Exposure | |
Net realized gain (loss) on written options contracts | $(627,724) |
Net change in unrealized appreciation (depreciation) on written options contracts | (107,296) |
(1) | If Common Shares are trading at or above net asset value (“NAV”) at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) NAV per Common Share on that date or (ii) 95% of the market price on that date. |
(2) | If Common Shares are trading below NAV at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market within 30 days of the valuation date except where temporary curtailment or suspension of purchases is necessary to comply with federal securities laws. Interest will not be paid on any uninvested cash payments. |
FUND ACCOUNTANT, AND
CUSTODIAN
PUBLIC ACCOUNTING FIRM
(b) | Not applicable. |
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a) | Not applicable. |
(b) | There have been no changes, as of the date of filing, in any of the Portfolio Managers identified in response to paragraph (a)(1) of this item in the registrant’s most recent annual report on Form N-CSR. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities For Closed-End Management Investment Companies.
(a) | Not applicable. |
(b) | Not applicable. |
Item 13. Exhibits.
(a)(1) | Not applicable. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(3) | Not applicable. |
(a)(4) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(c) | Notices to the registrant’s common shareholders in accordance with the order under Section 6(c) of the 1940 Act granting an exemption from Section 19(b) of the 1940 Act and Rule 19a-l under the 1940 Act, dated March 24, 2010. (1) |
(1) | The Fund received exemptive relief from the Securities and Exchange Commission which permits the Fund to make periodic distributions of long-term capital gains as frequently as monthly each taxable year. The relief is conditioned, in part, on an undertaking by the Fund to make the disclosures to the holders of the Fund’s common shares, in addition to the information required by Section 19(a) of the 1940 Act and Rule 19a-1 thereunder. The Fund is likewise obligated to file with the SEC the information contained in any such notice to shareholders. In that regard, attached as an exhibit to this filing is a copy of such notice made during the period. |
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.
(registrant) | First Trust Enhanced Equity Income Fund |
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | September 8, 2023 |
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 (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | September 8, 2023 |
By (Signature and Title)* | /s/ Derek D. Maltbie | |
Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date: | September 8, 2023 |
* Print the name and title of each signing officer under his or her signature.