Eaton Vance Enhanced Equity Income Fund
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
811-21614
Investment Company Act File Number
Eaton Vance Enhanced Equity Income Fund
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Maureen A. Gemma
Two International Place, Boston, Massachusetts 02110
(Name and Address of Agent for Services)
(617) 482-8260
(Registrant’s Telephone Number, Including Area Code)
September 30
Date of Fiscal Year End
December 31, 2010
Date of Reporting Period
 
 

 


 

Item 1. Schedule of Investments

 


 

Eaton Vance Enhanced Equity Income Fund as of December 31, 2010
 
PORTFOLIO OF INVESTMENTS (Unaudited)
 
Common Stocks — 100.9%(1)
 
                 
Security   Shares     Value  
Aerospace & Defense — 0.5%
               
United Technologies Corp. 
    36,001     $ 2,833,999  
                 
            $ 2,833,999  
                 
Automobiles — 1.4%
               
Ford Motor Co.(2)
    454,441     $ 7,630,064  
                 
            $ 7,630,064  
                 
Beverages — 3.2%
               
Coca-Cola Co. (The)
    133,997     $ 8,812,983  
PepsiCo, Inc. 
    129,030       8,429,530  
                 
            $ 17,242,513  
                 
Biotechnology — 1.8%
               
Amgen, Inc.(2)
    94,121     $ 5,167,243  
Celgene Corp.(2)
    73,092       4,322,661  
                 
            $ 9,489,904  
                 
Capital Markets — 2.4%
               
Goldman Sachs Group, Inc. (The)
    39,870     $ 6,704,539  
Northern Trust Corp. 
    50,539       2,800,366  
State Street Corp. 
    72,658       3,366,972  
                 
            $ 12,871,877  
                 
Commercial Banks — 3.3%
               
KeyCorp
    413,601     $ 3,660,369  
PNC Financial Services Group, Inc. 
    56,108       3,406,878  
Wells Fargo & Co. 
    352,605       10,927,229  
                 
            $ 17,994,476  
                 
Communications Equipment — 1.7%
               
Cisco Systems, Inc.(2)
    275,491     $ 5,573,183  
QUALCOMM, Inc. 
    72,985       3,612,028  
                 
            $ 9,185,211  
                 
Computers & Peripherals — 3.7%
               
Apple, Inc.(2)
    62,113     $ 20,035,169  
                 
            $ 20,035,169  
                 
Construction & Engineering — 1.8%
               
Fluor Corp. 
    142,981     $ 9,473,921  
                 
            $ 9,473,921  
                 
Consumer Finance — 0.6%
               
American Express Co. 
    81,560     $ 3,500,555  
                 
            $ 3,500,555  
                 
Diversified Financial Services — 3.0%
               
Citigroup, Inc.(2)
    604,762     $ 2,860,524  
JPMorgan Chase & Co. 
    314,081       13,323,316  
                 
            $ 16,183,840  
                 
Diversified Telecommunication Services — 1.3%
               
AT&T, Inc. 
    143,740     $ 4,223,081  
Verizon Communications, Inc. 
    82,027       2,934,926  
                 
            $ 7,158,007  
                 
 
1


 

                 
Security   Shares     Value  
Electric Utilities — 0.5%
               
American Electric Power Co., Inc. 
    74,395     $ 2,676,732  
                 
            $ 2,676,732  
                 
Electrical Equipment — 2.1%
               
Emerson Electric Co. 
    196,942     $ 11,259,174  
                 
            $ 11,259,174  
                 
Electronic Equipment, Instruments & Components — 1.1%
               
Corning, Inc. 
    296,364     $ 5,725,753  
                 
            $ 5,725,753  
                 
Energy Equipment & Services — 2.4%
               
Halliburton Co. 
    126,284     $ 5,156,176  
Schlumberger, Ltd. 
    94,560       7,895,760  
                 
