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: December 31, 2020
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.
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Fund Statistics | |
Symbol on New York Stock Exchange | FFA |
Common Share Price | $17.62 |
Common Share Net Asset Value (“NAV”) | $18.29 |
Premium (Discount) to NAV | (3.66)% |
Net Assets Applicable to Common Shares | $365,431,959 |
Current Quarterly Distribution per Common Share(1) | $0.2850 |
Current Annualized Distribution per Common Share | $1.1400 |
Current Distribution Rate on Common Share Price(2) | 6.47% |
Current Distribution Rate on NAV(2) | 6.23% |
Performance | ||||
Average Annual Total Returns | ||||
1 Year Ended 12/31/20 | 5 Years Ended 12/31/20 | 10 Years Ended 12/31/20 | Inception (8/26/04) to 12/31/20 | |
Fund Performance(3) | ||||
NAV | 16.84% | 12.04% | 11.07% | 8.16% |
Market Value | 10.41% | 14.07% | 11.15% | 7.61% |
Index Performance | ||||
S&P 500® Index | 18.40% | 15.22% | 13.88% | 10.01% |
CBOE S&P 500 BuyWrite Monthly Index | -2.75% | 5.33% | 6.14% | 5.16% |
(1) | Most recent distribution paid or declared through 12/31/2020. Subject to change in the future. |
(2) | Distribution rates are calculated by annualizing the most recent distribution paid or declared through the report date and then dividing by Common Share Price or NAV, as applicable, as of 12/31/2020. 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. |
Top Ten Holdings | % of Total Investments |
Microsoft Corp. | 7.6% |
Apple, Inc. | 7.5 |
JPMorgan Chase & Co. | 3.5 |
UnitedHealth Group, Inc. | 2.8 |
Thermo Fisher Scientific, Inc. | 2.5 |
Merck & Co., Inc. | 2.3 |
PayPal Holdings, Inc. | 2.3 |
NVIDIA Corp. | 2.2 |
Mastercard, Inc., Class A | 2.2 |
Alphabet, Inc., Class C | 2.2 |
Total | 35.1% |
Sector Allocation | % of Total Investments |
Information Technology | 30.6% |
Health Care | 14.2 |
Communication Services | 11.5 |
Consumer Discretionary | 10.8 |
Financials | 10.7 |
Industrials | 7.5 |
Consumer Staples | 5.3 |
Real Estate | 3.4 |
Utilities | 3.1 |
Energy | 1.8 |
Materials | 1.1 |
Total | 100.0% |
Fund Allocation | % of Net Assets |
Common Stocks | 93.7% |
Real Estate Investment Trusts | 3.3 |
Common Stocks - Business Development Companies | 1.0 |
$100 Par Preferred Securities | 0.7 |
Warrants | 0.0* |
Call Options Written | (0.1) |
Net Other Assets and Liabilities | 1.4 |
Total | 100.0% |
* | Amount is less than 0.1%. |
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 Common 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. |
Shares | Description | Value | ||
COMMON STOCKS – 93.7% | ||||
Aerospace & Defense – 1.9% | ||||
14,000 | Boeing (The) Co. (a) | $2,996,840 | ||
11,000 | Lockheed Martin Corp. (a) | 3,904,780 | ||
6,901,620 | ||||
Automobiles – 0.9% | ||||
75,000 | General Motors Co. | 3,123,000 | ||
Banks – 5.7% | ||||
100,000 | JPMorgan Chase & Co. | 12,707,000 | ||
200,000 | KeyCorp (a) | 3,282,000 | ||
100,000 | Truist Financial Corp. (a) | 4,793,000 | ||
20,782,000 | ||||
Beverages – 2.7% | ||||
107,000 | Coca-Cola (The) Co. | 5,867,880 | ||
18,500 | Constellation Brands, Inc., Class A (a) | 4,052,425 | ||
9,920,305 | ||||
Capital Markets – 1.0% | ||||
52,500 | Morgan Stanley (a) | 3,597,825 | ||
Chemicals – 1.1% | ||||
15,000 | Linde PLC (a) | 3,952,650 | ||
Communications Equipment – 1.4% | ||||
117,500 | Cisco Systems, Inc. | 5,258,125 | ||
Diversified Telecommunication Services – 3.1% | ||||
215,000 | AT&T, Inc. (a) | 6,183,400 | ||
90,000 | Verizon Communications, Inc. (a) | 5,287,500 | ||
11,470,900 | ||||
Electric Utilities – 2.2% | ||||
100,000 | Exelon Corp. | 4,222,000 | ||
135,000 | PPL Corp. (a) | 3,807,000 | ||
8,029,000 | ||||
Electronic Equipment, Instruments & Components – 0.8% | ||||
22,500 | Keysight Technologies, Inc. (a) (b) | 2,972,025 | ||
Entertainment – 4.6% | ||||
79,000 | Activision Blizzard, Inc. (a) | 7,335,150 | ||
90,000 | Cinemark Holdings, Inc. (a) | 1,566,900 | ||
157,500 | Lions Gate Entertainment Corp., Class B (a) (b) | 1,634,850 | ||
35,000 | Walt Disney (The) Co. (a) (b) | 6,341,300 | ||
16,878,200 | ||||
Food & Staples Retailing – 1.8% | ||||
17,500 | Costco Wholesale Corp. | 6,593,650 | ||
Food Products – 0.7% | ||||
45,000 | Mondelez International, Inc., Class A (a) | 2,631,150 | ||
Health Care Equipment & Supplies – 1.4% | ||||
23,000 | Danaher Corp. | 5,109,220 | ||
Health Care Providers & Services – 2.8% | ||||
29,000 | UnitedHealth Group, Inc. (a) | 10,169,720 |
Shares | Description | Value | ||
COMMON STOCKS (Continued) | ||||
Hotels, Restaurants & Leisure – 2.8% | ||||
