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 811-21787
Name of Fund: Enhanced S&P 500(R) Covered Call Fund Inc. (BEO)
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Mitchell M. Cox, Chief Executive
Officer, Enhanced S&P 500(R) Covered Call Fund Inc., 4 World Financial
Center, 6th Floor, New York, New York 10080.
Registrant's telephone number, including area code: (877) 449-4742
Date of fiscal year end: 12/31/2007
Date of reporting period: 01/01/2007 - 12/31/2007
Item 1 - Report to Stockholders
Enhanced S&P 500(R)
Covered Call Fund Inc.
Annual Report
December 31, 2007
[LOGO] IQ INVESTMENT [LOGO] OPPENHEIMER CAPITAL
ADVISORS
Enhanced S&P 500(R) Covered Call Fund Inc.
Portfolio Information as of December 31, 2007
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Exxon Mobil Corp. .................................................... 3.1%
General Electric Co. ................................................. 2.3
Microsoft Corp. ...................................................... 1.8
AT&T Inc. ............................................................ 1.5
The Procter & Gamble Co. ............................................. 1.4
Chevron Corp. ........................................................ 1.2
Johnson & Johnson .................................................... 1.2
Bank of America Corp. ................................................ 1.1
Apple Computer, Inc. ................................................. 1.1
Cisco Systems, Inc. .................................................. 1.0
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
- --------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels .......................................... 8.1%
Pharmaceuticals ...................................................... 5.0
Computers & Peripherals .............................................. 3.6
Diversified Financial Services ....................................... 3.5
Insurance ............................................................ 3.4
- --------------------------------------------------------------------------------
S&P 500(R) Index Sector Weightings Percent of
on Common Stock Long-Term Investments
- --------------------------------------------------------------------------------
Financials ........................................................... 17.7%
Information Technology ............................................... 16.7
Energy ............................................................... 12.7
Health Care .......................................................... 12.0
Industrials .......................................................... 11.5
Consumer Staples ..................................................... 10.2
Consumer Discretionary ............................................... 8.5
Utilities ............................................................ 3.8
Telecommunication Services ........................................... 3.6
Materials ............................................................ 3.3
- --------------------------------------------------------------------------------
For Fund portfolio compliance purposes, the Fund's industry and sector
classifications refer to one or more of the industry and sector
sub-classifications used by one or more widely recognized market indexes
or ratings group indexes, and/or as defined by Fund management. This
definition may not apply for the purposes of this report, which may
combine industry and sector sub-classifications for reporting ease.
S&P 500 and Standard & Poor's 500 are registered trademarks of the McGraw-Hill
Companies.
2 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
A Summary From Your Fund's Portfolio Manager
We are pleased to provide you with this shareholder report for Enhanced
S&P 500(R) Covered Call Fund Inc. While the Fund is advised by IQ Investment
Advisors LLC, the following is provided by Oppenheimer Capital LLC, the Fund's
subadviser.
The investment objective of Enhanced S&P 500(R) Covered Call Fund Inc. (the
"Fund") is to seek leveraged returns on the CBOE S&P 500(R) BuyWrite IndexSM
(the "BXM Index"), less fees and expenses. The Fund will employ leverage to
increase the volatility of the Fund's investment portfolio to approximate the
volatility of the Standard and Poor's 500(R) Composite Stock Price Index ("S&P
500 Index"). The BXM Index is a passive, total return index that is based on
purchasing the common stocks of all of the companies included in the S&P 500
Index, weighted in the same proportions as the S&P 500 Index (the "S&P 500 Index
Stocks"), and writing (selling) one-month call options on the S&P 500 Index.
There can be no assurance that the Fund will achieve its investment objective.
For the annual period ended December 31, 2007, the Fund had a total investment
return as set forth in the table below, based on the change per share in net
asset value of $18.99 to $17.86. For the same period, the Fund's unmanaged
reference index, the BXM Index, had a total return as shown below. All of the
Fund and index information presented includes the reinvestment of any dividends
or distributions. Distribution information may be found in the Notes to
Financial Statements, Note 5.
- --------------------------------------------------------------------------------
Period Fund* BXM Index** Difference
- --------------------------------------------------------------------------------
Fiscal year ended
December 31, 2007 6.34% 6.59% (0.25%)
- --------------------------------------------------------------------------------
Since inception
(September 30, 2005) 22.57% 18.30% 4.27%
- --------------------------------------------------------------------------------
* Fund performance information is net of expenses.
** The reference index has no expenses associated with performance.
For more detail with regard to the Fund's total investment return based on a
change in the per share market value of the Fund's Common Stock (as measured by
the trading price of the Fund's shares on the New York Stock Exchange), please
refer to the Financial Highlights section of this report.
As a closed-end fund, the Fund's shares may trade in the secondary market at a
premium or discount to the Fund's net asset value. As a result, total investment
returns based on changes in the market value of the Fund's Common Stock can vary
significantly from total investment returns based on changes in the Fund's net
asset value.
Stephen Bond-Nelson
Portfolio Manager
January 18, 2008
CBOE, Volatility Index and VIX are registered trademarks and BXM is a
service mark of the Chicago Board Options Exchange.
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 3
Schedule of Investments as of December 31, 2007
Shares
Industry Common Stocks Held Value
===========================================================================================
Aerospace & Defense -- 2.3%
Boeing Co. 7,701 $ 673,529
General Dynamics Corp. 3,998 355,782
Goodrich Corp. 1,238 87,415
Honeywell International, Inc. 7,420 456,849
L-3 Communications Holdings, Inc. 1,246 132,001
Lockheed Martin Corp. 3,448 362,936
Northrop Grumman Corp. 3,362 264,388
Precision Castparts Corp. 1,372 190,296
Raytheon Co. 4,265 258,886
Rockwell Collins, Inc. 1,619 116,519
United Technologies Corp. 9,822 751,776
------------
3,650,377
- -------------------------------------------------------------------------------------------
Air Freight & Logistics -- 0.7%
C.H. Robinson Worldwide, Inc. 1,687 91,300
Expeditors International Washington, Inc. 2,117 94,588
FedEx Corp. 3,073 274,019
United Parcel Service, Inc. Class B 10,441 738,388
------------
1,198,295
- -------------------------------------------------------------------------------------------
Airlines -- 0.1%
Southwest Airlines Co. 7,293 88,975
- -------------------------------------------------------------------------------------------
Auto Components -- 0.2%
The Goodyear Tire & Rubber Co. (a) 2,383 67,248
Johnson Controls, Inc. 5,900 212,636
WABCO Holdings, Inc. 1 50
------------
279,934
- -------------------------------------------------------------------------------------------
Automobiles -- 0.2%
Ford Motor Co. (a) 20,966 141,101
General Motors Corp. 5,624 139,981
Harley-Davidson, Inc. 2,399 112,057
------------
393,139
- -------------------------------------------------------------------------------------------
Beverages -- 1.9%
Anheuser-Busch Cos., Inc. 7,291 381,611
Brown-Forman Corp. Class B 855 63,364
The Coca-Cola Co. 19,747 1,211,873
Coca-Cola Enterprises, Inc. 2,843 74,003
Constellation Brands, Inc. Class A (a) 1,926 45,531
Molson Coors Brewing Co. Class B 1,358 70,100
Pepsi Bottling Group, Inc. 1,378 54,376
PepsiCo, Inc. 15,994 1,213,945
------------
3,114,803
- -------------------------------------------------------------------------------------------
Biotechnology -- 0.9%
Amgen, Inc. (a) 10,807 501,877
Biogen Idec, Inc. (a) 2,915 165,922
Celgene Corp. (a) 3,834 177,169
Genzyme Corp. (a) 2,643 196,745
Gilead Sciences, Inc. (a) 9,248 425,500
------------
1,467,213
- -------------------------------------------------------------------------------------------
Building Products -- 0.1%
Masco Corp. 3,664 79,179
Trane, Inc. 1,703 79,547
------------
158,726
- -------------------------------------------------------------------------------------------
Capital Markets -- 2.7%
American Capital Strategies Ltd. 1,905 62,789
Ameriprise Financial, Inc. 2,304 126,973
The Bank of New York Mellon Corp. 11,314 551,671
The Bear Stearns Cos., Inc. 1,148 101,311
The Charles Schwab Corp. 9,307 237,794
E*Trade Financial Corp. (a) 4,210 14,945
Federated Investors, Inc. Class B 859 35,356
Franklin Resources, Inc. 1,605 183,660
The Goldman Sachs Group, Inc. 3,951 849,663
Janus Capital Group, Inc. 1,524 50,063