            $ 13,051,936  
                 
Food & Staples Retailing — 0.4%
               
Wal-Mart Stores, Inc. 
    39,778     $ 2,145,228  
                 
            $ 2,145,228  
                 
Food Products — 2.0%
               
Nestle SA
    96,501     $ 5,653,383  
Nestle SA ADR
    87,745       5,161,161  
                 
            $ 10,814,544  
                 
Health Care Equipment & Supplies — 1.4%
               
Covidien PLC
    67,855     $ 3,098,259  
Varian Medical Systems, Inc.(2)
    63,624       4,407,871  
                 
            $ 7,506,130  
                 
Health Care Providers & Services — 4.0%
               
AmerisourceBergen Corp. 
    138,618     $ 4,729,646  
Cardinal Health, Inc. 
    73,526       2,816,781  
DaVita, Inc.(2)
    56,026       3,893,247  
Fresenius Medical Care AG & Co. KGaA ADR
    52,277       3,015,860  
UnitedHealth Group, Inc. 
    189,532       6,844,001  
                 
            $ 21,299,535  
                 
Hotels, Restaurants & Leisure — 2.3%
               
Carnival Corp. 
    113,306     $ 5,224,539  
McDonald’s Corp. 
    92,751       7,119,567  
                 
            $ 12,344,106  
                 
Household Products — 2.0%
               
Procter & Gamble Co. 
    168,771     $ 10,857,038  
                 
            $ 10,857,038  
                 
Industrial Conglomerates — 1.7%
               
General Electric Co. 
    502,110     $ 9,183,592  
                 
            $ 9,183,592  
                 
Insurance — 2.8%
               
Aflac, Inc. 
    21,546     $ 1,215,841  
Lincoln National Corp. 
    108,387       3,014,242  
MetLife, Inc. 
    111,605       4,959,726  
Prudential Financial, Inc. 
    98,694       5,794,325  
                 
            $ 14,984,134  
                 
Internet & Catalog Retail — 1.5%
               
Amazon.com, Inc.(2)
    44,813     $ 8,066,340  
                 
            $ 8,066,340  
                 
 
2


 

                 
Security   Shares     Value  
Internet Software & Services — 3.8%
               
Akamai Technologies, Inc.(2)
    172,761     $ 8,128,405  
Google, Inc., Class A(2)
    20,386       12,108,673  
                 
            $ 20,237,078  
                 
IT Services — 3.5%
               
Accenture PLC, Class A
    184,742     $ 8,958,140  
International Business Machines Corp. 
    66,652       9,781,847  
                 
            $ 18,739,987  
                 
Leisure Equipment & Products — 0.5%
               
Hasbro, Inc. 
    56,606     $ 2,670,671  
                 
            $ 2,670,671  
                 
Life Sciences Tools & Services — 1.0%
               
Thermo Fisher Scientific, Inc.(2)
    97,676     $ 5,407,343  
                 
            $ 5,407,343  
                 
Machinery — 3.9%
               
Danaher Corp. 
    189,048     $ 8,917,394  
Deere & Co. 
    91,808       7,624,655  
Parker Hannifin Corp. 
    50,271       4,338,387  
                 
            $ 20,880,436  
                 
Media — 1.4%
               
Comcast Corp., Class A
    337,161     $ 7,407,427  
                 
            $ 7,407,427  
                 
Metals & Mining — 4.6%
               
BHP Billiton, Ltd. ADR
    61,918     $ 5,753,420  
Freeport-McMoRan Copper & Gold, Inc. 
    78,610       9,440,275  
Goldcorp, Inc. 
    204,213       9,389,714  
                 