85,000 | Carnival Corp. (a) | $1,841,100 | ||
60,000 | Las Vegas Sands Corp. (a) | 3,576,000 | ||
52,000 | Restaurant Brands International, Inc. | 3,177,720 | ||
47,500 | Six Flags Entertainment Corp. (a) | 1,619,750 | ||
10,214,570 | ||||
Industrial Conglomerates – 2.0% | ||||
35,000 | Honeywell International, Inc. (a) | 7,444,500 | ||
Insurance – 3.0% | ||||
41,000 | Arthur J. Gallagher & Co. | 5,072,110 | ||
37,000 | Chubb, Ltd. (a) | 5,695,040 | ||
10,767,150 | ||||
Interactive Media & Services – 3.2% | ||||
4,500 | Alphabet, Inc., Class C (a) (b) | 7,883,460 | ||
14,000 | Facebook, Inc., Class A (b) | 3,824,240 | ||
11,707,700 | ||||
Internet & Direct Marketing Retail – 1.1% | ||||
17,500 | Alibaba Group Holding Ltd., ADR (a) (b) | 4,072,775 | ||
IT Services – 4.5% | ||||
22,500 | Mastercard, Inc., Class A (a) | 8,031,150 | ||
35,000 | PayPal Holdings, Inc. (a) (b) | 8,197,000 | ||
16,228,150 | ||||
Life Sciences Tools & Services – 2.4% | ||||
19,000 | Thermo Fisher Scientific, Inc. (a) | 8,849,820 | ||
Machinery – 2.2% | ||||
22,000 | Caterpillar, Inc. (a) | 4,004,440 | ||
22,000 | Stanley Black & Decker, Inc. (a) | 3,928,320 | ||
7,932,760 | ||||
Media – 0.4% | ||||
39,000 | ViacomCBS, Inc., Class B (a) | 1,453,140 | ||
Oil, Gas & Consumable Fuels – 1.8% | ||||
50,000 | Hess Corp. | 2,639,500 | ||
58,500 | Occidental Petroleum Corp. (a) | 1,012,635 | ||
26,500 | Pioneer Natural Resources Co. | 3,018,085 | ||
6,670,220 | ||||
Pharmaceuticals – 6.7% | ||||
100,000 | Bristol-Myers Squibb Co. (a) | 6,203,000 | ||
40,000 | Horizon Therapeutics PLC (b) | 2,926,000 | ||
102,000 | Merck & Co., Inc. (a) | 8,343,600 | ||
42,500 | Zoetis, Inc. (a) | 7,033,750 | ||
24,506,350 | ||||
Road & Rail – 1.3% | ||||
52,000 | CSX Corp. (a) | 4,719,000 | ||
Semiconductors & Semiconductor Equipment – 5.5% | ||||
157,000 | Intel Corp. | 7,821,740 | ||
56,500 | Micron Technology, Inc. (b) | 4,247,670 |
Shares | Description | Value | ||
COMMON STOCKS (Continued) | ||||
Semiconductors & Semiconductor Equipment (Continued) | ||||
15,500 | NVIDIA Corp. (a) | $8,094,100 | ||
20,163,510 | ||||
Software – 10.6% | ||||
15,000 | Adobe, Inc. (a) (b) | 7,501,800 | ||
123,000 | Microsoft Corp. (a) | 27,357,660 | ||
14,500 | Synopsys, Inc. (a) (b) | 3,758,980 | ||
38,618,440 | ||||
Specialty Retail – 3.9% | ||||
17,000 | Burlington Stores, Inc. (b) | 4,446,350 | ||
83,000 | Foot Locker, Inc. | 3,356,520 | ||
41,000 | Lowe’s Cos., Inc. (a) | 6,580,910 | ||
14,383,780 | ||||
Technology Hardware, Storage & Peripherals – 7.4% | ||||
204,000 | Apple, Inc. (a) | 27,068,760 | ||
Textiles, Apparel & Luxury Goods – 1.9% | ||||
50,000 | NIKE, Inc., Class B | 7,073,500 | ||
Water Utilities – 0.9% | ||||
20,000 | American Water Works Co., Inc. (a) | 3,069,400 | ||
Total Common Stocks | 342,332,915 | |||
(Cost $240,183,291) | ||||
REAL ESTATE INVESTMENT TRUSTS – 3.3% | ||||
Equity Real Estate Investment Trusts – 3.3% | ||||
34,000 | Crown Castle International Corp. (a) | 5,412,460 | ||
120,000 | Healthcare Trust of America, Inc., Class A | 3,304,800 | ||
43,000 | Lamar Advertising Co., Class A (a) | 3,578,460 | ||
Total Real Estate Investment Trusts | 12,295,720 | |||
(Cost $9,729,380) | ||||
COMMON STOCKS – BUSINESS DEVELOPMENT COMPANIES - 1.0% | ||||
Capital Markets – 1.0% | ||||
215,000 | Ares Capital Corp. (a) | 3,631,350 | ||
(Cost $3,728,891) | ||||
WARRANTS – 0.0% | ||||
Oil, Gas & Consumable Fuels – 0.0% | ||||
7,312 | Occidental Petroleum Corp., expiring 08/03/2027 (b) | 49,795 | ||
(Cost $36,194) |
Shares | Description | Stated Rate | Stated Maturity | Value | ||||
$100 PAR PREFERRED SECURITIES – 0.7% | ||||||||
Health Care Equipment & Supplies – 0.7% | ||||||||
22,500 | Boston Scientific Corp., Series A | 5.50% | 06/01/23 | 2,465,325 | ||||
(Cost $2,579,715) |
Total Investments – 98.7% | 360,775,105 | ||
(Cost $256,257,471) (c) |
Number of Contracts | Description | Notional Amount | Exercise Price | Expiration Date | Value | |||||
CALL OPTIONS WRITTEN – (0.1)% | ||||||||||
(100) | Activision Blizzard, Inc. | $(928,500) | $92.50 | Jan 2021 | $(23,500) | |||||
(40) | Burlington Stores, Inc. | (1,046,200) | 260.00 | Jan 2021 | (36,120) | |||||
(75) | Caterpillar, Inc. | (1,365,150) | 190.00 | Jan 2021 | (9,375) | |||||
(100) | Cinemark Holdings, Inc. | (174,100) | 17.50 | Jan 2021 | (12,000) | |||||
(200) | Cinemark Holdings, Inc. | (348,200) | 20.00 | Jan 2021 | (8,800) | |||||
(130) | Foot Locker, Inc. | (525,720) | 47.50 | Jan 2021 | (910) | |||||
(100) | Horizon Therapeutics PLC | (731,500) | 80.00 | Jan 2021 | (13,500) | |||||