Legg Mason, Inc. 1,334 97,582
Lehman Brothers Holdings, Inc. 5,266 344,607
Merrill Lynch & Co., Inc. (b) 8,505 456,548
Morgan Stanley 10,544 559,992
Northern Trust Corp. 1,901 145,579
State Street Corp. 3,837 311,564
T. Rowe Price Group, Inc. 2,622 159,627
------------
4,289,724
- -------------------------------------------------------------------------------------------
Chemicals -- 1.5%
Air Products & Chemicals, Inc. 2,140 211,068
Ashland, Inc. 553 26,229
The Dow Chemical Co. 9,383 369,878
E.I. du Pont de Nemours & Co. 8,933 393,856
Eastman Chemical Co. 805 49,178
Ecolab, Inc. 1,736 88,901
Hercules, Inc. 1,148 22,214
International Flavors & Fragrances, Inc. 804 38,697
Monsanto Co. 5,433 606,812
PPG Industries, Inc. 1,627 114,264
Praxair, Inc. 3,139 278,461
Rohm & Haas Co. 1,245 66,072
Sigma-Aldrich Corp. 1,292 70,543
------------
2,336,173
- -------------------------------------------------------------------------------------------
Commercial Banks -- 2.4%
BB&T Corp. 5,458 167,397
Comerica, Inc. 1,500 65,295
Commerce Bancorp, Inc. 1,936 73,839
Fifth Third Bancorp 5,292 132,988
First Horizon National Corp. 1,256 22,796
Huntington Bancshares, Inc. 3,635 53,653
KeyCorp 3,863 90,587
M&T Bank Corp. 746 60,851
Marshall & Ilsley Corp. 2,555 67,656
National City Corp. 6,295 103,616
The PNC Financial Services Group, Inc. 3,473 228,002
Regions Financial Corp. 6,906 163,327
SunTrust Banks, Inc. 3,470 216,840
Synovus Financial Corp. 3,263 78,573
U.S. Bancorp 17,156 544,531
Wachovia Corp. 19,627 746,415
Wells Fargo & Co. 33,527 1,012,180
Zions Bancorporation 1,073 50,098
------------
3,878,644
- -------------------------------------------------------------------------------------------
Commercial Services & Supplies -- 0.4%
Allied Waste Industries, Inc. (a) 2,877 31,704
Avery Dennison Corp. 1,058 56,222
Cintas Corp. 1,342 45,118
Equifax, Inc. 1,310 47,632
Monster Worldwide, Inc. (a) 1,271 41,180
Pitney Bowes, Inc. 2,155 81,976
R.R. Donnelley & Sons Co. 2,132 80,462
Robert Half International, Inc. 1,600 43,264
Waste Management, Inc. 5,051 165,016
------------
592,574
- -------------------------------------------------------------------------------------------
4 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Schedule of Investments (continued)
Shares
Industry Common Stocks Held Value
===========================================================================================
Communications Equipment --2.0%
Ciena Corp. (a) 850 $ 28,993
Cisco Systems, Inc. (a) 60,280 1,631,780
Corning, Inc. 15,657 375,611
JDS Uniphase Corp. (a) 2,181 29,007
Juniper Networks, Inc. (a) 5,182 172,042
Motorola, Inc. 22,696 364,044
QUALCOMM, Inc. 16,260 639,831
Tellabs, Inc. (a) 4,363 28,534
------------
3,269,842
- -------------------------------------------------------------------------------------------
Computers & Peripherals -- 3.6%
Apple Computer, Inc. (a) 8,699 1,723,098
Dell, Inc. (a) 22,266 545,740
EMC Corp. 20,847 386,295
Hewlett-Packard Co. 25,615 1,293,045
International Business Machines Corp. 13,691 1,479,997
Lexmark International, Inc. Class A (a) 941 32,803
Network Appliance, Inc. (a) 3,420 85,363
QLogic Corp. (a) 1,360 19,312
SanDisk Corp. (a) 2,267 75,196
Sun Microsystems, Inc. (a) 8,233 149,264
Teradata Corp. (a) 1,798 49,283
------------
5,839,396
- -------------------------------------------------------------------------------------------
Construction & Engineering -- 0.2%
Fluor Corp. 879 128,088
Jacobs Engineering Group, Inc. (a) 1,200 114,732
------------
242,820
- -------------------------------------------------------------------------------------------
Construction Materials -- 0.1%
Vulcan Materials Co. 1,075 85,022
- -------------------------------------------------------------------------------------------
Consumer Finance -- 0.6%
American Express Co. 11,619 604,420
Capital One Financial Corp. 3,883 183,510
Discover Financial Services 4,745 71,555
SLM Corp. 5,125 103,218
------------
962,703
- -------------------------------------------------------------------------------------------
Containers & Packaging -- 0.1%
Ball Corp. 999 44,955
Bemis Co. 999 27,353
Pactiv Corp. (a) 1,293 34,433
Sealed Air Corp. 1,605 37,140
------------
143,881
- -------------------------------------------------------------------------------------------
Distributors -- 0.0%
Genuine Parts Co. 1,668 77,228
- -------------------------------------------------------------------------------------------
Diversified Consumer Services -- 0.1%
Apollo Group, Inc. Class A (a) 1,359 95,334
H&R Block, Inc. 3,229 59,962
------------
155,296
- -------------------------------------------------------------------------------------------
Diversified Financial Services -- 3.5%
Bank of America Corp. 44,098 1,819,483
CIT Group, Inc. 1,888 45,369
CME Group, Inc. 544 373,184
Citigroup, Inc. 49,602 1,460,283
IntercontinentalExchange, Inc. (a) 691 133,018
JPMorgan Chase & Co. 33,375 1,456,819
Leucadia National Corp. 1,680 79,128
Moody's Corp. 2,131 76,077
NYSE Euronext 2,633 231,098
------------
5,674,459
- -------------------------------------------------------------------------------------------
Diversified Telecommunication Services -- 2.5%
AT&T Inc. 60,258 2,504,322
CenturyTel, Inc. 1,097 45,482
Citizens Communications Co. 3,257 41,462
Embarq Corp. 1,518 75,187
Qwest Communications International Inc. 15,601 109,363
Verizon Communications, Inc. 28,718 1,254,689
Windstream Corp. 4,740 61,715
------------
4,092,220
- -------------------------------------------------------------------------------------------
Electric Utilities -- 1.7%
Allegheny Energy, Inc. 1,652 105,084
American Electric Power Co., Inc. 3,974 185,029
Duke Energy Corp. 12,529 252,710
Edison International 3,237 172,759
Entergy Corp. 1,935 231,271
Exelon Corp. 6,557 535,313
FPL Group, Inc. 4,045 274,170
FirstEnergy Corp. 3,029 219,118
PPL Corp. 3,698 192,629
Pepco Holdings, Inc. 1,990 58,367
Pinnacle West Capital Corp. 997 42,283
Progress Energy, Inc. 2,575 124,707
The Southern Co. 7,546 292,408
------------
2,685,848
- -------------------------------------------------------------------------------------------
Electrical Equipment -- 0.4%
Cooper Industries Ltd. Class A 1,789 94,602
Emerson Electric Co. 7,822 443,195
Rockwell Automation, Inc. 1,483 102,268
------------
640,065
- -------------------------------------------------------------------------------------------
Electronic Equipment & Instruments -- 0.2%
Agilent Technologies, Inc. (a) 3,841 141,118
Jabil Circuit, Inc. 2,067 31,563
Molex, Inc. 1,407 38,411
Tyco Electronics Ltd. 4,940 183,422
------------
394,514
- -------------------------------------------------------------------------------------------
Energy Equipment & Services -- 2.0%
BJ Services Co. 2,909 70,572
Baker Hughes, Inc. 3,160 256,276
ENSCO International, Inc. 1,439 85,793
Halliburton Co. 8,755 331,902
Nabors Industries Ltd. (a) 2,814 77,075
National Oilwell Varco, Inc. (a) 3,544 260,342
Noble Corp. 2,663 150,486
Rowan Cos., Inc. 1,106 43,643
Schlumberger Ltd. 11,882 1,168,832
Smith International, Inc. 1,990 146,962
Transocean, Inc. (a) 3,160 452,354
Weatherford International Ltd. (a) 3,351 229,879
------------
3,274,116
- -------------------------------------------------------------------------------------------
Food & Staples Retailing -- 1.9%
CVS/Caremark Corp. 14,674 583,291
Costco Wholesale Corp. 4,313 300,875
The Kroger Co. 6,768 180,773
SUPERVALU INC. 2,100 78,792
SYSCO Corp. 6,043 188,602
Safeway, Inc. 4,396 150,387
Wal-Mart Stores, Inc. 23,477 1,115,862
Walgreen Co. 9,852 375,164
Whole Foods Market, Inc. 1,385 56,508
------------
3,030,254
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 5
Schedule of Investments (continued)
Shares
Industry Common Stocks Held Value
===========================================================================================
Food Products -- 1.2%
Archer-Daniels-Midland Co. 6,388 $ 296,595
Campbell Soup Co. 2,211 78,999
ConAgra Foods, Inc. 4,843 115,215
Dean Foods Co. 1,308 33,825
General Mills, Inc. 3,355 191,235
H.J. Heinz Co. 3,149 146,995
The Hershey Co. 1,672 65,877
Kellogg Co. 2,623 137,524
Kraft Foods, Inc. 15,373 501,621
McCormick & Co., Inc. 1,269 48,108
Sara Lee Corp. 7,195 115,552
Tyson Foods, Inc. Class A 2,720 41,698
Wm. Wrigley Jr. Co. 2,164 126,702
------------
1,899,946
- -------------------------------------------------------------------------------------------
Gas Utilities -- 0.2%
Nicor, Inc. 448 18,973
Questar Corp. 1,716 92,836
Spectra Energy Corp. 6,282 162,201
------------
274,010
- -------------------------------------------------------------------------------------------
Health Care Equipment & Supplies -- 1.4%
Baxter International, Inc. 6,300 365,715
Becton Dickinson & Co. 2,423 202,514
Boston Scientific Corp. (a) 13,331 155,039
C.R. Bard, Inc. 1,012 95,938
Covidien Ltd. 4,947 219,103
Hospira, Inc. (a) 1,565 66,732
Medtronic, Inc. 11,234 564,733
St. Jude Medical, Inc. (a) 3,402 138,257
Stryker Corp. 2,366 176,788
Varian Medical Systems, Inc. (a) 1,243 64,835
Zimmer Holdings, Inc. (a) 2,331 154,196
------------
2,203,850
- -------------------------------------------------------------------------------------------
Health Care Providers & Services --1.9%
Aetna, Inc. 4,972 287,033
AmerisourceBergen Corp. 1,669 74,888
Cardinal Health, Inc. 3,592 207,438
Cigna Corp. 2,774 149,047
Coventry Health Care, Inc. (a) 1,539 91,186
Express Scripts, Inc. (a) 2,504 182,792
Humana, Inc. (a) 1,683 126,747
Laboratory Corp. of America Holdings (a) 1,145 86,482
McKesson Corp. 2,875 188,341
Medco Health Solutions, Inc. (a) 2,657 269,420
Patterson Cos., Inc. (a) 1,389 47,157
Quest Diagnostics, Inc. 1,558 82,418
Tenet Healthcare Corp. (a) 4,711 23,932
UnitedHealth Group, Inc. 12,839 747,230
WellPoint, Inc. (a) 5,677 498,043
------------