            $ 24,583,409  
                 
Multi-Utilities — 1.0%
               
PG&E Corp. 
    113,806     $ 5,444,479  
                 
            $ 5,444,479  
                 
Multiline Retail — 1.3%
               
Target Corp. 
    117,881     $ 7,088,185  
                 
            $ 7,088,185  
                 
Oil, Gas & Consumable Fuels — 12.4%
               
Apache Corp. 
    68,208     $ 8,132,440  
ConocoPhillips
    136,567       9,300,213  
Exxon Mobil Corp. 
    212,694       15,552,185  
Hess Corp. 
    156,498       11,978,357  
Occidental Petroleum Corp. 
    102,933       10,097,727  
Peabody Energy Corp. 
    105,542       6,752,577  
Southwestern Energy Co.(2)
    136,760       5,118,927  
                 
            $ 66,932,426  
                 
Pharmaceuticals — 3.1%
               
Bristol-Myers Squibb Co. 
    163,695     $ 4,334,644  
Johnson & Johnson
    84,638       5,234,860  
Pfizer, Inc. 
    398,040       6,969,680  
                 
            $ 16,539,184  
                 
Real Estate Investment Trusts (REITs) — 0.6%
               
AvalonBay Communities, Inc. 
    24,053     $ 2,707,165  
Boston Properties, Inc. 
    6,279       540,622  
                 
            $ 3,247,787  
                 
 
3


 

                 
Security   Shares     Value  
Road & Rail — 1.6%
               
CSX Corp. 
    135,212     $ 8,736,047  
                 
            $ 8,736,047  
                 
Semiconductors & Semiconductor Equipment — 1.2%
               
Intel Corp. 
    312,314     $ 6,567,963  
                 
            $ 6,567,963  
                 
Software — 5.4%
               
Microsoft Corp. 
    385,408     $ 10,760,591  
Oracle Corp. 
    390,200       12,213,260  
salesforce.com, inc.(2)
    46,144       6,091,008  
                 
            $ 29,064,859  
                 
Specialty Retail — 2.2%
               
Best Buy Co., Inc. 
    127,203     $ 4,361,791  
Home Depot, Inc. 
    216,570       7,592,944  
                 
            $ 11,954,735  
                 
Textiles, Apparel & Luxury Goods — 1.4%
               
NIKE, Inc., Class B
    86,366     $ 7,377,384  
                 
            $ 7,377,384  
                 
Tobacco — 1.3%
               
Philip Morris International, Inc. 
    116,936     $ 6,844,264  
                 
            $ 6,844,264  
                 
Wireless Telecommunication Services — 1.8%
               
American Tower Corp., Class A(2)
    76,423     $ 3,946,484  
Vodafone Group PLC
    2,105,439       5,527,100  
                 
            $ 9,473,584  
                 
                 
Total Common Stocks
(identified cost $449,717,943)
          $ 542,711,026  
                 
 
Short-Term Investments — 1.6%
 
                 
    Interest
       
Description   (000’s omitted)     Value  
Eaton Vance Cash Reserves Fund, LLC, 0.22%(3)(4)
  $ 8,821     $ 8,820,719  
                 
                 
Total Short-Term Investments
(identified cost $8,820,719)
          $ 8,820,719  
                 
                 
Total Investments — 102.5%
(identified cost $458,538,662)
          $ 551,531,745  
                 
 
Covered Call Options Written — (2.5)%
 
                             
    Number
  Strike
    Expiration
     
Security   of Contracts   Price     Date   Value  
Accenture PLC, Class A
    295     $ 47.50     1/22/11   $ (44,250 )
Accenture PLC, Class A
    815       52.50     2/19/11     (16,300 )
Aflac, Inc. 
    110       55.00     2/19/11     (34,100 )
Akamai Technologies, Inc. 
    1,040       55.00     2/19/11     (92,040 )
Amazon.com, Inc. 
    215       155.00     1/22/11     (543,413 )
American Electric Power Co., Inc. 
    743       38.00     2/19/11     (5,572 )
American Express Co. 
    410       43.00     1/22/11     (35,670 )
American Tower Corp., Class A
    385       52.50     1/22/11     (21,175 )
AmerisourceBergen Corp. 
    540       32.00     2/19/11     (143,100 )
Amgen, Inc. 
    475       57.50     1/22/11     (12,825 )
Apache Corp. 
    340       105.00     1/22/11     (491,300 )
 