(100) | Lamar Advertising Co., Class A | (832,200) | 87.50 | Jan 2021 | (7,500) | |||||
(100) | NIKE, Inc., Class B | (1,414,700) | 155.00 | Jan 2021 | (1,600) | |||||
(125) | Occidental Petroleum Corp. | (216,375) | 24.00 | Jan 2021 | (625) | |||||
(125) | Occidental Petroleum Corp. | (216,375) | 29.00 | Jan 2021 | (250) | |||||
(75) | PayPal Holdings, Inc. | (1,756,500) | 260.00 | Jan 2021 | (5,250) | |||||
(275) | S&P 500® Index (d) | (103,291,925) | 3,875.00 | Jan 2021 | (116,600) | |||||
(275) | S&P 500® Index (d) | (103,291,925) | 3,900.00 | Jan 2021 | (118,250) | |||||
(100) | Six Flags Entertainment Corp. | (341,000) | 37.50 | Jan 2021 | (4,700) | |||||
(125) | Six Flags Entertainment Corp. | (426,250) | 40.00 | Jan 2021 | (1,875) | |||||
(75) | Walt Disney (The) Co. | (1,358,850) | 180.00 | Jan 2021 | (38,625) | |||||
(50) | Walt Disney (The) Co. | (905,900) | 190.00 | Jan 2021 | (8,050) | |||||
Total Call Options Written | (407,530) | |||||||||
(Premiums received $632,168) |
Net Other Assets and Liabilities – 1.4% | 5,064,384 | ||
Net Assets – 100.0% | $365,431,959 |
(a) | All or a portion of these securities are pledged to cover index call options written. |
(b) | Non-income producing security. |
(c) | Aggregate cost for federal income tax purposes was $257,133,024. As of December 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $119,761,544 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $16,526,993. The net unrealized appreciation was $103,234,551. The unrealized amounts presented are inclusive of derivative contracts. |
(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. |
ADR | American Depositary Receipt |
ASSETS TABLE | ||||
Total Value at 12/31/2020 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Common Stocks* | $ 342,332,915 | $ 342,332,915 | $ — | $ — |
Real Estate Investment Trusts* | 12,295,720 | 12,295,720 | — | — |
Common Stocks - Business Development Companies* | 3,631,350 | 3,631,350 | — | — |
Warrants* | 49,795 | 49,795 | — | — |
$100 Par Preferred Securities* | 2,465,325 | 2,465,325 | — | — |
Total Investments | $ 360,775,105 | $ 360,775,105 | $— | $— |
LIABILITIES TABLE | ||||
Total Value at 12/31/2020 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Call Options Written | $ (407,530) | $ (406,370) | $ (1,160) | $ — |
* | See Portfolio of Investments for industry breakout. |
ASSETS: | |
Investments, at value (Cost $256,257,471) | $ 360,775,105 |
Cash | 5,217,513 |
Dividends receivable | 270,624 |
Prepaid expenses | 2,736 |
Total Assets | 366,265,978 |
LIABILITIES: | |
Options written, at value (Premiums received $632,168) | 407,530 |
Payables: | |
Investment advisory fees | 306,014 |
Audit and tax fees | 43,523 |
Shareholder reporting fees | 28,211 |
Administrative fees | 15,460 |
Custodian fees | 14,039 |
Legal fees | 11,424 |
Transfer agent fees | 5,209 |
Financial reporting fees | 771 |
Trustees’ fees and expenses | 3 |
Other liabilities | 1,835 |
Total Liabilities | 834,019 |
NET ASSETS | $365,431,959 |
NET ASSETS consist of: | |
Paid-in capital | $ 263,882,127 |
Par value | 199,828 |
Accumulated distributable earnings (loss) | 101,350,004 |
NET ASSETS | $365,431,959 |
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) | $18.29 |
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized) | 19,982,838 |
INVESTMENT INCOME: | ||
Dividends (net of foreign withholding tax of $16,235) | $ 6,155,664 | |
Interest | 2,955 | |
Total investment income | 6,158,619 | |
EXPENSES: | ||
Investment advisory fees | 3,207,284 | |
Administrative fees | 157,476 | |
Shareholder reporting fees | 100,950 | |
Legal fees | 48,931 | |
Audit and tax fees | 43,604 | |
Transfer agent fees | 31,056 | |
Custodian fees | 28,084 | |
Listing expense | 26,268 | |
Trustees’ fees and expenses | 15,934 | |
Financial reporting fees | 9,250 | |
Other | 15,825 | |
Total expenses | 3,684,662 | |
NET INVESTMENT INCOME (LOSS) | 2,473,957 | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on: | ||
Investments | 18,222,559 | |
Written options contracts | 1,980,766 | |
Net realized gain (loss) | 20,203,325 | |
Net change in unrealized appreciation (depreciation) on: | ||
Investments | 27,158,774 | |
Written options contracts | 177,893 | |
Net change in unrealized appreciation (depreciation) | 27,336,667 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | 47,539,992 | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ 50,013,949 |
Year Ended 12/31/2020 | Year Ended 12/31/2019 | ||
OPERATIONS: | |||
Net investment income (loss) | $ 2,473,957 | $ 3,417,780 | |
Net realized gain (loss) | 20,203,325 | 19,605,590 | |