3,062,154
- -------------------------------------------------------------------------------------------
Health Care Technology -- 0.0%
IMS Health, Inc. 1,927 44,398
- -------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure -- 1.1%
Carnival Corp. 4,340 193,087
Darden Restaurants, Inc. 1,410 39,071
Harrah's Entertainment, Inc. 1,864 165,430
International Game Technology 3,134 137,677
Marriott International, Inc. Class A 3,106 106,163
McDonald's Corp. 11,752 692,310
Starbucks Corp. (a) 7,257 148,551
Starwood Hotels & Resorts Worldwide, Inc. 1,979 87,135
Wendy's International, Inc. 864 22,326
Wyndham Worldwide Corp. 1,766 41,607
Yum! Brands, Inc. 5,053 193,378
------------
1,826,735
- -------------------------------------------------------------------------------------------
Household Durables -- 0.3%
Black & Decker Corp. 621 43,253
Centex Corp. 1,208 30,514
D.R. Horton, Inc. 2,754 36,270
Fortune Brands, Inc. 1,515 109,625
Harman International Industries, Inc. 601 44,300
KB Home 761 16,438
Leggett & Platt, Inc. 1,690 29,474
Lennar Corp. Class A 1,385 24,778
Newell Rubbermaid, Inc. 2,775 71,817
Pulte Homes, Inc. 2,111 22,250
Snap-On, Inc. 571 27,545
The Stanley Works 817 39,608
Whirlpool Corp. 771 62,937
------------
558,809
- -------------------------------------------------------------------------------------------
Household Products -- 1.9%
Clorox Co. 1,376 89,674
Colgate-Palmolive Co. 5,065 394,867
Kimberly-Clark Corp. 4,208 291,783
The Procter & Gamble Co. 30,857 2,265,521
------------
3,041,845
- -------------------------------------------------------------------------------------------
IT Services -- 0.7%
Affiliated Computer Services, Inc. Class A (a) 998 45,010
Automatic Data Processing, Inc. 5,228 232,803
Cognizant Technology Solutions Corp. (a) 2,885 97,917
Computer Sciences Corp. (a) 1,729 85,534
Convergys Corp. (a) 1,294 21,299
Electronic Data Systems Corp. 5,088 105,474
Fidelity National Information Services, Inc. 1,696 70,537
Fiserv, Inc. (a) 1,636 90,782
Paychex, Inc. 3,314 120,033
Unisys Corp. (a) 3,455 16,342
The Western Union Co. 7,461 181,153
------------
1,066,884
- -------------------------------------------------------------------------------------------
Independent Power Producers &
Energy Traders -- 0.2%
The AES Corp. (a) 6,650 142,244
Constellation Energy Group, Inc. 1,795 184,041
Dynegy, Inc. Class A (a) 4,926 35,172
------------
361,457
- -------------------------------------------------------------------------------------------
Industrial Conglomerates -- 2.9%
General Electric Co. 100,413 3,722,310
3M Co. 7,086 597,492
Textron, Inc. 2,476 176,539
Tyco International Ltd. 4,916 194,919
------------
4,691,260
- -------------------------------------------------------------------------------------------
Insurance -- 3.4%
ACE Ltd. 3,275 202,329
AMBAC Financial Group, Inc. 1,009 26,002
AON Corp. 2,917 139,112
Aflac, Inc. 4,847 303,568
The Allstate Corp. 5,670 296,144
American International Group, Inc. 25,199 1,469,102
6 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Schedule of Investments (continued)
Shares
Industry Common Stocks Held Value
===========================================================================================
Insurance (concluded)
Assurant, Inc. 949 $ 63,488
Chubb Corp. 3,813 208,114
Cincinnati Financial Corp. 1,649 65,201
Genworth Financial, Inc. Class A 4,358 110,911
Hartford Financial Services Group, Inc. 3,118 271,858
Lincoln National Corp. 2,676 155,797
Loews Corp. 4,367 219,835
MBIA, Inc. 1,251 23,306
Marsh & McLennan Cos., Inc. 5,168 136,797
MetLife, Inc. 7,358 453,400
Principal Financial Group, Inc. 2,599 178,915
The Progressive Corp. 6,936 132,894
Prudential Financial, Inc. 4,511 419,703
Safeco Corp. 935 52,061
Torchmark Corp. 916 55,445
The Travelers Cos., Inc. 6,408 344,750
UnumProvident Corp. 3,585 85,287
XL Capital Ltd. Class A 1,771 89,099
------------
5,503,118
- -------------------------------------------------------------------------------------------
Internet & Catalog Retail -- 0.2%
Amazon.com, Inc. (a) 3,053 282,830
Expedia, Inc. (a) 2,064 65,264
IAC/InterActiveCorp (a) 1,832 49,317
------------
397,411
- -------------------------------------------------------------------------------------------
Internet Software & Services -- 1.5%
Akamai Technologies, Inc. (a) 1,651 57,125
eBay, Inc. (a) 11,297 374,947
Google, Inc. Class A (a) 2,300 1,590,404
VeriSign, Inc. (a) 2,195 82,554
Yahoo! Inc. (a) 13,279 308,870
------------
2,413,900
- -------------------------------------------------------------------------------------------
Leisure Equipment & Products -- 0.1%
Brunswick Corp. 874 14,902
Eastman Kodak Co. 2,861 62,570
Hasbro, Inc. 1,461 37,372
Mattel, Inc. 3,645 69,401
------------
184,245
- -------------------------------------------------------------------------------------------
Life Sciences Tools & Services -- 0.3%
Applera Corp. -- Applied
Biosystems Group 1,671 56,680
Millipore Corp. (a) 542 39,664
PerkinElmer, Inc. 1,178 30,652
Thermo Fisher Scientific, Inc. (a) 4,192 241,795
Waters Corp. (a) 998 78,912
------------
447,703
- -------------------------------------------------------------------------------------------
Machinery -- 1.5%
Caterpillar, Inc. 6,320 458,579
Cummins, Inc. 1,015 129,281
Danaher Corp. 2,515 220,666
Deere & Co. 4,409 410,566
Dover Corp. 1,974 90,982
Eaton Corp. 1,456 141,159
ITT Corp. 1,801 118,938
Illinois Tool Works, Inc. 4,107 219,889
Ingersoll-Rand Co. Class A 2,707 125,794
Manitowoc Co. 1,290 62,991
PACCAR, Inc. 3,660 199,397
Pall Corp. 1,218 49,110
Parker Hannifin Corp. 1,671 125,843
Terex Corp. (a) 1,019 66,816
------------
2,420,011
- -------------------------------------------------------------------------------------------
Media -- 2.2%
CBS Corp. Class B 6,806 185,463
Clear Channel Communications, Inc. 4,947 170,770
Comcast Corp. Class A (a) 30,534 557,551
The DIRECTV Group, Inc. (a) 7,133 164,915
The E.W. Scripps Co. Class A 887 39,924
Gannett Co., Inc. 2,303 89,817
Interpublic Group of Cos., Inc. (a) 4,684 37,987
The McGraw-Hill Cos., Inc. 3,269 143,215
Meredith Corp. 377 20,727
The New York Times Co. Class A 1,429 25,050
News Corp. Class A 22,984 470,942
Omnicom Group Inc. 3,246 154,282
Time Warner, Inc. 35,914 592,940
Viacom, Inc. Class B (a) 6,520 286,358
Walt Disney Co. 18,913 610,512
The Washington Post Co. Class B 58 45,903
------------
3,596,356
- -------------------------------------------------------------------------------------------
Metals & Mining -- 0.8%
Alcoa, Inc. 8,427 308,007
Allegheny Technologies, Inc. 1,016 87,782
Freeport-McMoRan Copper &
Gold, Inc. Class B 3,795 388,760
Newmont Mining Corp. 4,489 219,198
Nucor Corp. 2,861 169,428
Titanium Metals Corp. 866 22,906
United States Steel Corp. 1,174 141,948
------------
1,338,029
- -------------------------------------------------------------------------------------------
Multi-Utilities -- 0.9%
Ameren Corp. 2,067 112,052
CMS Energy Corp. 2,236 38,862
CenterPoint Energy, Inc. 3,192 54,679
Consolidated Edison, Inc. 2,698 131,797
DTE Energy Co. 1,627 71,523
Dominion Resources, Inc. 5,811 275,732
Integrys Energy Group, Inc. 758 39,181
NiSource, Inc. 2,724 51,456
PG&E Corp. 3,518 151,591
Public Service Enterprise Group, Inc. 2,527 248,252
Sempra Energy 2,597 160,702
TECO Energy, Inc. 2,093 36,021
Xcel Energy, Inc. 4,172 94,162
------------
1,466,010
- -------------------------------------------------------------------------------------------
Multiline Retail -- 0.6%
Big Lots, Inc. (a) 898 14,359
Dillard's, Inc. Class A 568 10,667
Family Dollar Stores, Inc. 1,396 26,845
J.C. Penney Co., Inc. 2,203 96,910
Kohl's Corp. (a) 3,117 142,759
Macy's, Inc. 4,302 111,293
Nordstrom, Inc. 1,868 68,612
Sears Holdings Corp. (a) 725 73,986
Target Corp. 8,255 412,750
------------
958,181
- -------------------------------------------------------------------------------------------
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 7
Schedule of Investments (continued)
Shares
Industry Common Stocks Held Value
===========================================================================================
Office Electronics -- 0.1%
Xerox Corp. 9,185 $ 148,705
- -------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 8.1%
Anadarko Petroleum Corp. 4,634 304,407
Apache Corp. 3,290 353,807
Chesapeake Energy Corp. 4,513 176,910
Chevron Corp. 20,979 1,957,970
ConocoPhillips 15,893 1,403,352
Consol Energy, Inc. 1,803 128,950
Devon Energy Corp. 4,421 393,071
EOG Resources, Inc. 2,444 218,127
El Paso Corp. 6,960 119,990
Exxon Mobil Corp. 54,285 5,085,962
Hess Corp. 2,761 278,474
Marathon Oil Corp. 7,057 429,489
Murphy Oil Corp. 1,869 158,566
Noble Energy, Inc. 1,706 135,661
Occidental Petroleum Corp. 8,233 633,859
Peabody Energy Corp. 2,631 162,175
Range Resources Corp. 1,482 76,116
Sunoco, Inc. 1,168 84,610
Tesoro Corp. 1,361 64,920
Valero Energy Corp. 5,469 382,994
Williams Cos., Inc. 5,897 210,995
XTO Energy, Inc. 4,804 246,721
------------
13,007,126
- -------------------------------------------------------------------------------------------
Paper & Forest Products -- 0.2%
International Paper Co. 4,254 137,745
MeadWestvaco Corp. 1,836 57,467
Weyerhaeuser Co. 2,082 153,527
------------
348,739
- -------------------------------------------------------------------------------------------
Personal Products -- 0.1%
Avon Products, Inc. 4,263 168,516
The Estee Lauder Cos., Inc. Class A 1,133 49,410
------------
217,926
- -------------------------------------------------------------------------------------------
Pharmaceuticals -- 5.0%
Abbott Laboratories 15,353 862,071
Allergan, Inc. 3,050 195,932
Barr Pharmaceuticals, Inc. (a) 1,071 56,870
Bristol-Myers Squibb Co. 19,658 521,330
Eli Lilly & Co. 9,805 523,489
Forest Laboratories, Inc. (a) 3,099 112,959