4


 

                             
    Number
  Strike
    Expiration
     
Security   of Contracts   Price     Date   Value  
Apple, Inc. 
    315     $ 290.00     1/22/11   $ (1,082,813 )
AT&T, Inc. 
    1,405       30.00     1/22/11     (11,942 )
Best Buy Co., Inc. 
    640       41.00     1/22/11     (1,280 )
BHP Billiton, Ltd. ADR
    375       95.00     2/19/11     (112,688 )
Bristol-Myers Squibb Co. 
    985       27.00     2/19/11     (34,967 )
Cardinal Health, Inc. 
    445       39.00     3/19/11     (70,088 )
Carnival Corp. 
    485       42.00     1/22/11     (208,550 )
Celgene Corp. 
    190       60.00     1/22/11     (22,800 )
Cisco Systems, Inc. 
    1,117       22.50     1/22/11     (3,909 )
Coca-Cola Co. (The)
    520       62.50     2/19/11     (201,500 )
Comcast Corp., Class A
    2,040       22.00     2/19/11     (166,260 )
ConocoPhillips
    820       67.50     2/19/11     (200,080 )
Corning, Inc. 
    1,250       18.00     2/19/11     (211,250 )
Covidien PLC
    340       45.00     1/22/11     (45,900 )
CSX Corp. 
    435       62.50     2/19/11     (165,300 )
CSX Corp. 
    380       65.00     2/19/11     (88,350 )
Danaher Corp. 
    1,135       47.00     3/19/11     (221,325 )
DaVita, Inc. 
    340       70.00     1/22/11     (37,400 )
Deere & Co. 
    640       85.00     1/22/11     (64,960 )
Emerson Electric Co. 
    1,185       60.00     3/19/11     (130,350 )
Exxon Mobil Corp. 
    895       65.00     1/22/11     (738,375 )
Fluor Corp. 
    240       60.00     1/22/11     (157,200 )
Fluor Corp. 
    620       65.00     1/22/11     (156,550 )
Ford Motor Co. 
    2,730       18.00     2/19/11     (91,455 )
Freeport-McMoRan Copper & Gold, Inc. 
    130       109.00     2/19/11     (178,425 )
Freeport-McMoRan Copper & Gold, Inc. 
    345       119.00     2/19/11     (246,675 )
Fresenius Medical Care AG & Co. KGaA ADR
    155       65.00     1/22/11     (15,112 )
General Electric Co. 
    3,015       18.00     2/19/11     (253,260 )
Goldman Sachs Group, Inc. (The)
    200       155.00     1/22/11     (279,500 )
Google, Inc., Class A
    125       610.00     3/19/11     (274,375 )
Halliburton Co. 
    330       37.00     1/22/11     (134,475 )
Halliburton Co. 
    430       42.00     2/19/11     (67,080 )
Hess Corp. 
    660       72.50     2/19/11     (377,850 )
Home Depot, Inc. 
    1,075       31.00     2/19/11     (456,875 )
Intel Corp. 
    1,115       21.00     1/22/11     (57,422 )
International Business Machines Corp. 
    345       140.00     1/22/11     (257,025 )
Johnson & Johnson
    846       65.00     1/22/11     (3,807 )
JPMorgan Chase & Co. 
    1,570       40.00     1/22/11     (434,890 )
Lincoln National Corp. 
    545       25.00     1/22/11     (157,778 )
McDonald’s Corp. 
    680       80.00     1/22/11     (11,560 )
MetLife, Inc. 
    670       46.00     3/19/11     (114,235 )
Microsoft Corp. 
    2,315       28.00     2/19/11     (215,295 )
NIKE, Inc., Class B
    390       85.00     1/22/11     (71,370 )
Northern Trust Corp. 
    305       55.00     1/22/11     (55,662 )
Occidental Petroleum Corp. 
    435       90.00     2/19/11     (413,250 )
Oracle Corp. 
    2,345       31.00     3/19/11     (358,785 )
Parker Hannifin Corp. 
    170       85.00     2/19/11     (68,000 )
Peabody Energy Corp. 
    635       65.00     3/19/11     (225,425 )
PepsiCo, Inc. 
    645       65.00     1/22/11     (64,177 )
Pfizer, Inc. 
    2,390       18.00     2/19/11     (68,115 )
PG&E Corp. 
    685       50.00     3/19/11     (44,525 )
Philip Morris International, Inc. 
    705       60.00     3/19/11     (96,233 )
PNC Financial Services Group, Inc. 
    285       60.00     2/19/11     (83,078 )
Procter & Gamble Co. 
    715       62.50     1/22/11     (150,150 )
Prudential Financial, Inc. 
    595       60.00     3/19/11     (151,428 )
QUALCOMM, Inc. 
    495       49.00     1/22/11     (66,330 )
salesforce.com, inc.
    280       145.00     2/19/11     (107,100 )
Schlumberger, Ltd. 
    440       75.00     1/22/11     (389,400 )
Southwestern Energy Co. 
    820       38.00     3/19/11     (162,360 )
State Street Corp. 
    365       44.00     2/19/11     (133,225 )
Target Corp. 
    495       55.00     1/22/11     (259,875 )
 