Net change in unrealized appreciation (depreciation) | 27,336,667 | 60,345,744 | |
Net increase (decrease) in net assets resulting from operations | 50,013,949 | 83,369,114 | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations | (22,780,435) | (22,772,258) | |
CAPITAL TRANSACTIONS: | |||
Proceeds from Common Shares reinvested | — | 158,582 | |
Net increase (decrease) in net assets resulting from capital transactions | — | 158,582 | |
Total increase (decrease) in net assets | 27,233,514 | 60,755,438 | |
NET ASSETS: | |||
Beginning of period | 338,198,445 | 277,443,007 | |
End of period | $ 365,431,959 | $ 338,198,445 | |
COMMON SHARES: | |||
Common Shares at beginning of period | 19,982,838 | 19,973,164 | |
Common Shares issued as reinvestment under the Dividend Reinvestment Plan | — | 9,674 | |
Common Shares at end of period | 19,982,838 | 19,982,838 |
Year Ended December 31, | |||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||
Net asset value, beginning of period | $ 16.92 | $ 13.89 | $ 16.51 | $ 15.23 | $ 14.99 | ||||
Income from investment operations: | |||||||||
Net investment income (loss) | 0.12 | 0.17 | 0.19 | 0.20 | 0.19 | ||||
Net realized and unrealized gain (loss) | 2.39 | 4.00 | (1.67) | 2.19 | 1.01 | ||||
Total from investment operations | 2.51 | 4.17 | (1.48) | 2.39 | 1.20 | ||||
Distributions paid to shareholders from: | |||||||||
Net investment income | (0.08) | (0.14) | (0.19) | (0.23) | (0.18) | ||||
Net realized gain | (1.06) | (1.00) | (0.95) | (0.88) | (0.48) | ||||
Return of capital | — | — | — | — | (0.30) | ||||
Total distributions paid to Common Shareholders | (1.14) | (1.14) | (1.14) | (1.11) | (0.96) | ||||
Net asset value, end of period | $18.29 | $16.92 | $13.89 | $16.51 | $15.23 | ||||
Market value, end of period | $17.62 | $17.25 | $12.92 | $16.19 | $13.51 | ||||
Total return based on net asset value (a) | 16.84% | 30.78% | (9.19)% | 16.53% (b) | 9.18% | ||||
Total return based on market value (a) | 10.41% | 43.34% | (13.86)% | 28.82% | 9.98% | ||||
Ratios to average net assets/supplemental data: | |||||||||
Net assets, end of period (in 000’s) | $ 365,432 | $ 338,198 | $ 277,443 | $ 329,835 | $ 304,114 | ||||
Ratio of total expenses to average net assets | 1.15% | 1.14% | 1.14% | 1.14% | 1.13% | ||||
Ratio of net investment income (loss) to average net assets | 0.77% | 1.08% | 1.13% | 1.21% | 1.27% | ||||
Portfolio turnover rate | 20% | 37% | 45% | 36% | 32% |
(a) | 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. |
(b) | The Fund received a reimbursement from Chartwell in the amount of $17,250, which represents less than $0.01 per share. Since the Fund was reimbursed, there was no effect on the Fund’s total return. |
1) | the type of security; |
2) | the size of the holding; |
3) | the initial cost of the security; |
4) | transactions in comparable securities; |
5) | price quotes from dealers and/or third-party pricing services; |
6) | relationships among various securities; |
7) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
8) | an analysis of the issuer’s financial statements; and |
9) | the existence of merger proposals or tender offers that might affect the value of the security. |
• | 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: | 2020 | 2019 |
Ordinary income | $4,535,363 | $5,807,796 |
Capital gains | 18,245,072 | 16,964,462 |
Return of capital | — | — |
Undistributed ordinary income | $2,101,603 |
Undistributed capital gains | — |
Total undistributed earnings | 2,101,603 |
Accumulated capital and other losses | — |
Net unrealized appreciation (depreciation) | 103,234,551 |
Total accumulated earnings (losses) | 105,336,154 |
Other | (3,986,150) |
Paid-in capital | 264,081,955 |
Total net assets | $365,431,959 |
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 | $ 407,530 |
Statement of Operations Location | |
Equity Risk Exposure | |
Net realized gain (loss) on written options contracts | $1,980,766 |
Net change in unrealized appreciation (depreciation) on written options contracts | 177,893 |
(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. |
• | Common Stock/Equity Securities: The Sub-Advisor selects common stocks and equity securities by utilizing its proprietary quantitative/qualitative selection criteria, which focuses on sectors, industries and individual common stocks and equity securities that exhibit strong fundamental characteristics. |
o | The Fund invests substantially all, but in no event less than 90%, of its Managed Assets in common stocks and other equity securities such as Real Estate Investment Trusts, Master Limited Partnerships and Investment Companies (including exchange-traded funds and business development companies). |