Johnson & Johnson 28,434 1,896,548
King Pharmaceuticals, Inc. (a) 2,429 24,873
Merck & Co., Inc. 21,626 1,256,687
Mylan, Inc. 3,004 42,236
Pfizer, Inc. 67,859 1,542,435
Schering-Plough Corp. 16,093 428,718
Watson Pharmaceuticals, Inc. (a) 1,030 27,954
Wyeth 13,305 587,948
------------
8,080,050
- -------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) --0.8%
Apartment Investment & Management
Co. Class A 950 32,994
AvalonBay Communities, Inc. 784 73,806
Boston Properties, Inc. 1,185 108,795
Developers Diversified Realty Corp. 1,221 46,752
Equity Residential 2,693 98,214
General Growth Properties, Inc. 2,422 99,738
Host Marriott Corp. 5,190 88,438
Kimco Realty Corp. 2,511 91,400
Plum Creek Timber Co., Inc. 1,712 78,820
ProLogis 2,559 162,189
Public Storage 1,237 90,808
Simon Property Group, Inc. 2,216 192,482
Vornado Realty Trust 1,331 117,061
------------
1,281,497
- -------------------------------------------------------------------------------------------
Real Estate Management & Development -- 0.0%
CB Richard Ellis Group, Inc. (a) 1,966 42,367
- -------------------------------------------------------------------------------------------
Road & Rail -- 0.6%
Burlington Northern Santa Fe Corp. 2,961 246,444
CSX Corp. 4,177 183,704
Norfolk Southern Corp. 3,848 194,093
Ryder System, Inc. 577 27,125
Union Pacific Corp. 2,609 327,743
------------
979,109
- -------------------------------------------------------------------------------------------
Semiconductors & Semiconductor
Equipment -- 2.1%
Advanced Micro Devices, Inc. (a) 5,998 44,985
Altera Corp. 3,337 64,471
Analog Devices, Inc. 3,014 95,544
Applied Materials, Inc. 13,692 243,170
Broadcom Corp. Class A (a) 4,675 122,204
Intel Corp. 58,094 1,548,786
KLA-Tencor Corp. 1,810 87,170
LSI Logic Corp. (a) 7,014 37,244
Linear Technology Corp. 2,220 70,663
MEMC Electronic Materials, Inc. (a) 2,276 201,403
Microchip Technology, Inc. 2,129 66,893
Micron Technology, Inc. (a) 7,555 54,774
National Semiconductor Corp. 2,335 52,864
Novellus Systems, Inc. (a) 1,154 31,816
Nvidia Corp. (a) 5,520 187,790
Teradyne, Inc. (a) 1,725 17,837
Texas Instruments, Inc. 13,892 463,993
Xilinx, Inc. 2,921 63,882
------------
3,455,489
- -------------------------------------------------------------------------------------------
Software -- 3.0%
Adobe Systems, Inc. (a) 5,701 243,604
Autodesk, Inc. (a) 2,294 114,149
BMC Software, Inc. (a) 1,946 69,355
CA, Inc. 3,893 97,130
Citrix Systems, Inc. (a) 1,885 71,649
Compuware Corp. (a) 2,844 25,255
Electronic Arts, Inc. (a) 3,129 182,765
Intuit, Inc. (a) 3,306 104,503
Microsoft Corp. 79,940 2,845,864
Novell, Inc. (a) 3,476 23,880
Oracle Corp. (a) 39,181 884,707
Symantec Corp. (a) 8,617 139,078
------------
4,801,939
- -------------------------------------------------------------------------------------------
Specialty Retail -- 1.2%
Abercrombie & Fitch Co. Class A 857 68,534
AutoNation, Inc. (a) 1,371 21,470
AutoZone, Inc. (a) 439 52,640
8 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Schedule of Investments (continued)
Shares
Industry Common Stocks Held Value
===========================================================================================
Specialty Retail (concluded)
Bed Bath & Beyond, Inc. (a) 2,631 $ 77,325
Best Buy Co., Inc. 3,487 183,590
Circuit City Stores, Inc. 1,675 7,035
GameStop Corp. Class A (a) 1,580 98,134
The Gap, Inc. 4,628 98,484
Home Depot, Inc. 16,768 451,730
Limited Brands, Inc. 3,088 58,456
Lowe's Cos., Inc. 14,532 328,714
Office Depot, Inc. (a) 2,712 37,724
OfficeMax, Inc. 749 15,474
RadioShack Corp. 1,302 21,952
The Sherwin-Williams Co. 1,036 60,129
Staples, Inc. 7,026 162,090
TJX Cos., Inc. 4,342 124,746
Tiffany & Co. 1,352 62,233
------------
1,930,460
- -------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods -- 0.3%
Coach, Inc. (a) 3,658 111,862
Jones Apparel Group, Inc. 843 13,480
Liz Claiborne, Inc. 988 20,106
Nike, Inc. Class B 3,816 245,140
Polo Ralph Lauren Corp. 585 36,147
VF Corp. 877 60,215
------------
486,950
- -------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance -- 0.6%
Countrywide Financial Corp. 5,750 51,405
Fannie Mae 9,719 388,566
Freddie Mac 6,573 223,942
Hudson City Bancorp, Inc. 5,171 77,668
MGIC Investment Corp. 810 18,168
Sovereign Bancorp, Inc. 3,581 40,823
Washington Mutual, Inc. 8,631 117,468
------------
918,040
- -------------------------------------------------------------------------------------------
Tobacco -- 1.1%
Altria Group, Inc. 20,928 1,581,738
Reynolds American, Inc. 1,700 112,132
UST, Inc. 1,556 85,269
------------
1,779,139
- -------------------------------------------------------------------------------------------
Trading Companies & Distributors -- 0.0%
W.W. Grainger, Inc. 666 58,288
- -------------------------------------------------------------------------------------------
Wireless Telecommunication Services -- 0.3%
American Tower Corp. Class A (a) 4,021 171,295
Sprint Nextel Corp. 28,258 371,028
------------
542,323
- -------------------------------------------------------------------------------------------
Total Common Stocks
(Cost -- $106,530,541) -- 79.1% 127,850,700
===========================================================================================
===========================================================================================
Face
U.S. Government Obligations Amount
===========================================================================================
U.S. Treasury Notes, 4.625%
due 11/30/2008 $33,300,000 33,708,458
- -------------------------------------------------------------------------------------------
Total U.S. Government Obligations
(Cost -- $33,568,442) -- 20.8% 33,708,458
===========================================================================================
===========================================================================================
Short-Term Securities
===========================================================================================
Time Deposits -- 1.5%
State Street Bank & Trust Co., 3.25%
due 1/02/2008 2,467,750 2,467,750
- -------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $2,467,750) -- 1.5% 2,467,750
===========================================================================================
Total Investments Before Options Written
(Cost -- $142,566,733*) -- 101.4% 164,026,908
- -------------------------------------------------------------------------------------------
===========================================================================================
Number of
Options Written Contracts
===========================================================================================
Call Options Written
S&P 500 Index, expiring January
2008 at USD 1,480 881 (1,797,240)
- -------------------------------------------------------------------------------------------
Total Options Written
(Premiums Received -- $2,605,609) -- (1.1%) (1,797,240)
===========================================================================================
Total Investments, Net of Options Written
(Cost -- $139,961,124) -- 100.3% 162,229,668
Liabilities in Excess of Other Assets -- (0.3%) (524,624)
------------
Net Assets -- 100.0% $161,705,044
============
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 9
Schedule of Investments (concluded)
* The cost and unrealized appreciation (depreciation) of investments, as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost .......................................... $ 163,187,698
=============
Gross unrealized appreciation ........................... $ 1,720,081
Gross unrealized depreciation ........................... (880,871)
-------------
Net unrealized appreciation ............................. $ 839,210
=============
(a) Non-income producing security.
(b) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Purchase Sales Realized Dividend
Affiliate Cost Cost Gain Income
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. $3,357 $49,951 $20,720 $12,483
--------------------------------------------------------------------------
o Financial futures contracts purchased as of December 31, 2007 were as
follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
--------------------------------------------------------------------------
21 E-MINI S&P 500 March 2008 $1,551,373 $(259)
--------------------------------------------------------------------------
o Total Return Swaps outstanding as of December 31, 2007 were as follows:
------------------------------------------------------------------------------------------------------------------------------
Notional Unrealized
Counterparty Receive Total Return Pay Expiration Amount Appreciation
------------------------------------------------------------------------------------------------------------------------------
HSBC Bank USA NA CBOE S&P 500
BuyWrite Index 12-month LIBOR rate with
(BXMSM) -- Total Return a negotiated spread October 2008 $20,000,000 $ 73,276
Deutsche Bank AG CBOE S&P 500
BuyWrite Index 12-month LIBOR rate with
(BXMSM) -- Total Return a negotiated spread October 2008 $94,580,000 $386,880
------------------------------------------------------------------------------------------------------------------------------
Total $460,156
==========
o For Fund portfolio compliance purposes, the Fund's industry
classifications refer to any one or more of the industry
sub-classifications used by one or more widely recognized market indexes
or ratings group indexes, and/or as defined by Fund management. This
definition may not apply for the purposes of this report, which may
combine industry sub-classifications for reporting ease. Industries are
shown as a percent of net assets. These industry classifications are
unaudited.
See Notes to Financial Statements.
