Edgar Filing: FIRST TRUST 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 COMPANY

Investment Company Act file number 811-21586

FIRST TRUST ENHANCED EQUITY INCOME FUND
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(Exact name of registrant as specified in charter)

120 East Liberty Drive, Suite 400

WHEATON, IL 60187
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(Address of principal executive offices) (Zip code)

W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
WHEATON, IL 60187
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(Name and address of agent for service)

Registrant's telephone number, including area code: (630) 765-8000
----------------

Date of fiscal year end: DECEMBER 31

Date of reporting period: SEPTEMBER 30, 2009

Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.

ITEM 1. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.

FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a)
SEPTEMBER 30, 2009 (UNAUDITED)

SHARES DESCRIPTION VALUE
------- ------------------------------------------------------- ------------

COMMON STOCKS - 90.1%
AEROSPACE & DEFENSE - 3.0%
100,000 Honeywell International, Inc. ......................... $ 3,715,000
54,000 United Technologies Corp. (b) ......................... 3,290,220
------------
7,005,220
------------
BEVERAGES - 4.2%
80,000 Coca-Cola (The) Co. ................................... 4,296,000
60,000 Diageo PLC, ADR (e) ................................... 3,689,400
30,000 PepsiCo, Inc. ......................................... 1,759,800
------------
9,745,200
------------
CAPITAL MARKETS - 1.9%
56,300 Ameriprise Financial, Inc. (b) ........................ 2,045,379
80,000 Bank of New York Mellon (The), Corp. (e) .............. 2,319,200
------------
4,364,579
------------
CHEMICALS - 1.7%
70,000 PPG Industries, Inc. (e) .............................. 4,074,700
------------
COMMERCIAL BANKS - 1.0%
198,185 National Penn Bancshares, Inc. ........................ 1,210,910
37,500 Wells Fargo & Co. (b) ................................ 1,056,750
------------
2,267,660
------------
COMMERCIAL SERVICES & SUPPLIES - 1.0%
80,000 Waste Management, Inc. (e) ............................ 2,385,600
------------
COMMUNICATIONS EQUIPMENT - 3.5%
295,200 Cisco Systems, Inc. (c) ............................... 6,949,008
30,000 QUALCOMM, Inc. (e) .................................... 1,349,400
------------
8,298,408
------------
COMPUTERS & PERIPHERALS - 4.0%
70,000 Hewlett-Packard Co. ................................... 3,304,700
50,000 International Business Machines Corp. (e) ............. 5,980,500
------------
9,285,200
------------
DIVERSIFIED FINANCIAL SERVICES - 2.7%
147,000 JPMorgan Chase & Co. (e) .............................. 6,441,540
------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 3.9%
200,000 Alaska Communications Systems Group, Inc. ............. 1,850,000
92,100 AT&T, Inc. (e) ........................................ 2,487,621
155,000 Verizon Communications, Inc. (e) ...................... 4,691,850
------------
9,029,471
------------
ELECTRIC UTILITIES - 0.7%
35,000 Exelon Corp. .......................................... 1,736,700
------------
ELECTRICAL EQUIPMENT - 3.1%
180,000 Emerson Electric Co. (e) .............................. 7,214,400
------------
FOOD & STAPLES RETAILING - 0.7%
45,000 CVS Caremark Corp. .................................... 1,608,300
------------

See Notes to Quarterly Portfolio of Investments

Page 1

FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)