5


 

                             
    Number
  Strike
    Expiration
     
Security   of Contracts   Price     Date   Value  
Thermo Fisher Scientific, Inc. 
    590     $ 60.00     3/19/11   $ (48,675 )
United Technologies Corp. 
    180       75.00     2/19/11     (86,400 )
UnitedHealth Group, Inc. 
    1,140       38.00     3/19/11     (118,560 )
Varian Medical Systems, Inc. 
    260       65.00     2/19/11     (143,000 )
Verizon Communications, Inc. 
    490       34.00     1/22/11     (87,955 )
Wal-Mart Stores, Inc. 
    240       55.00     3/19/11     (23,640 )
Wells Fargo & Co. 
    1,765       26.00     1/22/11     (891,325 )
                         
         
Total Covered Call Options Written
(premiums received $9,709,675)
  $ (13,568,719 )
         
         
Other Assets, Less Liabilities — 0.0%(5)
  $ 54,381  
         
         
Net Assets — 100.0%
  $ 538,017,407  
         
 
             
The percentage shown for each investment category in the Portfolio of Investments is based on net assets.
         
ADR
  -   American Depositary Receipt
         
(1)
      A portion of each applicable common stock for which a written call option is outstanding at December 31, 2010 has been pledged as collateral for such written option.
         
(2)
      Non-income producing security.
         
(3)
      Affiliated investment company available to Eaton Vance portfolios and funds which invests in high quality, U.S. dollar denominated money market instruments. The rate shown is the annualized seven-day yield as of December 31, 2010.
         
(4)
      Net income allocated from the investment in Eaton Vance Cash Reserves Fund, LLC for the fiscal year to date ended December 31, 2010 was $5,927.
         
(5)
      Amount is less than 0.05%.
 
The cost and unrealized appreciation (depreciation) of investments of the Fund at December 31, 2010, as determined on a federal income tax basis, were as follows:
 
         
Aggregate cost
  $ 460,549,978  
         
Gross unrealized appreciation
  $ 96,605,959  
Gross unrealized depreciation
    (5,624,192 )
         
Net unrealized appreciation
  $ 90,981,767  
         
 
Written call options activity for the fiscal year to date ended December 31, 2010 was as follows:
 
                 
    Number of
    Premiums
 
    Contracts     Received  
Outstanding, beginning of period
    89,697     $ 13,017,697  
Options written
    69,380       11,272,462  
Options terminated in closing purchase transactions
    (89,992 )     (12,669,660 )
Options exercised
    (5,298 )     (1,119,817 )
Options expired
    (6,481 )     (791,007 )
                 
Outstanding, end of period
    57,306     $ 9,709,675  
                 
 
At December 31, 2010, the Fund had sufficient cash and/or securities to cover commitments under these contracts.
 