10 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Statement of Assets, Liabilities and Capital
As of December 31, 2007
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost -- $142,037,416) ... $ 163,570,360
Investments in affiliated securities, at value (identified cost -- $529,317) ......... 456,548
Cash ................................................................................. 36,498
Cash collateral on financial futures contracts ....................................... 75,600
Unrealized appreciation on swaps
Receivables:
Dividends ........................................................................ $ 187,809
Interest ......................................................................... 134,879
Securities sold .................................................................. 31,581 354,269
------------------------------
Total assets ......................................................................... 164,953,431
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received -- $2,605,609) .......................... 1,797,240
Payables:
Dividends and distributions to shareholders ...................................... 1,144,791
Investment adviser ............................................................... 108,613
Securities purchased ............................................................. 66,380
Variation margin ................................................................. 8,663 1,328,447
-------------
Accrued expenses ..................................................................... 122,700
-------------
Total liabilities .................................................................... 3,248,387
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................................... $ 161,705,044
=============
===================================================================================================================================
Capital
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value, 100,000,000 shares authorized ......................... $ 9,054
Paid-in capital in excess of par ..................................................... 161,986,341
Accumulated realized capital losses -- net ........................................... $ (23,018,792)
Unrealized appreciation -- net ....................................................... 22,728,441
-------------
Total accumulated losses ............................................................. (290,351)
-------------
Total capital -- Equivalent to $17.86 per share based on 9,053,558 shares of
Common Stock outstanding (market price -- $17.15) .................................. $ 161,705,044
=============
See Notes to Financial Statements.
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 11
Statement of Operations
For the Year Ended December 31, 2007
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (including $12,483 from affiliates) ........................................ $ 2,581,263
Interest ............................................................................. 1,766,588
-------------
Total income ......................................................................... 4,347,851
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................................. $ 1,364,170
Professional fees .................................................................... 75,718
Accounting services .................................................................. 70,886
Directors' fees and expenses ......................................................... 59,743
Transfer agent fees .................................................................. 31,225
Custodian fees ....................................................................... 26,376
Repurchase offer ..................................................................... 24,199
Listing fees ......................................................................... 23,750
Printing and shareholder reports ..................................................... 21,557
Other ................................................................................ 28,540
-------------
Total expenses before reimbursement .................................................. 1,726,164
Reimbursement of expenses ............................................................ (36,498)
-------------
Total expenses after reimbursement ................................................... 1,689,666
-------------
Investment income -- net ............................................................. 2,658,185
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain on:
Investments (including $20,720 from affiliates) -- net ........................... 3,269,855
Financial futures contracts and swaps -- net ..................................... 2,611,031
Options written -- net ........................................................... 521,144 6,402,030
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net ............................................................... 1,968,283
Financial futures contracts and swaps -- net ..................................... (1,336,521)
Options written -- net ........................................................... 42,194 673,956
------------------------------
Total realized and unrealized gain -- net ............................................ 7,075,986
-------------
Net Increase in Net Assets Resulting from Operations ................................. $ 9,734,171
=============
See Notes to Financial Statements.
12 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Statements of Changes in Net Assets
For the Year Ended
December 31,
------------------------------
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ............................................................. $ 2,658,185 $ 2,321,240
Realized gain -- net ................................................................. 6,402,030 7,648,713
Change in unrealized appreciation/depreciation -- net ................................ 673,956 15,894,635
------------------------------
Net increase in net assets resulting from operations ................................. 9,734,171 25,864,588
------------------------------
===================================================================================================================================
Dividends & Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ............................................................. (4,593,708) (429,115)
Realized gain -- net ................................................................. (8,859,304) (19,628,868)
Tax return of capital ................................................................ (6,492,084) --
------------------------------
Net decrease in net assets resulting from dividends and distributions to
shareholders ....................................................................... (19,945,096) (20,057,983)
------------------------------
===================================================================================================================================
Common Stock Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net redemption of Common Stock resulting from a repurchase offer (including $7,112
and $2,759 of repurchase fees, respectively) ....................................... (1,898,998) (5,378,110)
Value of shares issued to shareholders in reinvestment of dividends and
distributions ...................................................................... 1,433,234 1,911,192
------------------------------
Net decrease in net assets resulting from common stock transactions .................. (465,764) (3,466,918)
------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets .............................................. 2,339,687
Beginning of year .................................................................... 172,381,733 170,042,046
------------------------------
End of year* ......................................................................... $ 161,705,044 $ 172,381,733
==============================
* Undistributed investment income -- net ......................................... -- $ 1,911,324
==============================
See Notes to Financial Statements.
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 13
Financial Highlights
For the Period
For the Year Ended September 30,
December 31, 2005+++ to
The following per share data and ratios have been derived --------------------------- December 31,
from information provided in the financial statements. 2007 2006 2005
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................................. $ 18.99 $ 18.37 $ 19.10
----------------------------------------------
Investment income -- net*** ........................................... .29 .25 .06
Realized and unrealized gain (loss) -- net ............................ .78* 2.57* (.20)
----------------------------------------------
Total from investment operations ...................................... 1.07 2.82 (.14)
----------------------------------------------
Less dividends and distributions from:
Investment income -- net .......................................... (.50) (.05) (.06)
Realized gain -- net .............................................. (.98) (2.15) (.06)
Tax return of capital ............................................. (.72) -- (.43)
----------------------------------------------
Total dividends and distributions ..................................... (2.20) (2.20) (.55)
----------------------------------------------
Offering costs resulting from the issuance of Common Stock ............ -- -- (.04)
----------------------------------------------
Net asset value, end of period ........................................ $ 17.86 $ 18.99 $ 18.37
----------------------------------------------
Market price per share, end of period ................................. $ 17.15 $ 20.31 $ 16.83
==============================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................................... 6.34% 16.11% (.73%)+
==============================================
Based on market price per share ....................................... (4.53%) 35.55% (13.14%)+
==============================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................................ .98% 1.06% 1.36%++
==============================================
Expenses .............................................................. 1.00% 1.06% 1.36%++
==============================================
Investment income -- net .............................................. 1.54% 1.32% 1.32%++
==============================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............................. $ 161,705 $ 172,382 $ 170,042
==============================================
Portfolio turnover .................................................... 24% 26% 7%
==============================================
* Includes repurchase offer fees, which are less than $.01 per share.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Based on average shares outstanding.
+ Aggregate total investment return.
++ Annualized.
+++ Commencement of operations.
See Notes to Financial Statements.
14 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Notes to Financial Statements
1. Significant Accounting Policies:
Enhanced S&P 500(R) Covered Call Fund Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company with a fixed term of approximately five years. The
Fund's financial statements are prepared in conformity with U.S. generally
accepted accounting principles, which may require the use of management accruals
and estimates. Actual results may differ from these estimates. The Fund
determines and makes available for publication the net asset value of its Common
Stock on a daily basis. The Fund's Common Stock shares are listed on the New
York Stock Exchange ("NYSE") under the symbol BEO. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments -- Equity securities that are held by the Fund that
are traded on stock exchanges or the NASDAQ Global Market are valued at the last
sale price or official close price on the exchange, as of the close of business
on the day the securities are being valued or, lacking any sales, at the last
available bid price for long positions, and at the last available asked price
for short positions. In cases where equity securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Directors of the Fund.
Long positions traded in the over-the-counter ("OTC") market, NASDAQ Capital
Market or Bulletin Board are valued at the last available bid price or yield
equivalent obtained from one or more dealers or pricing services approved by the
Board of Directors of the Fund. Short positions traded in the OTC market are
valued at the last available asked price. Portfolio securities that are traded
both in the OTC market and on a stock exchange are valued according to the
broadest and most representative market.
Effective September 4, 2007, exchange-traded options are valued at the mean
between the last bid and ask prices at the close of the options market in which
the options trade and previously were valued at the last sales price. Options
traded in the OTC market are valued at the last asked price (options written) or
the last bid price (options purchased). Swap agreements are valued based upon
quoted fair valuations received daily by the Fund from a pricing service or
counterparty. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the investment adviser believes that this method no
longer produces valuations.
Repurchase agreements are valued at cost plus accrued interest. The Fund employs
pricing services to provide certain securities prices for the Fund. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Fund's Board of Directors. Such
valuations and procedures will be reviewed periodically by the Board of
Directors of the Fund.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities, is substantially
completed each day at various times prior to the close of business on the NYSE.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
will generally be determined as of the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NYSE that may not be reflected in the computation of the Fund's
net asset value. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Fund's Board of Directors
or by the Investment Advisor using a pricing service and/or procedures approved
by the Fund's Board of Directors.
(b) Derivative financial instruments -- The Fund will engage in various
portfolio investment strategies both to enhance its returns or as a proxy for a
direct investment in securities underlying the Fund's index. Losses may arise
due to changes in the value of the contract due to an unfavorable change in the
price of the underlying security or index, or if the counterparty does not
perform under the contract.
o Options -- The Fund writes covered call options. When the Fund writes an
option, an amount equal to the premium received by the Fund is reflected
as an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current value of the option
written. The Fund provides the purchaser with the right to potentially
receive a cash payment from the Fund equal to any appreciation in the cash
value of the
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 15
Notes to Financial Statements (continued)
index over the strike price on the expiration date of the written option.
When an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received (or gain or loss to the extent the cost of the closing
transaction exceeds the premium received). Written options are non-income
producing investments.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon entering into a contract, the Fund deposits, and maintains as
collateral, such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
o Swaps -- The Fund will enter into swap agreements, which are OTC contracts
in which the Fund and a counterparty agree to make periodic net payments
on a specified notional amount. The net payments can be made for a set
period of time or may be triggered by a pre-determined credit event. The
net periodic payments may be based on a fixed or variable interest rate;
the change in market value of a specified security, basket of securities,
or index; or the return generated by a security. These periodic payments
received or made by the Fund are recorded in the accompanying Statement of
Operations as realized gains or losses, respectively. Gains or losses are
also realized upon termination of the swap agreements. Swaps are
marked-to-market daily and changes in value are recorded as unrealized
appreciation (depreciation). Risks include changes in the returns of the
underlying instruments, failure of the counterparties to perform under the
contracts' terms and the possible lack of liquidity with respect to the
swap agreements.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest is recognized on the accrual basis. The Fund amortizes all premiums and
discounts on debt securities.
(e) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates. A portion of the distributions paid by
the Fund during the year ended December 31, 2007 was characterized as a tax
return of capital.
(f) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it receives a fee from the borrower. The Fund typically receives the income on
the loaned securities, but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access to the
collateral. The Fund also could suffer a loss where the value of the collateral
falls below the market value of the borrowed securities, in the event of
borrower default or in the event of losses on investments made with cash
collateral.
