UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY
Investment Company Act file number 811-21586
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FIRST TRUST ENHANCED EQUITY INCOME FUND (FORMERLY KNOWN AS FIRST
----------------------------------------------------------------
TRUST/FIDUCIARY ASSET MANAGEMENT COVERED CALL FUND)
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(Exact name of registrant as specified in charter)
1001 Warrenville Road, Suite 300
LISLE, IL 60532
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
1001 Warrenville Road, Suite 300
LISLE, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 241-4141
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Date of fiscal year end: DECEMBER 31
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Date of reporting period: SEPTEMBER 30, 2007
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Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q 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 the
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. ss. 3507.
ITEM 1. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
FIRST TRUST ENHANCED EQUITY INCOME FUND (FORMERLY KNOWN AS FIRST TRUST/FIDUCIARY
ASSET MANAGEMENT COVERED CALL FUND)
PORTFOLIO OF INVESTMENTS (a)
SEPTEMBER 30, 2007 (UNAUDITED)
MARKET
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
COMMON STOCKS (b) - 102.3%
AEROSPACE & DEFENSE - 5.9%
145,200 Honeywell International Inc. ................... $ 8,635,044
77,400 Rockwell Collins Inc. .......................... 5,653,296
104,200 United Technologies Corp. ...................... 8,386,016
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22,674,356
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AIR FREIGHT & LOGISTICS - 1.3%
47,200 FedEx Corp. .................................... 4,944,200
---------------
BEVERAGES - 3.0%
94,000 Coca-Cola (The), Company ....................... 5,402,180
82,600 PepsiCo, Inc. .................................. 6,051,276
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11,453,456
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BIOTECHNOLOGY - 3.4%
38,900 Amgen, Inc. (c) ................................ 2,200,573
58,300 Genentech, Inc. (c) ............................ 4,548,566
156,800 Gilead Sciences, Inc. (c) ...................... 6,408,416
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13,157,555
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CAPITAL MARKETS - 8.4%
120,000 AllianceBernstein Holding, LP .................. 10,568,400
18,100 Goldman Sachs Group (The), Inc. ................ 3,922,994
156,700 Lehman Brothers Holdings, Inc. ................. 9,673,091
114,500 Merrill Lynch & Company, Inc. .................. 8,161,560
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32,326,045
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CHEMICALS - 2.4%
107,100 Monsanto Company ............................... 9,182,754
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COMMERCIAL BANKS - 4.6%
158,500 Huntington Bancshares, Inc. .................... 2,691,330
80,000 U.S. Bancorp ................................... 2,602,400
77,300 Wachovia Corp. ................................. 3,876,595
240,000 Wells Fargo & Company .......................... 8,548,800
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17,719,125
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COMMUNICATIONS EQUIPMENT - 4.0%
295,200 Cisco Systems, Inc. (c) ........................ 9,774,072
136,500 QUALCOMM, Inc. ................................. 5,768,490
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15,542,562
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COMPUTERS & PERIPHERALS - 3.8%
7,500 Apple, Inc. (c) ................................ 1,151,550
389,500 EMC Corp. (c) .................................. 8,101,600
47,900 International Business Machines Corp. .......... 5,642,620
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14,895,770
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See Notes to Quarterly Portfolio of Investments. Page 1
FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2007 (UNAUDITED)
MARKET
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
COMMON STOCKS (b) - (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES - 5.8%
157,100 Bank of America Corp. .......................... $ 7,897,417
135,700 Citigroup, Inc. ................................ 6,333,119
175,100 JPMorgan Chase & Company ....................... 8,023,082
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22,253,618
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DIVERSIFIED TELECOMMUNICATION SERVICES - 4.1%
200,000 Alaska Communications Systems Group, Inc. ...... 2,890,000
229,700 AT&T Inc. ...................................... 9,718,607
75,600 Verizon Communications, Inc. ................... 3,347,568
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15,956,175
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ELECTRICAL EQUIPMENT - 2.1%
156,100 Emerson Electric Company ....................... 8,307,642
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ENERGY EQUIPMENT AND SERVICES - 1.4%
27,200 Oil Service Holders Trust ...................... 5,215,600
---------------
FOOD & STAPLES RETAILING - 2.7%
133,600 CVS Caremark Corp.. ............................ 5,294,568
108,800 Walgreen Company ............................... 5,139,712
---------------
10,434,280
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HEALTH CARE PROVIDERS & SERVICES - 3.0%