SHARES DESCRIPTION VALUE
------- ------------------------------------------------------- ------------

COMMON STOCKS - (CONTINUED)
FOOD PRODUCTS - 1.0%
85,000 Kraft Foods, Inc., Class A ............................ $ 2,232,950
------------
HEALTHCARE EQUIPMENT & SUPPLIES - 1.4%
90,000 Medtronic, Inc. ....................................... 3,312,000
------------
HOTELS, RESTAURANTS & LEISURE - 2.7%
90,000 Carnival Corp. (b) .................................... 2,995,200
100,000 Darden Restaurants, Inc. (e) .......................... 3,413,000
------------
6,408,200
------------
INDUSTRIAL CONGLOMERATES - 1.0%
30,000 3M Co. (e) ............................................ 2,214,000
------------
INSURANCE - 5.5%
60,000 ACE Ltd. .............................................. 3,207,600
50,000 Lincoln National Corp. ................................ 1,295,500
130,000 MetLife, Inc. (b) ..................................... 4,949,100
70,000 Prudential Financial, Inc. (e) ........................ 3,493,700
------------
12,945,900
------------
IT SERVICES - 1.2%
100,000 Paychex, Inc. (b) ..................................... 2,905,000
------------
MACHINERY - 2.0%
90,000 Caterpillar, Inc. (e) ................................. 4,619,700
------------
MARINE - 0.4%
110,000 Seaspan Corp. ......................................... 984,500
------------
MEDIA - 1.2%
145,000 Regal Entertainment Group, Class A (e) ................ 1,786,400
40,000 Walt Disney (The) Co. (e) ............................. 1,098,400
------------
2,884,800
------------
METALS & MINING - 1.1%
40,000 BHP Billiton Ltd., ADR (b) ............................ 2,640,400
------------
MULTILINE RETAIL - 4.3%
119,000 J.C. Penney Co., Inc. (e) ............................. 4,016,250
131,000 Target Corp. (e) ...................................... 6,115,080
------------
10,131,330
------------
OIL, GAS & CONSUMABLE FUELS - 9.3%
60,000 Chevron Corp. (e) ..................................... 4,225,800
120,000 Exxon Mobil Corp. ..................................... 8,233,200
105,200 Occidental Petroleum Corp. (e) ........................ 8,247,680
60,000 Williams (The) Cos., Inc.(b) .......................... 1,072,200
------------
21,778,880
------------
PHARMACEUTICALS - 8.5%
95,000 Abbott Laboratories ................................... 4,699,650
400,000 Bristol-Myers Squibb Co. (e) .......................... 9,008,000
70,000 Merck & Co., Inc. ..................................... 2,214,100
250,000 Pfizer, Inc. .......................................... 4,137,500
------------
20,059,250
------------

See Notes to Quarterly Portfolio of Investments

Page 2

FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)

SHARES DESCRIPTION VALUE
------- ------------------------------------------------------- ------------

COMMON STOCKS - (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (REITS) - 5.1%
200,400 Annaly Capital Management, Inc. (b) ................... $ 3,635,256
100,000 Capstead Mortgage Corp. ............................... 1,391,000
865,000 MFA Mortgage Investments, Inc. ........................ 6,885,400
------------
11,911,656
------------
ROAD & RAIL - 1.7%
70,000 Union Pacific Corp. (e) ............................... 4,084,500
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 6.1%
457,300 Intel Corp. (e) ....................................... 8,949,361
200,000 Microchip Technology, Inc. ............................ 5,300,000
------------
14,249,361
------------
SOFTWARE - 1.2%
110,000 Microsoft Corp. (e) ................................... 2,847,900
------------
SPECIALTY RETAIL - 2.9%
400,000 Limited Brands, Inc. (b) .............................. 6,796,000
------------
TOBACCO - 1.5%
120,000 Altria Group, Inc. .................................... 2,137,200
30,000 Philip Morris International, Inc. ..................... 1,462,200
------------
3,599,400
------------
WATER UTILITIES - 0.6%
74,200 American Water Works Co., Inc. ........................ 1,479,548
------------
TOTAL COMMON STOCKS
(Cost $232,317,491) ................................ 211,542,253
------------
MASTER LIMITED PARTNERSHIPS - 4.6%
OIL, GAS & CONSUMABLE FUELS - 4.6%
200,000 Copano Energy, LLC .................................... 3,640,000
90,000 Energy Transfer Partners, L.P. ........................ 3,829,500
40,000 Enterprise Products Partners, L.P. .................... 1,132,800
60,000 Magellan Midstream Partners, L.P. ..................... 2,256,000
------------
TOTAL MASTER LIMITED PARTNERSHIPS
(Cost $10,255,083) ................................. 10,858,300
------------
EXCHANGE-TRADED FUNDS - 3.9%
CAPITAL MARKET - 2.6%
264,500 SPDR KBW Bank ETF (b) ................................. 6,170,785
------------
LARGE CAP GROWTH - 1.3%
28,000 SPDR Trust Series 1 ................................... 2,955,680
------------
TOTAL EXCHANGE-TRADED FUNDS
(Cost $6,923,028) .................................. 9,126,465
------------
TOTAL INVESTMENTS - 98.6%
(Cost $249,495,602) (d) ............................ 231,527,018
------------

See Notes to Quarterly Portfolio of Investments

Page 3

FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)