o | The Fund may invest up to 20% of its Managed Assets in U.S. dollar-denominated equity securities of foreign issuers. |
o | The Fund may invest up to 10% of its Managed Assets in equity securities of other investment companies that invest primarily in securities of the type in which the Fund may invest directly. |
o | The Fund may invest up to 25% of its Managed Assets in the equity securities of issuers in a single industry or sector of the economy. |
• | Covered Call Options: The Fund writes (sells) covered call options, including Long-Term Equity AnticiPation Securities (“LEAPS®”), held against the equity securities held in the Fund’s portfolio with strike prices (defined below) and expiration dates (defined below) that are collectively intended to provide risk/reward characteristics that are consistent with the Fund’s investment objective. |
o | The Fund’s Sub-Advisor writes (sells) call options as determined to be appropriate, consistent with the Fund’s investment objective. |
o | The Fund writes (sells) options that are considered “covered” because the Fund owns equity securities against which the options are written (sold). The number of call options the Fund can write (sell) is limited by the number of equity securities the Fund holds in its portfolio. |
o | The Fund does not write (sell) “naked” options, i.e., options on more equity securities than are held in the Fund’s portfolio. |
o | When the Fund writes (sells) a call option, it sells to the buyer (the “option holder”) the right, but not the obligation, to purchase a particular asset (the underlying equity security) from the Fund at a fixed price (the “strike price”) on or before a specified date (the “expiration date”). In exchange for the right to purchase the underlying equity security, the option holder pays a fee (a “premium”) to the Fund. The Fund typically utilizes “American-style” options, which may be exercised at any time between the date of purchase and the expiration date. The Fund may write (sell) “European-style” options, which may be exercised only during a specified period of time just prior to the expiration date. |
o | A call option normally represents the right to purchase 100 shares of the underlying equity security. |
o | Conventional listed call options have expiration dates which generally can be up to nine months from the date the call options are first listed for trading. Longer-term call options, such as LEAPS®, can have expiration dates up to three years from the date of listing. |
o | The Fund primarily writes (sells) call options which are “out-of-the-money”, meaning options with a strike price above the current market price of the underlying equity security. The Fund may write (sell) “in-the-money” (call options with a strike price below the current market price of the underlying equity security) and “at-the-money” (call options with a strike price equal to the current price of the underlying equity security). In-the-money and at-the-money call options may be written (sold) as a defensive measure to protect against a possible decline in the underlying security. |
(1) | issue senior securities, as defined in the 1940 Act, other than the borrowings permitted by investment restriction (2) set forth below; |
(2) | borrow money, except as permitted by the 1940 Act; |
(3) | act as underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the purchase and sale of portfolio securities; |
(4) | purchase or sell real estate, but this shall not prevent the Fund from investing in securities of companies that deal in real estate or are engaged in the real estate business, including real estate investment trusts, and securities secured by real estate or interests therein and the Fund may hold and sell real estate or mortgages on real estate acquired through default, liquidation, or other distributions of an interest in real estate as a result of the Fund’s ownership of such securities; |
(5) | purchase or sell physical commodities (but this shall not prevent the Fund from purchasing or selling options, futures contracts, derivative instruments or from investing in securities or other instruments backed by physical commodities; |
(6) | make loans of funds or other assets, other than by entering into repurchase agreements, lending portfolio securities and through the purchase of debt securities in accordance with its investment objectives, policies and limitations; |