(g) Recent accounting pronouncements -- Effective June 29, 2007, the Fund
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
16 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Notes to Financial Statements (continued)
Statement No. 109" ("FIN 48"). FIN 48 prescribes the minimum recognition
threshold a tax position must meet in connection with accounting for
uncertainties in income tax positions taken or expected to be taken by an
entity, including investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Fund, and has determined that the adoption of FIN 48 does not have a
material impact on the Fund's financial statements. The Fund files U.S. and
various state tax returns. No income tax returns are currently under
examination. All tax years of the Fund are open at this time.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. The impact on the Fund's financial statement disclosures, if any,
is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of FAS 157. FAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. The impact on the Fund's financial
statement disclosures, if any, is currently being assessed.
(h) Reclassifications -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $24,199 has been reclassified between paid-in capital in excess of par and
accumulated distributions in excess of net investment income as a result of a
permanent difference attributable to nondeductible expenses. This
reclassification has no effect on net assets or net asset value per share.
2. Investment Advisory and Management Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory and Management Agreement with
IQ Investment Advisors LLC ("IQ"), an indirect subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."). IQ is responsible for the investment advisory,
management and administrative services to the Fund. In addition, IQ provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate equal to .90% of the average daily value of the Fund's net assets
plus borrowings for investment purposes, but excluding any net assets
attributable to leveraging transactions. In addition, IQ entered into a
Subadvisory Agreement with Oppenheimer Capital, LLC (the "Subadviser") pursuant
to which the Subadviser provides certain investment advisory services to IQ with
respect to the Fund. For such services, IQ pays the Subadviser a monthly fee at
an annual rate equal to .40% of the average daily value of the Fund's net assets
plus borrowings for investment purposes, but excluding any net assets
attributable to leveraging transactions. There is no increase in the aggregate
fees paid by the Fund for these services.
IQ has entered into an Administration Agreement with Princeton Administrators,
LLC (the "Administrator"). The Administration Agreement provides that IQ pays
the Administrator a fee from its investment advisory fee at an annual rate equal
to .12% of the average daily value of the Fund's net assets plus borrowings for
investment purposes, but excluding any net assets attributable to leveraging
transactions for the performance of administrative and other services necessary
for the operation of the Fund. There is no increase in the aggregate fees paid
by the Fund for these services. The Administrator is an indirect subsidiary of
BlackRock, Inc. ML & Co. is a principal owner of BlackRock, Inc.
Certain officers of the Fund are officers and/or directors of IQ, ML & Co.,
BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2007 were $39,725,595 and $50,136,378, respectively.
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 17
Notes to Financial Statements (concluded)
Transactions in call options written for the year ended December 31, 2007 were
as follows:
- -------------------------------------------------------------------------------
Number of Premiums
Contracts Received
- -------------------------------------------------------------------------------
Outstanding call options written,
beginning of year ............................ 960 $ 1,447,776
Options written ................................ 11,356 30,245,107
Options closed ................................. (7,658) (21,263,290)
Options expired ................................ (3,777) (7,823,984)
----------------------
Outstanding call options written,
end of year .................................. 881 $ 2,605,609
======================
4. Common Stock Transactions:
The Fund is authorized to issue 100,000,000 shares of capital stock, par value
$.001 per share, all of which were initially classified as Common Stock. The
Board of Directors is authorized, however, to classify and reclassify any
unissued shares of Common Stock without approval of the holders of Common Stock.
Subject to the approval of the Board of Directors, the Fund will make offers to
repurchase its shares at annual (approximately 12-month) intervals. The shares
tendered in the repurchase offer will be subject to a repurchase fee retained by
the Fund to compensate the Fund for expenses directly related to the repurchase
offer.
Shares issued and outstanding for the year ended December 31, 2007 increased by
76,816 from dividend and distribution reinvestments and decreased by 101,605 as
a result of a repurchase offer. Shares issued and outstanding for the year ended
December 31, 2006 increased by 99,053 from dividend and distribution
reinvestments and decreased by 275,942 as a result of a repurchase offer.
With regard to repurchase fees, IQ will reimburse the Fund for the cost of
expenses paid in excess of 2% of the value of the shares that are repurchased.
5. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended December
31, 2007 and December 31, 2006 was as follows:
- --------------------------------------------------------------------------------
12/31/2007 12/31/2006
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income .................................. $ 7,206,520 $ 9,922,149
Long-term capital gains .......................... 6,246,492 10,135,834
Tax return of capital ............................ 6,492,084 --
-------------------------
Total distributions ................................ $19,945,096 $20,057,983
=========================
As of December 31, 2007 the components of accumulated losses on a tax basis were
as follows:
- ------------------------------------------------------------------------------
Undistributed ordinary income -- net ............................. --
Undistributed long-term capital gains -- net ..................... --
---------
Total undistributed earnings -- net .............................. --
Capital loss carryforward ........................................ --
Unrealized losses -- net ......................................... $(290,351)*
---------
Total accumulated losses -- net .................................. $(290,351)
=========
* The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the realization for tax purposes of unrealized
gains (losses) on certain financial futures contracts and options, the
deferral of post-October capital losses for tax purposes and the
realization for tax purposes of unrealized gains (losses) on certain
securities that are part of a straddle.
18 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Enhanced S&P 500(R) Covered Call
Fund Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of Enhanced S&P 500(R) Covered Call Fund
Inc. as of December 31, 2007, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
respective periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2007, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Enhanced S&P 500(R) Covered Call Fund Inc. as of December 31, 2007, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and its financial highlights for
each of the respective periods presented, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, NJ
February 29, 2008
Fund Certification (Unaudited)
In May 2007, the Fund filed its Chief Executive Officer Certification for the
prior year with the New York Stock Exchange pursuant to Section 303A.12(a) of
the New York Stock Exchange Corporate Governance Listing Standards.
The Fund's Chief Executive Officer and Chief Financial Officer Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the
Fund's Form N-CSR and are available on the Securities and Exchange Commission's
website at http://www.sec.gov.
Important Tax Information (Unaudited)
The following information is provided with respect to the taxable ordinary
income portion of the distributions paid by Enhanced S&P 500 Covered Call Fund
Inc. to shareholders of record on June 21, 2007 and December 20, 2007:
- --------------------------------------------------------------------------------
Federal Obligation Interest ........................................ 22.77%*
Interest-Related Dividends for Non-U.S. Residents .................. 33.56%**
Short-Term Capital Gain Dividends for Non-U.S. Residents ........... 36.28%**
- --------------------------------------------------------------------------------
* The law varies in each state as to whether and what percentage of dividend
income attributable to Federal Obligations is exempt from state income
tax. We recommend that you consult your tax adviser to determine if any
portion of the dividends you received is exempt from state income taxes.
** Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
Additionally, the Fund distributed long-term capital gains of $.344502 per share
to shareholders of record on June 21, 2007 and December 20, 2007.
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 19
Automatic Dividend Reinvestment Plan
How the Plan Works -- The Fund offers a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by the Fund are
automatically reinvested in additional shares of Common Stock of the Fund. The
Plan is administered on behalf of the shareholders by The Bank of New York
Mellon (the "Plan Agent"). Under the Plan, whenever the Fund declares a
dividend, participants in the Plan will receive the equivalent in shares of
Common Stock of the Fund. The Plan Agent will acquire the shares for the
participant's account either (i) through receipt of additional unissued but
authorized shares of the Fund ("newly issued shares") or (ii) by purchase of
outstanding shares of Common Stock on the open market on the New York Stock
Exchange or elsewhere. If, on the dividend payment date, the Fund's net asset
value per share is equal to or less than the market price per share plus
estimated brokerage commissions (a condition often referred to as a "market
premium"), the Plan Agent will invest the dividend amount in newly issued
shares. If the Fund's net asset value per share is greater than the market price
per share (a condition often referred to as a "market discount"), the Plan Agent
will invest the dividend amount by purchasing on the open market additional
shares. If the Plan Agent is unable to invest the full dividend amount in open
market purchases, or if the market discount shifts to a market premium during
the purchase period, the Plan Agent will invest any uninvested portion in newly
issued shares. The shares acquired are credited to each shareholder's account.
The amount credited is determined by dividing the dollar amount of the dividend
by either (i) when the shares are newly issued, the net asset value per share on
the date the shares are issued or (ii) when shares are purchased in the open
market, the average purchase price per share.
Participation in the Plan -- Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Fund unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan, must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by writing to the Plan Agent.
Benefits of the Plan -- The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Fund. The Plan
promotes a long-term strategy of investing at a lower cost. All shares acquired
pursuant to the Plan receive voting rights. In addition, if the market price
plus commissions of the Fund's shares is above the net asset value, participants
in the Plan will receive shares of the Fund for less than they could otherwise
purchase them and with a cash value greater than the value of any cash
distribution they would have received. However, there may not be enough shares
available in the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price on resale
may be more or less than the net asset value.
Plan Fees -- There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Fund. However, brokerage commissions may be
incurred when the Fund purchases shares on the open market and shareholders will
pay a pro rata share of any such commissions.
Tax Implications -- The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income tax that may
be payable (or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash. Participation in the Plan generally will not affect the tax-exempt status
of exempt interest dividends paid by the Fund. If, when the Fund's shares are
trading at a market premium, the Fund issues shares pursuant to the Plan that
have a greater fair market value than the amount of cash reinvested, it is
possible that all or a portion of the discount from the market value (which may
not exceed 5% of the fair market value of the Fund's shares) could be viewed as
a taxable distribution. If the discount is viewed as a taxable distribution, it
is also possible that the taxable character of this discount would be allocable
to all the shareholders, including shareholders who do not participate in the
Plan. Thus, shareholders who do not participate in the Plan might be required to
report as ordinary income a portion of their distributions equal to their
allocable share of the discount.
Contact Information -- All correspondence concerning the Plan, including any
questions about the Plan, should be directed to the Plan Agent at BNY Mellon
Shareowner Services, P.O. Box 358035, Pittsburgh, PA 15252-8035, Telephone:
877-296-3711.
20 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Directors and Officers
Number of
IQ Advisors-
Affiliate
Advised Funds Other Public
Position(s) Length of and Portfolios Directorships
Held with Time Overseen By Held by
Name Address & Age Fund Served** Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Non-Interested Directors*
- ------------------------------------------------------------------------------------------------------------------------------------
Paul P.O. Box 9095 Director & 2005 to Professor, Columbia University Business School 11 None
Glasserman Princeton, NJ Chairman of present since 1991; Senior Vice Dean since July 2004.