68,900 Cardinal Health, Inc. .......................... 4,308,317
50,050 Coventry Health Care, Inc. (c). ................ 3,113,611
83,500 UnitedHealth Group, Inc. ....................... 4,043,905
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11,465,833
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HOTELS, RESTAURANTS & LEISURE - 3.8%
126,200 McDonald's Corp. ............................... 6,874,114
36,200 MGM MIRAGE (c) ................................. 3,237,728
177,600 Starbucks Corp. (c) ............................ 4,653,120
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14,764,962
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HOUSEHOLD DURABLES - 1.6%
90,900 Procter & Gamble (The) Company ................. 6,393,906
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INDUSTRIAL CONGLOMERATES - 0.7%
64,800 General Electric Company ....................... 2,682,720
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INSURANCE - 2.3%
132,800 American International Group, Inc. ............. 8,983,920
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INTERNET SOFTWARE & SERVICES - 1.5%
145,700 eBay, Inc. (c) ................................. 5,685,214
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MACHINERY - 3.0%
67,600 Caterpillar, Inc. .............................. 5,301,868
14,600 Deere & Company ................................ 2,166,932
81,800 Joy Global Inc. ................................ 4,160,348
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11,629,148
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Page 2 See Notes to Quarterly Portfolio of Investments.
FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2007 (UNAUDITED)
MARKET
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
COMMON STOCKS (b) - (CONTINUED)
MEDIA - 3.0%
277,100 Comcast Corp., Class A (c) ..................... $ 6,700,278
147,400 Walt Disney (The) Company ...................... 5,069,086
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11,769,364
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MULTILINE RETAIL - 3.4%
173,400 Nordstrom, Inc. ................................ 8,130,726
79,500 Target Corp. ................................... 5,053,815
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13,184,541
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OIL, GAS & CONSUMABLE FUELS - 7.4%
97,800 Chevron Corp. .................................. 9,152,124
307,900 El Paso Corp. .................................. 5,225,063
76,100 Plains All American Pipeline, LP ............... 4,146,689
54,800 Valero Energy Corp. ............................ 3,681,464
189,400 Williams Companies (The), Inc. ................. 6,450,964
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28,656,304
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PHARMACEUTICALS - 3.4%
223,100 Pfizer, Inc. ................................... 5,450,333
94,800 Pharmaceutical Holders Trust ................... 7,594,428
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13,044,761
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REAL ESTATE INVESTMENT TRUSTS (REITS) - 1.4%
130,000 CapitalSource, Inc. ............................ 2,631,200
80,000 iStar Financial, Inc. .......................... 2,719,200
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5,350,400
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ROAD & RAIL - 0.7%
33,300 Burlington Northern Santa Fe Corp. ............. 2,702,961
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.3%
172,200 Broadcom Corp., Class A (c) .................... 6,274,968
287,300 Intel Corp. .................................... 7,429,578
84,400 Texas Instruments, Inc. ........................ 3,088,196
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16,792,742
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SOFTWARE - 5.5%
143,900 Adobe Systems, Inc. (c) ........................ 6,282,674
167,000 Amdocs Ltd. (c) ................................ 6,210,730
389,700 BEA Systems, Inc. (c) .......................... 5,405,139
108,900 Microsoft Corp. ................................ 3,208,194
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21,106,737
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SPECIALTY RETAIL - 1.3%
107,000 Best Buy Company, Inc. ......................... 4,924,140
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TEXTILES, APPAREL & LUXURY GOODS - 1.5%
98,600 Nike Inc., Class B ............................. 5,783,876
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TOBACCO - 1.6%
87,300 Altria Group Inc. .............................. 6,069,969
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See Notes to Quarterly Portfolio of Investments. Page 3
FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2007 (UNAUDITED)
MARKET
DESCRIPTION VALUE
------------------------------------------------ ---------------
TOTAL COMMON STOCKS ............................ $ 395,054,636
(Cost $390,925,453) ---------------
TOTAL INVESTMENTS - 102.3% ..................... 395,054,636
(Cost $390,925,453) (d)
CALL OPTIONS WRITTEN - (2.7%) .................. (10,293,720)
(Premiums received $8,573,832)
NET OTHER ASSETS AND LIABILITIES - 0.4% ........ 1,565,182
---------------
NET ASSETS - 100.0% ............................ $ 386,326,098
===============
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(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) Call options were written on either entire or partial Common Stock
positions; all Common Stocks are pledged as collateral.