(7) | with respect to 75% of its total assets, purchase any securities, if as a result more than 5% of the Fund’s total assets would then be invested in securities of any single issuer or if, as a result, the Fund would hold more than 10% of the outstanding voting securities of any single issuer; provided, that Government securities (as defined in the 1940 Act), securities issued by other investment companies and cash items (including receivables) shall not be counted for purposes of this limitation; and |
(8) | invest 25% or more of its total assets in securities of issuers in any single industry, provided there shall be no limitation on the purchase obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. |
Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INDEPENDENT TRUSTEES | ||||
Richard E. Erickson, Trustee (1951) | • Three Year Term
• Since Fund Inception | Physician; Officer, Wheaton Orthopedics; Limited Partner, Gundersen Real Estate Limited Partnership (June 1992 to December 2016) | 190 | None |
Thomas R. Kadlec, Trustee (1957) | • Three Year Term
• Since Fund Inception | President, ADM Investor Services, Inc. (Futures Commission Merchant) | 190 | Director of ADM Investor Services, Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association |
Robert F. Keith, Trustee (1956) | • Three Year Term
• Since June 2006 | President, Hibs Enterprises (Financial and Management Consulting) | 190 | Director of Trust Company of Illinois |
Niel B. Nielson, Trustee (1954) | • Three Year Term
• Since Fund Inception | Senior Advisor (August 2018 to Present), Managing Director and Chief Operating Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Products and Services) | 190 | None |
INTERESTED TRUSTEE | ||||
James A. Bowen(2), Trustee and Chairman of the Board (1955) | • Three Year Term
• Since Fund Inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 190 | None |
(1) | Currently, Richard E. Erickson and Thomas R. Kadlec, as Class II Trustees, are serving as trustees until the Fund’s 2021 annual meeting of shareholders. James A. Bowen and Niel B. Nielson, as Class III Trustees, are serving as trustees until the Fund’s 2022 annual meeting of shareholders. Robert F. Keith, as a Class I Trustee, is serving as a trustee until the Fund’s 2023 annual meeting of shareholders. |
(2) | Mr. Bowen is deemed an “interested person” of the Fund due to his position as CEO of First Trust Advisors L.P., investment advisor of the Fund. |
Name and Year of Birth | Position and Offices with Fund | Term of Office and Length of Service | Principal Occupations During Past 5 Years |
OFFICERS(3) | |||
James M. Dykas (1966) | President and Chief Executive Officer | • Indefinite Term • Since January 2016 | Managing Director and Chief Financial Officer (January 2016 to Present), Controller (January 2011 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) |
Donald P. Swade (1972) | Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite Term • Since January 2016 | Senior Vice President (July 2016 to Present), Vice President (April 2012 to July 2016), First Trust Advisors L.P. and First Trust Portfolios L.P. |
W. Scott Jardine (1960) | Secretary and Chief Legal Officer | • Indefinite Term • Since Fund Inception | General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
Daniel J. Lindquist (1970) | Vice President | • Indefinite Term • Since December 2005 | Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Kristi A. Maher (1966) | Chief Compliance Officer and Assistant Secretary | • Indefinite Term
• Assistant Secretary Since Fund Inception | Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
(3) | The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. |
• | Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; |
• | Information about your transactions with us, our affiliates or others; |
• | Information we receive from your inquiries by mail, e-mail or telephone; and |
• | Information we collect on our website through the use of “cookies”. For example, we may identify the pages on our website that your browser requests or visits. |
• | In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. |
• | We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). |
FUND ACCOUNTANT, AND
CUSTODIAN
PUBLIC ACCOUNTING FIRM
(b) Not applicable.
Item 2. Code of Ethics.
(a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
(d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
(e) | Not applicable. |
(f) | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees (Registrant) — The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $38,000.00 for 2019 and $38,000.00 for 2020.