08543-9095 the Audit
Age: 45 Committee
- ------------------------------------------------------------------------------------------------------------------------------------
Steven W. P.O. Box 9095 Director & 2005 to Retired since August 2002; Managing Director, 11 Ametek, Inc.
Kohlhagen Princeton, NJ Chairman of present Wachovia National Bank and its predecessors
08543-9095 Nominating (1992 - 2002).
Age: 60 & Corporate
Governance
Committee
- ------------------------------------------------------------------------------------------------------------------------------------
William J. P.O. Box 9095 Director & 2005 to Retired since November 2004; Chairman and 11 None
Rainer Princeton, NJ Chairman of present Chief Executive Officer, OneChicago, LLC, a
08543-9095 the Board designated contract market (2001 - 2004);
Age: 61 Chairman, U.S. Commodity Futures
Trading Commission (1999 - 2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Laura S. P.O. Box 9095 Director 2007 to Independent Consultant; Commissioner of the 11 CA, Inc.
Unger Princeton, NJ present Securities and Exchange Commission (1997 - (software) and
08543-9095 2002), including Acting Chairperson of the SEC Ambac Financial
Age: 46 from February to August 2001; Regulatory Expert Group, Inc.
for CNBC (2002 - 2003).
------------------------------------------------------------------------------------------------------------------------
* Each of the Non-Interested Directors is a member of the Audit Committee and the Nominating and Corporate
Governance Committee.
** Each Director will serve for a term of one year and until his successor is elected and qualifies, or his earlier
death, resignation or removal as provided in the Fund's Bylaws, charter or by statute.
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 21
Directors and Officers (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Mitchell P.O. Box 9011 President 2005 to IQ Investment Advisors LLC, President since April 2004; MLPF&S, Managing
M. Cox Princeton, NJ present Director, Head of Global Investments & Insurance Solutions and Head of Global
08543-9011 Alternative Investments since 2008; MLPF&S, Managing Director, Head of Financial
Age: 42 Products Group since 2007; Head of Global Wealth Management Market Investments &
Origination (2003 - 2007); MLPF&S, FAM Distributors ("FAMD"), Director since
2006; IQ Financial Products LLC, Director since 2006.
- ------------------------------------------------------------------------------------------------------------------------------------
Justin C. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Vice President since 2005; MLPF&S, Managing
Ferri Princeton, NJ President present Director, Structured and Alternative Solutions since 2008; MLPF&S, Director,
08543-9011 Structured and Alternative Solutions in 2007; Director, Global Wealth Management
Age: 32 Market Investments & Origination (2005 - 2007); MLPF&S, Vice President, Global
Private Client Market Investments & Origination (2005); MLPF&S, Vice President,
Head of Global Private Client Rampart Equity Derivatives (2004 - 2005); MLPF&S,
Vice President, Co-Head Global Private Client Domestic Analytic Development
(2002 - 2004); mPower Advisors LLC, Vice President, Quantitative Development
(1999 - 2002).
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Secretary and Treasurer (2004 - March 2007);
Burke Princeton, NJ President present BlackRock, Inc., Managing Director since 2006; Merrill Lynch Investment
08543-9011 and Managers, L.P. ("MLIM") and Fund Asset Management ("FAM") Managing Director
Age: 47 Secretary (2006); MLIM and FAM, First Vice President (1997 - 2005) and Treasurer (1999 -
2006); Princeton Services, Inc., Senior Vice President and Treasurer (1999 -
2006).
- ------------------------------------------------------------------------------------------------------------------------------------
James E. P.O. Box 9011 Vice 2007 to IQ Investment Advisors LLC, Treasurer since March 2007; MLPF&S, Director,
Hillman Princeton, NJ President present Structured and Alternative Solutions since 2007; Director, Global Wealth
08543-9011 and Management Market Investments & Origination (September 2006 - 2007); Managed
Age: 50 Treasurer Account Advisors LLC, Vice President and Treasurer since November 2006;
Director, Citigroup Alternative Investments Tax Advantaged Short Term Fund in
2006; Director, Korea Equity Inc. Fund in 2006; Independent Consultant, January
to September 2006; Managing Director, The Bank of New York, Inc. (1999 - 2006).
- ------------------------------------------------------------------------------------------------------------------------------------
Catherine P.O. Box 9011 Chief 2007 to IQ Investment Advisors LLC, Chief Compliance Officer since April 2007; Merrill
A. Princeton, NJ Compliance present Lynch & Co., Inc., Director, Corporate Compliance since September 2007;
Johnston 08543-9011 Officer BlackRock, Inc., Director (2006 - 2007); MLIM, Director (2003 - 2006), Vice
Age: 53 President (1998 - 2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Martin G. P.O. Box 9011 Chief 2006 to IQ Investment Advisors LLC, Chief Legal Officer since June 2006; Merrill Lynch &
Byrne Princeton, NJ Legal present Co., Inc., Office of General Counsel, Managing Director since 2006, First Vice
08543-9011 Officer President (2002 - 2006), Director (2000 - 2002); Managed Account Advisors LLC,
Age: 45 Chief Legal Officer since November 2006; FAMD, Director since 2006.
- ------------------------------------------------------------------------------------------------------------------------------------
Jay M. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Vice President (2005 - March 2007); BlackRock, Inc.,
Fife Princeton, NJ President present Managing Director since 2007; BlackRock, Inc., Director in 2006; MLIM, Director
08543-9011 (2000 - 2006); MLPF&S, Director (2000) and Vice President (1997 - 2000).
Age: 37
- ------------------------------------------------------------------------------------------------------------------------------------
Colleen R. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Chief Administrative Officer and Secretary since
Rusch Princeton, NJ President present 2007, Vice President since 2005; MLPF&S, Director, Structured and Alternative
08543-9011 and Solutions since 2007; MLPF&S, Director, Global Wealth Management Market
Age: 40 Assistant Investments & Origination (2005 - 2007); MLIM, Director from January 2005 to
Secretary July 2005; Vice President of MLIM (1998 - 2004).
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310
NYSE Symbol
BEO
22 ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007
Fundamental Periodic Repurchase Policy
The Board of Directors approved a fundamental policy whereby the Fund would
adopt an "interval fund" structure pursuant to Rule 23c-3 under the Investment
Company Act of 1940 (the "1940 Act"), as amended. As an interval fund, the Fund
will make annual repurchase offers at net asset value (less repurchase fee not
to exceed 2%) to all Fund shareholders. The percentage of outstanding shares
that the Fund can repurchase in each offer will be established by the Fund's
Board of Directors shortly before the commencement of each offer, and will be
between 5% and 25% of the Fund's then outstanding shares.
The Fund has adopted the following fundamental policy regarding the periodic
repurchases:
a) The Fund will make offers to repurchase its shares at annual (approximately
once every 13 months) intervals pursuant to Rule 23c-3 under the 1940 Act
("Offers"). The Board of Directors may place such conditions and limitations on
an Offer as may be permitted under Rule 23c-3.
b) The repurchase request deadline, by which the Fund must receive repurchase
requests submitted by shareholders in response to the most recent offer, will be
determined by reference to the maturity date of the swap contracts that comprise
the Fund's leveraging transactions (as described in the Fund's prospectus) for
each annual period, and will be the fourteenth day prior to such maturity date;
provided that in the event that such day is not a business day, the repurchase
request deadline will be the business day subsequent to the fourteenth day prior
to the maturity date of the swap contracts (the "Repurchase Request Deadline").
c) The maximum number of days between a Repurchase Request Deadline and the next
repurchase pricing date will be fourteen days; provided that if the fourteenth
day after a Repurchase Request Deadline is not a business day, the repurchase
pricing date shall be the next business day (the "Repurchase Pricing Date").
d) Offers may be suspended or postponed under certain circumstances, as provided
for in Rule 23c-3.
Under the terms of the Offer for the most recent annual period, the Fund offered
to purchase up to 457,758 shares from shareholders at an amount per share equal
to the Fund's net asset value per share calculated as of the close of business
on the New York Stock Exchange on October 24, 2007, ten business days after
Wednesday, October 10, 2007, the Repurchase Request Deadline. As of October 24,
2007, 101,605 shares, or 1.11% of the Fund's outstanding shares, were
repurchased by the Fund at $18.76 per share (subject to a repurchase fee of
0.39% of the net asset value per share), the Fund's net asset value per share
was determined as of 4:00 p.m. EST, Wednesday, October 24, 2007.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this website
at http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification number
(PIN). You will need this PIN should you wish to update your e-mail address,
choose to discontinue this service and/or make any other changes to the service.
This service is not available for certain retirement accounts at this time.
Contact Information
For more information regarding the Fund, please visit www.IQIAFunds.com or
contact us at 1-877-449-4742.
ENHANCED S&P 500(R) COVERED CALL FUND INC. DECEMBER 31, 2007 23
[LOGO]
IQ
INVESTMENT
ADVISORS www.IQIAFunds.com
Enhanced S&P 500(R) Covered Call Fund Inc. seeks to provide leveraged returns on
the CBOE S&P 500(R) BuyWrite IndexSM less fees and expenses.
This report, including the financial information herein, is transmitted to
shareholders of Enhanced S&P 500(R) Covered Call Fund Inc. for their
information. It is not a prospectus. Past performance results shown in this
report should not be considered a representation of future performance.
Statements and other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge at
www.IQIAFunds.com/proxyvoting.asp or upon request by calling toll-free
1-877-449-4742 or through the Securities and Exchange Commission's website at
http://www.sec.gov. Information about how the Fund voted proxies relating to
securities held in the Fund's portfolio during the most recent 12-month period
ended June 30 is available (1) at www.IQIAFunds.com/proxyvoting.asp; and (2) on
the Securities and Exchange Commission's website at http://www.sec.gov.
Enhanced S&P 500(R) Covered Call Fund Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
#IQBEO -- 12/07
Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code
of ethics, as of the end of the period covered by this report, that
applies to the registrant's principal executive officer, principal
financial officer and principal accounting officer, or persons
performing similar functions. During the period covered by this
report, there have been no amendments to or waivers granted under
the code of ethics. A copy of the code of ethics is available
without charge upon request by calling toll-free 1-877-449-4742.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors has determined that (i) the registrant has the following
audit committee financial experts serving on its audit committee and
(ii) each audit committee financial expert is independent: (1) Alan
R. Batkin (resigned as of February 22, 2007) and (2) Steven W.
Kohlhagen.