(c) Non-income producing security.
(d) Aggregate cost for federal income tax and financial reporting purposes.
NUMBER OF MARKET
CONTRACTS DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
CALL OPTIONS WRITTEN - (2.7%)
Adobe Systems Inc. Call
1,439 @ 45 due Oct 07 ................................ $ (71,950)
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AllianceBernstein Holding, LP Call
600 @ 85 due Oct 07 ................................ (228,000)
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Altria Group Inc. Call
873 @ 70 due Oct 07 ................................ (78,570)
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Amdocs Ltd. Call
1,042 @ 35 due Oct 07 ................................ (255,290)
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American International Group, Inc. Calls
136 @ 70 due Oct 07 ................................ (3,808)
854 @ 65 due Oct 07 ................................ (290,360)
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(294,168)
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Amgen, Inc. Call
389 @ 57.5 due Oct 07 .............................. (36,566)
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Apple Inc. Call
75 @ 150 due Nov 07 ............................... (87,375)
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Page 4 See Notes to Quarterly Portfolio of Investments.
FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2007 (UNAUDITED)
NUMBER OF MARKET
CONTRACTS DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
CALL OPTIONS WRITTEN - (CONTINUED)
AT&T Inc. Calls
1,893 @ 42.5 due Oct 07 .............................. $ (121,152)
404 @ 42.5 due Nov 07 .............................. (56,560)
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(177,712)
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Bank of America Corp. Call
1,408 @ 52.5 due Oct 07 .............................. (21,120)
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BEA Systems, Inc. Calls
1,239 @ 15 due Oct 07 ................................ (24,780)
2,658 @ 15 due Nov 07 ................................ (106,320)
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(131,100)
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Best Buy Company, Inc. Calls
405 @ 47.5 due Oct 07 .............................. (16,200)
665 @ 45 due Oct 07 ................................ (106,400)
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(122,600)
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Broadcom Corp., Class A Call
1,722 @ 37.5 due Oct 07 .............................. (120,540)
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Burlington Northern Santa Fe Corp. Call
333 @ 85 due Oct 07 ................................ (28,305)
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CapitalSource, Inc. Call
800 @ 20 due Oct 07 ................................ (68,000)
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Cardinal Health, Inc. Call
689 @ 65 due Oct 07 ................................ (17,225)
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Caterpillar, Inc. Call
676 @ 80 due Oct 07 ................................ (101,400)
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Chevron Corp. Calls
460 @ 95 due Nov 07 ................................ (128,800)
461 @ 95 due Oct 07 ................................ (76,065)
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(204,865)
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Cisco Systems, Inc. Call
2,952 @ 32.5 due Oct 07 .............................. (333,576)
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Citigroup, Inc. Call
1,357 @ 50 due Oct 07 ................................ (18,998)
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Coca-Cola (The), Company Calls
135 @ 60 due Nov 07 ................................ (6,750)
405 @ 55 due Nov 07 ................................ (141,750)
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(148,500)
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Comcast Corp., Class A Call
2,771 @ 25 due Oct 07 ................................ (83,130)
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See Notes to Quarterly Portfolio of Investments. Page 5
FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2007 (UNAUDITED)
NUMBER OF MARKET
CONTRACTS DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
CALL OPTIONS WRITTEN - (CONTINUED)
Coventry Health Care, Inc. Call
363 @ 60 due Oct 07 ................................ $ (112,530)
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CVS Caremark Corp. Call
773 @ 37.5 due Oct 07 .............................. (187,066)
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Deere & Company Calls
65 @ 135 due Oct 07 ............................... (98,800)
81 @ 150 due Nov 07 ............................... (54,270)
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(153,070)
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eBay Inc. Calls
1,049 @37.5 due Oct 07 ............................... (241,270)
408 @ 40 due Nov 07 ................................ (67,320)
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(308,590)
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El Paso Corp. Call
2,544 @ 17 due Oct 07 ................................ (114,480)
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EMC Corp. Calls
2,921 @ 20 due Oct 07 ................................ (335,915)
974 @ 20 due Nov 07 ................................ (155,840)
---------------
(491,755)
---------------
Emerson Electric Company Call
1,561 @ 55 due Nov 07 ................................ (179,515)
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FedEx Corp. Calls
378 @ 115 due Oct 07 ............................... (5,670)
94 @ 110 due Oct 07 ............................... (5,640)
---------------
(11,310)
---------------
Genentech, Inc. Call
583 @ 80 due Oct 07 ................................ (49,555)
---------------
Gilead Sciences, Inc. Call
784 @ 37.5 due Oct 07 .............................. (274,400)
---------------
Goldman Sachs Group (The) Inc. Calls
96 @ 190 due Oct 07 ............................... (264,000)
85 @ 210 due Nov 07 ............................... (114,750)
---------------
(378,750)
---------------
Honeywell International Inc. Calls
873 @ 57.5 due Oct 07 .............................. (241,821)
579 @ 60 due Nov 07 ................................ (104,220)
---------------
(346,041)
---------------
Huntington Bancshares, Inc. Call
1,390 @ 17.5 due Oct 07 .............................. (48,650)
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Page 6 See Notes to Quarterly Portfolio of Investments.
FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2007 (UNAUDITED)
NUMBER OF MARKET
CONTRACTS DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
CALL OPTIONS WRITTEN - (CONTINUED)
Intel Corp. Calls
2,145 @ 25 due Oct 07 ................................ $ (270,270)
728 @ 27.5 due Nov 07 .............................. (32,032)
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(302,302)
---------------
International Business Machines Corp. Calls
408 @ 120 due Oct 07 ............................... (77,520)
71 @ 120 due Nov 07 ............................... (19,880)
---------------
(97,400)
---------------
iStar Financial, Inc. Call
800 @ 35 due Oct 07 ................................ (40,000)
---------------
Joy Global Inc. Calls
650 @ 45 due Oct 07 ................................ (422,500)
168 @ 50 due Oct 07 ................................ (38,976)
---------------
(461,476)
---------------
JPMorgan Chase & Company Call
1,359 @ 47.5 due Oct 07 .............................. (61,155)
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Lehman Brothers Holdings, Inc. Call
1,097 @ 65 due Oct 07 ................................ (87,760)
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McDonald's Corp. Calls
1,152 @ 55 due Nov 07 ................................ (169,344)
110 @ 57.5 due Nov 07 .............................. (6,600)
---------------
(175,944)
---------------
Merrill Lynch & Company, Inc. Calls
80 @ 80 due Oct 07 ................................ (2,400)
737 @ 75 due Oct 07 ................................ (88,440)
---------------
(90,840)
---------------
MGM MIRAGE Call
260 @ 80 due Oct 07 ................................ (239,200)
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Microsoft Corp. Call
1,089 @ 30 due Oct 07 ................................ (37,026)
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Monsanto Company Calls
872 @ 75 due Oct 07 ................................ (961,816)
199 @ 80 due Nov 07 ................................ (159,200)
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(1,121,016)
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Nike Inc., Class B Call
739 @ 57.5 due Oct 07 .............................. (147,800)
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Nordstorm Inc. Call
1,581 @ 50 due Oct 07 ................................ (75,888)
---------------
See Notes to Quarterly Portfolio of Investments. Page 7
FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2007 (UNAUDITED)
NUMBER OF MARKET
CONTRACTS DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
CALL OPTIONS WRITTEN - (CONTINUED)
Oil Service Holders Trust Calls
68 @ 180 due Oct 07 ............................... $ (92,820)
204 @ 185 due Oct 07 ............................... (204,000)
---------------
(296,820)
---------------
PepsiCo, Inc. Call
731 @ 72.5 due Nov 07 .............................. (175,440)
---------------
Pharmaceutial Holders Trust Call
948 @ 80 due Oct 07 ................................ (104,280)
---------------
Proctor & Gamble (The) Company Calls
592 @ 65 due Oct 07 ................................ (319,680)
135 @ 70 due Oct 07 ................................ (17,550)
---------------
(337,230)
---------------
QUALCOMM, Inc. Call
1,121 @ 40 due Oct 07 ................................ (294,823)
---------------
Rockwell Collins Inc. Calls
429 @ 75 due Oct 07 ................................ (27,885)
345 @ 70 due Oct 07 ................................ (144,900)
---------------
(172,785)
---------------
Starbucks Corp. Call
1,419 @ 27.5 due Oct 07 .............................. (28,380)
---------------
Target Corp. Calls
498 @ 65 due Oct 07 ................................ (62,250)
297 @ 67.5 due Oct 07 .............................. (14,256)
---------------
(76,506)
---------------
Texas Instruments, Inc. Call
844 @ 37.5 due Oct 07 .............................. (38,824)
---------------
United Technologies Corp. Calls
260 @ 80 due Nov 07 ................................ (77,220)
782 @ 85 due Nov 07 ................................ (62,560)
---------------
(139,780)
---------------
UnitedHealth Group, Inc. Call
835 @ 50 due Oct 07 ................................ (33,400)
---------------
Valero Energy Corp. Call
411 @ 70 due Oct 07 ................................ (36,990)
---------------
Verizon Communications, Inc. Call
604 @ 45 due Oct 07 ................................ (24,160)
---------------
Wachovia Corp. Call
773 @ 52.5 due Oct 07 .............................. (27,055)
---------------
Page 8 See Notes to Quarterly Portfolio of Investments.
FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2007 (UNAUDITED)
NUMBER OF MARKET
CONTRACTS DESCRIPTION VALUE
----------- ------------------------------------------------ ---------------
CALL OPTIONS WRITTEN - (CONTINUED)
Walgreen Company Call
1,088 @ 47.5 due Oct 07 .............................. $ (93,568)
---------------
Walt Disney (The) Company Call
1,474 @ 35 due Oct 07 ................................ (51,590)
---------------
Wells Fargo & Company Calls
1,270 @ 37.5 due Oct 07 .............................. (38,100)
1,130 @ 40 due Oct 07 ................................ (6,780)
---------------
(44,880)
---------------
Williams Companies (The), Inc. Call
1,894 @ 35 due Oct 07 ................................ (94,700)
---------------
TOTAL CALL OPTIONS WRITTEN ........................ $ (10,293,720)
===============
(Premiums Received $8,573,832)
See Notes to Quarterly Portfolio of Investments. Page 9
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NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED EQUITY INCOME FUND
SEPTEMBER 30, 2007 (UNAUDITED)
1. VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of First Trust Enhanced Equity
Income Fund (formerly known as First Trust/Fiduciary Asset Management Covered
Call Fund) (the "Fund") is determined daily as of the close of regular trading
on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on
each day the NYSE is open for trading. The NAV per Common Share is calculated by
substracting the Fund's liabilities (including accrued expenses, the value of
call options written (sold) and dividends payable), from the Fund's total assets
(the value of the securities and other investments the Fund holds plus cash or
other assets, including accrued interest and dividends) and dividing the result
by the total number of Common Shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value according
to procedures adopted by the Fund's Board of Trustees. Portfolio securities
listed on any exchange other than the NASDAQ National Market ("NASDAQ") are
valued at the last sale price on the business day as of which such value is
being determined. If there has been no sale on such day, the securities are
valued at the mean of the most recent bid and asked prices on such day.
Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price
as determined by NASDAQ. Portfolio securities traded on more than one securities
exchange are valued at the last sale price on the business day as of which such
value is being determined at the close of the exchange representing the
principal market for such securities. Portfolio securities traded in the
over-the-counter market, but excluding securities trading on the NASDAQ, are
valued at the closing bid prices. Fixed income securities with a remaining
maturity of 60 days or more will be valued by the Fund using a pricing service.
Short-term investments that mature in less than 60 days are valued at amortized
cost.
The Fund values exchange-traded options and other derivative contracts at the
closing price on the exchange on which they are principally traded, or if not
traded, or no closing price is available, at the mean between the last bid and
asked price.
B. OPTION CONTRACTS:
Covered Options. When the Fund purchases equity securities, it simultaneously
writes (sells) covered call or put options ("options") on substantially all of
such equity securities. The number of options the Fund can write (sell) is
limited by the amount of equity securities the Fund holds in its portfolio. The
Fund will not write (sell) "naked" or uncovered options. By writing (selling)
options, the Fund seeks to generate additional income, in the form of premiums
received for writing (selling) the options, and provide a partial hedge against
a market decline in the underlying equity security. Options are marked-to-market
daily and their value will be affected by changes in the value and dividend
rates of the underlying equity securities, an increase in interest rates,
changes in the actual or perceived volatility of the securities markets and the
underlying equity securities and the remaining time to the options' expiration.
The value of options may also be adversely affected if the market for the
options becomes less liquid or smaller.