(b) Audit-Related Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years, for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2019 and $0 for 2020.
Audit-Related Fees (Investment Adviser) — The aggregate fees billed in each of the last two fiscal years of the registrant for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2019 and $0 for 2020.
(c) Tax Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant were $5,266 for 2019 and $5,263 for 2020. These fees were for tax preparation. These fees were for tax consultation and/or tax return preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services.
Tax Fees (Investment Adviser) — The aggregate fees billed in each of the last two fiscal years of the registrant for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant’s adviser were $0 for 2019 and $0 for 2020.
(d) All Other Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2019 and $0 for 2020.
All Other Fees (Investment Adviser) — The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant’s investment adviser, other than services reported in paragraphs (a) through (c) of this Item were $0 for 2019 and $0 for 2020.
(e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s adviser (not including a sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s adviser (other than any sub-adviser whose role is primarily portfolio management and is sub-contracted with or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant’s investment adviser of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: |
(b) 0%
(c) 0%
(d) 0%
(f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for 2019 were $5,266 and $75,670 for the Registrant and the Registrant’s investment adviser, respectively, and for 2020 were $5,263 and $23,200, for the Registrant and the Registrant’s investment adviser, respectively. |
(h) | The Registrant’s audit committee of its Board of Trustees determined that the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed registrants.
(a) The Registrant has a separately designated audit committee consisting of all the independent trustees of the Registrant. The members of the audit committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E. Erickson and Robert F. Keith.
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.
The Proxy Voting Policies are attached herewith.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio Manager(s) or Management Team Members
Information provided as of March 10, 2021
Chartwell Investment Partners, LLC (“Chartwell”), a wholly owned subsidiary of TriState Capital Holdings, Inc., is a research based equity and fixed-income manager with a disciplined, team-oriented investment process. The Chartwell Portfolio Management Team consists of the following:
Douglas W. Kugler, CFA
Principal, Senior Portfolio Manager
Mr. Kugler is a Senior Portfolio Manager on Chartwell’s large-cap equity portfolio management team and has 24 years of investment industry experience. His areas of focus include the Consumer Discretionary, Industrials, Materials and Technology sectors of the market. He has been a portfolio manager for the Fund since 2007. From 1993 to 2003, he held several positions at Morgan Stanley Investment Management (Miller Anderson & Sherrerd) the last of which was Senior Associate and Analyst for the Large Cap Value team. Mr. Kugler is a member of the CFA (Chartered Financial Analysts) Institute and the CFA Society of Philadelphia. He holds the Chartered Financial Analyst designation. Mr. Kugler earned a Bachelor’s degree in Accounting from the University of Delaware.
Peter M. Schofield, CFA
Principal, Senior Portfolio Manager
Mr. Schofield is a Senior Portfolio Manager on Chartwell’s large-cap equity portfolio management team and has 36 years of investment industry experience. His areas of focus include Consumer Staples, Health Care and Information Technology. From 2005 to 2010, he was a Co-Chief Investment Officer at Knott Capital. From 1996 to 2005, he was a Portfolio Manager at Sovereign Asset Management. Prior to Sovereign Asset Management, he was a portfolio manager at Geewax, Terker & Company. Mr. Schofield holds the Chartered Financial Analyst designation and is a member of the CFA (Chartered Financial Analysts) Institute and the CFA Society of Philadelphia. Mr. Schofield earned a Bachelor’s degree in History from the University of Pennsylvania.
The investment team for the First Trust Enhanced Equity Income Fund consists of two portfolio managers with an average of 265 years of investment experience. All team members (portfolio managers and analysts) conduct fundamental research and meet with company management. Purchase and sale decisions are discussed among the team members, however, final decision-making responsibility rests with Mr. Kugler. In addition, while each team member may be consulted on any options transactions involving the portfolio, Mr. Kugler has full responsibility for decisions involving the options program.
(a)(2) | Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest |
Information provided as of December 31, 2020
Other Accounts Managed by Portfolio Manager(s) or Management Team Member
Name of Portfolio Manager or Team Member | Type of Accounts* | Total # of Accounts Managed | Total Assets | # of Accounts Managed for which Advisory Fee is Based on Performance | Total Assets for which Advisory Fee is Based on Performance |
1. Douglas W. Kugler | Registered Investment Companies: | 0 | $0 | 0 | $0 |
Other Pooled Investment Vehicles: | 1 | $1,522,207 | 0 | $0 | |
Other Accounts: | 19 | $504,921,207 | 0 | $0 | |
2. Peter M. Schofield | Registered Investment Companies: | 1 | $56,773,147 | 0 | $0 |
Other Pooled Investment Vehicles: | 0 | $0 | 0 | $0 | |
Other Accounts: | 19 | $504,921,207 | 0 | $0 |
Potential Conflicts of Interests
The portfolio managers manage other accounts for Chartwell including institutional portfolios of similar investment styles. None of these portfolio managers manage any hedge funds nor any accounts with performance-based fees. When registered funds and investment accounts are managed side-by-side, firm personnel must strictly follow the policies and procedures outlined in our Trade Allocation Policy to ensure that accounts are treated in a fair and equitable manner, and that no client or account is favored over another. When registered funds and investment accounts are trading under the same investment product, and thus trading the same securities, shares are allocated on a pro-rata basis based on market value, and all portfolios obtain the same average price.