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees
- ----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Registrant Name End Year End End Year End End Year End End Year End
- ----------------------------------------------------------------------------------------------------------------------------------
Enhanced S&P 500(R) $26,000 $26,000 $0 $0 $8,500 $11,500 $0 $0
CoveredCall Fund Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial statements
not included in Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly
to the operations and the financial reporting of the registrant.
Certain of these non-audit services that the Committee believes are
a) consistent with the SEC's auditor independence rules and b)
routine and recurring services that will not impair the independence
of the independent accountants may be approved by the Committee
without consideration on a specific case-by-case basis ("general
pre-approval"). However, such services will only be deemed
pre-approved provided that any individual project does not exceed
$5,000 attributable to the registrant or $50,000 for all of the
registrants the Committee oversees. Any proposed services exceeding
the pre-approved cost levels will require specific pre-approval by
the Committee, as will any other services not subject to general
pre-approval (e.g., unanticipated but permissible services). The
Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Registrant Name Year End Year End
--------------------------------------------------------------------
Enhanced S&P 500(R) $2,102,500 $1,972,500
Covered Call Fund Inc.
--------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's 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.
Regulation S-X Rule 2-01(c)(7)(ii) - $0, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals
are members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
Alan R. Batkin (resigned as of February 22, 2007)
Steven W. Kohlhagen
Paul Glasserman
William J. Rainer
Laura S. Unger (effective September 12, 2007)
Item 6 - Schedule of Investments - The registrant's Schedule of Investments
is included as part of the Report to Stockholders filed under Item 1
of this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - The registrant has delegated the
voting of proxies relating to its voting securities to its
investment sub-adviser, Oppenheimer Capital LLC (the "Sub-adviser"
or "Oppenheimer Capital"). The Proxy Voting Policies and Procedures
of the Sub-adviser (the "Proxy Voting Policies") are attached as an
Exhibit hereto.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of December 31, 2007.
(a)(1) Mr. Stephen Bond-Nelson is primarily responsible for the
day-to-day management of the registrant's portfolio. As of December
31, 2005, Mr. Stephen Bond-Nelson was a co-portfolio manager for the
Fund. From 1999 to 2004, Stephen was a Senior Research Analyst at
PEA Capital LLC. Prior to joining the firm, he was a Senior Research
Analyst at Prudential Mutual Funds. He has over fourteen years of
investment management experience.
(a)(2) As of December 31, 2007:
-----------------------------------------------------------------------------------------------------------------------
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
-----------------------------------------------------------------------------------------------------------------------
Other Other Other Other
(i) Name of Registered Pooled Registered Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
-----------------------------------------------------------------------------------------------------------------------
Stephen
Bond-Nelson 3 3 0 0 3 0
-----------------------------------------------------------------------------------------------------------------------
$2,225,086,943 $454,554,586 $0 $0 $454,554,586 $0
-----------------------------------------------------------------------------------------------------------------------
(iv) Potential Material Conflicts of Interest
The potential for conflicts of interests exists when portfolio
managers are responsible for managing other accounts that have
similar investment objectives and strategies as the Fund. Potential
conflicts include, for example conflicts between investment
strategies and conflicts in the allocation of investment
opportunities. Typically, client portfolios having similar
strategies are managed by portfolio managers in the same group using
similar objectives, approach and philosophy. Therefore, portfolio
holdings, relative position size and industry and sector exposures
tend to be similar across portfolios with similar strategies, which
minimizes the potential for conflicts of interest.
Oppenheimer Capital may receive more compensation with respect to
certain accounts managed in a similar style than that received with
respect to the Fund or may receive compensation based in part on the
performance of certain similarly managed accounts. This may create a
potential conflict of interest for Oppenheimer Capital or its
portfolio managers by providing an incentive to favor these types of
accounts when for example, placing securities transactions.
Similarly, it could be viewed as having a conflict of interest to
the extent that Oppenheimer Capital or an affiliate has a
proprietary investment in an account managed in a similar strategy,
or the portfolio manager has personal investments in similarly
managed strategies. Potential conflicts of interest may arise with
both the aggregation and allocation of investment opportunities
because of market factors or investment restrictions imposed upon
Oppenheimer Capital by law, regulation, contract or internal
policies. The allocation of aggregated trades, in particular those
that were partially completed due to limited availability, could
also raise a conflict of interest, as Oppenheimer Capital could have
an incentive to allocate securities that are expected to increase in
value to favored accounts, for example, initial public offerings of
limited availability. Another potential conflict of interest may
arise when transactions for one account occurs after transactions in
a different account in the same or different strategy thereby
increasing the value of the securities when a purchase follows a
purchase of size in another account or similarly decreasing the
value if it is a sale. Oppenheimer Capital also manages accounts
that may engage in short sales of securities of the type in which
the Fund invests. Oppenheimer Capital could be seen as harming the
performance of the Fund for the benefit of the accounts engaging in
the short sales if the short sales cause the market value of the
securities to fall.
Oppenheimer Capital or its affiliates may from time to time maintain
certain overall investment limitations on the securities positions
or positions in other financial instruments due to liquidity or
other concerns or regulatory restrictions. Such policies may
preclude a Fund from purchasing a particular security or financial
instrument, even if such security or financial instrument would
otherwise meet the Fund's objectives.
Oppenheimer Capital and its affiliates' objective are to meet their
fiduciary obligation with respect to all clients. Oppenheimer
Capital and its affiliates have policies and procedures that are
reasonably designed to seek to manage conflicts. Oppenheimer Capital
and its affiliates monitor a variety of areas, including compliance
with fund guidelines, trade allocations, and compliance with the
respective Code of Ethics. Allocation policies and procedures are
designed to achieve a fair and equitable allocation of investment
opportunities among its client over time.
Orders for the same equity security traded through a single trading
desk or system are typically aggregated on a continual basis
throughout each trading day consistent with Oppenheimer Capital's
best execution obligation for its clients. If aggregated trades are
fully executed, accounts participating in the trade will be
allocated their pro rata share on an average price basis. Partially
completed orders generally will be allocated on a pro-rata average
price basis, subject to certain limited exceptions.
(a)(3) As of December 31, 2007:
Compensation. Mr. Bond-Nelson's compensation consists of the
following elements:
Base salary. The portfolio manager is paid a fixed base salary that
is set at a level determined by Oppenheimer Capital. In setting the
base salary, the firm's intentions are to be competitive in light of
the portfolio manager's experience and responsibilities. Firm
management evaluates competitive market compensation by reviewing
compensation survey results conducted by an independent third party
of investment industry compensation.
Annual bonus and Long Term Incentive Plan. The portfolio manager is
eligible for an annual bonus in addition to a base salary. The bonus
typically forms the majority of the individual's cash compensation
and is based in part on pre-tax performance against the Fund's
relevant benchmark or peer group ranking of the portfolio over a one
or three year period, with some consideration for longer time
periods. In addition to any bonus, the Firm utilizes two long-term
incentive plans. The first plan is an Allianz Global Investors Plan
for key employees. The plan provides awards that are based on the
Compound Annual Growth Rate (CAGR) of Oppenheimer Capital over a
period between either one year or over a three year period as well
as the collective earnings growth of all the asset management
companies of Allianz Global Investors. The second plan is a deferred
retention award for key investment professionals. The deferred
retention award typically vests over a three year period and is
invested in the fund(s) that the individual manages.
Participation in group retirement plans. Portfolio managers are
eligible to participate in a non-qualified deferred compensation
plan, which affords participating employees the tax benefits of
deferring the receipt of a portion of their cash compensation until
such time as designated under the plan.
(a)(4) Beneficial Ownership of Securities. As of December 31, 2007,
Mr. Bond-Nelson did not beneficially own any stock issued by the
Fund.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers -
------------------------------------------------------------------------------------------------------------------------
Period (a) Total (b) Average (c) Total Number of (d) Maximum Number (or
Number of Price Paid per Shares Purchased as Part Approx. Dollar Value) of
Shares Share of Publicly Announced Shares that May Yet Be
Purchased Plans or Programs Purchased Under the Plans
or Programs
------------------------------------------------------------------------------------------------------------------------
July 1-31, 2007
------------------------------------------------------------------------------------------------------------------------
August 1-31, 2007
------------------------------------------------------------------------------------------------------------------------
September 1-30, 2007
------------------------------------------------------------------------------------------------------------------------
October 1-31, 2007 101,605 $18.76 (1) 101,605(2) 0
------------------------------------------------------------------------------------------------------------------------
November 1-30, 2007
------------------------------------------------------------------------------------------------------------------------
December 1-31, 2007
------------------------------------------------------------------------------------------------------------------------
Total: 101,605 $18.76 (1) 101,605(2) 0
------------------------------------------------------------------------------------------------------------------------
(1) Subject to a repurchase fee of up to 0.39% of the net asset value
per share.
(2) On August 30, 2007, the repurchase offer was announced to repurchase
up to 5% of outstanding shares. The expiration date of the offer was
October 10, 2007. The registrant may conduct annual repurchases for
between 5% and 25% of its outstanding shares pursuant to Rule 23c-3
under the Investment Company Act of 1940, as amended.
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Corporate Governance Committee will
consider nominees to the Board recommended by shareholders when a
vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations which include biographical
information and set forth the qualifications of the proposed nominee
to the registrant's Secretary. There have been no material changes
to these procedures.
Item 11 - Controls and Procedures
11(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")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities and Exchange Act of 1934, as amended.
11(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)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
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.
Enhanced S&P 500(R) Covered Call Fund Inc.
By: /s/ Mitchell M. Cox
---------------------------------
Mitchell M. Cox
Chief Executive Officer (principal executive officer) of
Enhanced S&P 500(R) Covered Call Fund Inc.
Date: February 20, 2008
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: /s/ Mitchell M. Cox
---------------------------------
Mitchell M. Cox
Chief Executive Officer (principal executive officer) of
Enhanced S&P 500(R) Covered Call Fund Inc.
Date: February 20, 2008
By: /s/ James E. Hillman
---------------------------------
James E. Hillman
Chief Financial Officer (principal financial officer) of
Enhanced S&P 500(R) Covered Call Fund Inc.
Date: February 20, 2008