The Fund is subject to equity price risk in the normal course of pursuing its investment objectives. The Fund generally intends to write covered call options on individual stocks above the current value of the stock to generate premium income. In writing call options on individual stocks, the Fund in effect, sells potential appreciation in the value of the applicable stock above the exercise price in exchange for the option premium received. The Fund retains the risk of loss, minus the premium received, should the price of the underlying stock decline. The Fund is not subject to counterparty credit risk with respect to its written options as the Fund, not the counterparty, is obligated to perform under such derivatives.
 
At December 31, 2010, the aggregate fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in a liability position and whose primary underlying risk exposure is equity price risk was $13,568,719.
 
6


 

Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
 
  •   Level 1 — quoted prices in active markets for identical investments
 
  •   Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
 
  •   Level 3 — significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments)
 
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
 
At December 31, 2010, the hierarchy of inputs used in valuing the Fund’s investments, which are carried at value, were as follows:
 
                                 
    Quoted Prices in
                   
    Active Markets for
    Significant Other
    Significant
       
    Identical Assets     Observable Inputs     Unobservable Inputs        
       
Asset Description   (Level 1)     (Level 2)     (Level 3)     Total  
   
Common Stocks
                               
Consumer Discretionary
  $ 64,538,912     $     $     $ 64,538,912  
Consumer Staples
    42,250,204       5,653,383             47,903,587  
Energy
    79,984,362                   79,984,362  
Financials
    68,782,669                   68,782,669  
Health Care
    60,242,096                   60,242,096  
Industrials
    62,367,169                   62,367,169  
Information Technology
    109,556,020                   109,556,020  
Materials
    24,583,409                   24,583,409  
Telecommunication Services
    11,104,491       5,527,100             16,631,591  
Utilities
    8,121,211                   8,121,211  
 
 
Total Common Stocks
  $ 531,530,543     $ 11,180,483 *   $     $ 542,711,026  
 
 
Short-Term Investments
  $     $ 8,820,719     $     $ 8,820,719  
 
 
Total Investments
  $ 531,530,543     $ 20,001,202     $     $ 551,531,745  
 
 
                                 
Liability Description                        
   
Covered Call Options Written
  $ (13,568,719 )   $     $     $ (13,568,719 )
 
 
Total
  $ (13,568,719 )   $     $     $ (13,568,719 )
 
 
 
* Includes foreign equity securities whose values were adjusted to reflect market trading of comparable securities or other correlated instruments that occurred after the close of trading in their applicable foreign markets.
 
The Fund held no investments or other financial instruments as of September 30, 2010 whose fair value was determined using Level 3 inputs. At December 31, 2010, the value of investments transferred between Level 1 and Level 2, if any, during the fiscal year to date then ended was not significant.
 
For information on the Fund’s policy regarding the valuation of investments and other significant accounting policies, please refer to the Fund’s most recent financial statements included in its semiannual or annual report to shareholders.
 
7


 

Item 2. Controls and Procedures
(a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant on this Form N-Q has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant on this Form N-Q has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.
(b) There have been no changes in the registrant’s internal controls over financial reporting during the fiscal quarter for which the report is being filed that have materially affected, or are reasonably likely to materially affect the registrant’s internal control over financial reporting.

 


 

Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
Eaton Vance Enhanced Equity Income Fund
 
       
By:
  /s/ Walter A. Row, III    
 
       
 
  Walter A. Row, III    
 
  President    
 
       
Date:
  February 23, 2011    
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/ Walter A. Row, III    
 
       
 
  Walter A. Row, III    
 
  President    
 
       
Date:
  February 23, 2011    
 
       
By:
  /s/ Barbara E. Campbell    
 
       
 
  Barbara E. Campbell    
 
  Treasurer    
 
       
Date:
  February 23, 2011