Options the Fund writes (sells) will either be exercised, expire or be cancelled
pursuant to a closing transaction. If the price of the underlying equity
security exceeds the option's exercise price, it is likely that the option
holder will exercise the option. If an option written (sold) by the Fund is
exercised, the Fund would be obligated to deliver the underlying equity security
to the option holder upon payment of the exercise price. In this case, the
option premium received by the Fund will be added to the amount realized on the
sale of the underlying equity security for purposes of determining gain or loss.
If the price of the underlying equity security is less than the option's
exercise price, the option will likely expire without being exercised. The
option premium received by the fund will, in this case, be treated as short-term
capital gain on the expiration date of the option. The Fund may also elect to
close out its position in an option prior to its expiration by purchasing an
option of the same series as the option written (sold) by the Fund.
The Fund writes (sells) options on at least 80% of the Fund's Managed Assets. On
September 14, 2007, the Fund's Board of Trustees approved investment strategy
changes designed to provide the Fund with greater flexibility to pursue its
investment objective. The Fund will continue to seek to achieve its investment
objective by investing in a diversified portfolio of equity securities; however,
effective on or about November 19, 2007, the Fund will no longer be required to
write (or sell) call options on at least 80% of the Fund's Managed Assets.
Chartwell Investment Partners, L.P. ("Chartwell"), the Fund's investment
sub-advisor will thereafter write (sell) call options as determined to be
appropriate, consistent with the Fund's investment objective. "Managed Assets"
means the average daily gross assets of this Fund minus the sum of the Fund's
accrued and unpaid dividends on any outstanding Common Shares and accrued
liabilities, including the value of call options written. These options give the
option holder the right, but not the obligation, to purchase a security
Page 10
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NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED EQUITY INCOME FUND
SEPTEMBER 30, 2007 (UNAUDITED)
from the Fund at the strike price on or prior to the option's expiration date.
The ability to successfully implement the Fund's investment strategy depends on
the ability of the Fund's sub-advisor, Chartwell, to predict pertinent market
movements, which cannot be assured. Thus, the use of options may require the
Fund to sell portfolio securities at inopportune times or for prices other than
current market value, may limit the amount of appreciation the Fund can realize
on an investment, or may cause the Fund to hold a security that it might
otherwise sell. As the writer (seller) of a covered option, the Fund forgoes,
during the option's life, the opportunity to profit from increases in the market
value of the security covering the option above the sum of the premium and the
strike price of the option, but retains the risk of loss should the price of the
underlying security decline. The writer (seller) of an option has no control
over the time when it may be required to fulfill its obligation as a writer
(seller) of the option. Once an option writer (seller) has received an exercise
notice, it cannot effect a closing purchase transaction in order to terminate
its obligation under the option and must deliver the underlying security to the
option holder at the exercise price.
C. SECURITIES TRANSACTIONS:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
2. UNREALIZED APPRECIATION/(DEPRECIATION)
As of September 30, 2007, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $21,602,854
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $19,193,559.
3. OPTION ACTIVITY
Written option activity for the Fund was as follows:
NUMBER
OF
CONTRACTS PREMIUMS
----------- --------------
Options outstanding at December 31, 2006 ........ 71,400 $ 8,241,701
Options written ................................. 543,969 61,036,524
Options expired ................................. (97,343) (7,533,324)
Options exercised ............................... (4,934) (653,435)
Options closed .................................. (439,037) (52,517,634)
----------- -------------
Options outstanding at September 30, 2007 ....... 74,055 $ 8,573,832
=========== =============
Page 11
ITEM 2. 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 registrant's last fiscal
quarter that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are 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.
(Registrant) FIRST TRUST ENHANCED EQUITY INCOME FUND (FORMERLY KNOWN AS FIRST
------------------------------------------------------------------
TRUST/FIDUCIARY ASSET MANAGEMENT COVERED CALL FUND)
---------------------------------------------------
By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date NOVEMBER 5, 2007
----------------------------------------------------------------------------
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 A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date NOVEMBER 5, 2007
----------------------------------------------------------------------------
By (Signature and Title)* /S/ MARK R. BRADLEY
-------------------------------------------------------
Mark R. Bradley, Treasurer, Controller, Chief Financial
Officer and Chief Accounting Officer
(principal financial officer)
Date NOVEMBER 5, 2007
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.