On a monthly basis, Jon Caffey, a member of our Compliance Group, oversees the performance calculation process handled in Operations, and completes a spreadsheet of monthly portfolio returns by client. Caffey provides this spreadsheet to the CEO, COO, CCO and various investment personnel for their review. Any performance dispersion noted by anyone on the distribution list is investigated by Caffey by reviewing the underlying transactional detail, holdings & security weightings by portfolio. This monthly process ensures that all portfolios that are managed under the same investment product are treated fairly, and traded in accordance with firm policy.
(a)(3) Compensation Structure of Portfolio Manager(s) or Management Team Members
Information provided as of December 31, 2020
The compensation paid to a Chartwell portfolio manager and analyst consists of base salary, annual bonus, ownership distribution, and an annual profit-sharing contribution to the firm’s retirement plan.
A portfolio manager’s and analyst’s base salary is determined by Chartwell’s Compensation Committee and is reviewed at least annually. A portfolio manager’s and analyst’s experience, historical performance, and role in firm or product team management are the primary considerations in determining the base salary. Industry benchmarking is utilized by the Compensation Committee on an annual basis.
Annual bonuses are determined by the Compensation Committee based on a number of factors. The primary factor is a performance-based compensation schedule that is applied to all accounts managed by a portfolio manager within a particular investment product and is not specific to any one account. The bonus is calibrated based on the gross composite performance of such accounts versus the appropriate benchmark and peer group rankings. Portfolio construction, sector and security weighting, and performance are reviewed by the Compliance Committee and Compensation Committee to prevent a manager from taking undue risks. Additional factors used to determine the annual bonus include the portfolio manager’s contribution as an analyst, product team management, and contribution to the strategic planning and development of the investment group as well as the firm. For employee retention purposes, if an individual employee’s bonus exceeds $50,000 for a given year, an amount equal to 25% of the bonus is deferred and paid 3 years after the initial pay date. Chartwell also provides a profit sharing and 401(k) plan for all employees. The annual profit-sharing contribution and/or matching contribution from Chartwell is discretionary and based solely on the profitability of the firm.
The performance of the fund does factor into each portfolio manager’s compensation. Chartwell considers the one (1) and three (3) year performance of the fund compared to a combination of either the S&P 500 or BXM benchmarks and the fund’s performance compared to its’ peer group in consideration of each portfolio manager’s compensation
As described above, for employee retention purposes, if an individual employee’s bonus exceeds $50,000 for a given year, an amount equal to 25% of the bonus is deferred and paid 3 years after the initial paydate. Chartwell also provides a profit sharing and 401(k) plan for all employees.
(a)(4) Disclosure of Securities Ownership
Information provided as of December 31, 2020:
Name of Portfolio Manager or Team Member | Dollar Range of Fund Shares Beneficially Owned | |
Douglas W. Kugler | $100,001-500,000 | |
Peter M. Schofield | $0 |
(b) | Not applicable. |
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.
On October 19, 2020, after a thorough review, and consistent with the interests of the Fund, the Board of Trustees adopted Amended and Restated By-Laws, dated October 19, 2020 (the “Amended and Restated By-Laws”).
Among other changes, the Amended and Restated By-Laws contain new timelines for advance notice of nominees for Trustee to be brought before a meeting of shareholders. Further, the Amended and Restated By-Laws require compliance with certain procedural and informational requirements in connection with the advance notice of nominations, including a requirement to provide certain information about the nominee, and if requested, requires a nominee to sit for an interview with the Board to determine whether the nominee has the ability to critically review, evaluate, question and discuss information provided to the Board, and interact effectively with the other Trustees and management of the Fund, among other parties. Additionally, the Amended and Restated By-Laws include qualifications and eligibility requirements for Trustees. Any shareholder considering making a nomination should carefully review and comply with those provisions of the Amended and Restated By-Laws.
This discussion is only a high-level summary of certain aspects of the Amended and Restated By-Laws and is qualified in its entirety by reference to the Amended and Restated By-Laws. Shareholders should refer to the Amended and Restated By-Laws for more information. A copy of the Amended and Restated By-Laws can be found in the Current Report on Form 8-K filed by the Fund with the Securities and Exchange Commission on October 20, 2020, which is available at www.sec.gov, and may also be obtained by writing to the Secretary of the Fund at the Fund’s principal executive office.
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) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
(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. |
(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. |
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 | March 11, 2021 |
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 | March 11, 2021 |
By (Signature and Title)* | /s/ Donald P. Swade | |||
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date | March 11, 2021 |
* Print the name and title of each signing officer under his or her signature.