NUMBER OF
CONTRACTS DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------

CALL OPTIONS WRITTEN - (0.7%)
3M Co. Call
150 @ 75 due Oct 09 ..................................... $ (14,250)
------------
Ameriprise Financial, Inc. Call
563 @ 35 due Oct 09 ..................................... (121,045)
------------
Annaly Capital Management, Inc. Calls
4 @ 18 due Oct 09 ..................................... (188)
1,843 @ 19 due Nov 09 ..................................... (64,505)
157 @ 19 due Oct 09 ..................................... (1,570)
------------
(66,263)
------------
AT&T, Inc. Call
600 @ 27 due Oct 09 ..................................... (24,000)
------------
Bank of New York Mellon (The), Corp. Call
400 @ 33 due Oct 09 ..................................... (2,000)
------------
BHP Billiton Ltd.,ADR Call
400 @ 70 due Oct 09 ..................................... (26,000)
------------
Bristol-Myers Squibb Co. Call
2,000 @ 23 due Oct 09 ..................................... (48,000)
------------
Carnival Corp. Calls
450 @ 34 due Oct 09 ..................................... (24,300)
450 @ 35 due Oct 09 ..................................... (21,600)
------------
(45,900)
------------
Caterpillar, Inc. Call
400 @ 55 due Oct 09 ..................................... (22,800)
------------
Chevron Corp. Call
400 @ 75 due Oct 09 ..................................... (6,000)
------------
Darden Restaurants, Inc. Call
500 @ 38 due Oct 09 ..................................... (2,500)
------------
Diageo PLC, ADR Call
200 @ 65 due Oct 09 ..................................... (5,000)
------------
Emerson Electric Co. Call
700 @ 43 due Oct 09 ..................................... (10,500)
------------
Intel Corp. Call
750 @ 21 due Oct 09 ..................................... (13,500)
------------
International Business Machines Corp. Call
250 @ 130 due Oct 09 .................................... (6,250)
------------

See Notes to Quarterly Portfolio of Investments

Page 4

FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)

NUMBER OF
CONTRACTS DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------

CALL OPTIONS WRITTEN - (CONTINUED)
J.C. Penney Co., Inc. Calls
500 @ 33 due Oct 09 ..................................... $ (80,000)
350 @ 35 due Oct 09 ..................................... (19,250)
------------
(99,250)
------------
JPMorgan Chase & Co. Call
700 @ 47 due Oct 09 ..................................... (37,100)
------------
Limited Brands, Inc. Call
4,000 @ 17.5 due Oct 09 ................................... (140,000)
------------
Metlife, Inc. Calls
300 @ 41 due Oct 09 ..................................... (15,000)
1,000 @ 44 due Oct 09 ..................................... (10,000)
------------
(25,000)
------------
Microsoft Corp. Call
750 @ 26 due Oct 09 ..................................... (30,000)
------------
Occidental Petroleum Corp. Call
600 @ 80 due Oct 09 ..................................... (81,000)
------------
Paychex, Inc. Call
1,000 @ 30 due Oct 09 ..................................... (30,000)
------------
PPG Industries, Inc. Call
400 @ 60 due Oct 09 ..................................... (42,000)
------------
Prudential Financial, Inc. Calls
200 @ 50 due Oct 09 ..................................... (43,000)
250 @ 55 due Oct 09 ..................................... (13,750)
------------
(56,750)
------------
QUALCOMM, Inc. Call
150 @ 49 due Oct 09 ..................................... (1,200)
------------
Regal Entertainment Group, Class A Call
300 @ 15 due Oct 09 ..................................... (3,000)
------------
SPDR KBW Bank ETF Call
2,645 @ 24 due Oct 09 ..................................... (132,250)
------------
S&P 500 Index Call
400 @ 1070 due Oct 09(f) ................................ (504,000)
------------
Target Corp. Call
650 @ 50 due Oct 09 ..................................... (13,000)
------------
Union Pacific Corp. Call
200 @ 65 due Oct 09 ..................................... (3,000)
------------

See Notes to Quarterly Portfolio of Investments

Page 5

FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)

NUMBER OF
CONTRACTS DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------

CALL OPTIONS WRITTEN - (CONTINUED)
United Technologies Corp. Call
540 @ 65 due Oct 09 ..................................... $ (10,800)
------------
Verizon Communications, Inc. Call
500 @ 31 due Oct 09 ..................................... (7,500)
------------
Walt Disney (The) Co. Call
200 @ 29 due Oct 09 ..................................... (3,000)
------------
Waste Management, Inc. Call
300 @ 30 due Oct 09 ..................................... (13,500)
------------
Wells Fargo & Co. Call
375 @ 29 due Oct 09 ..................................... (20,625)
------------
Williams (The) Cos., Inc. Call
600 @ 20 due Oct 09 ..................................... (2,400)
------------
TOTAL CALL OPTIONS WRITTEN - (0.7%)
(Premiums received $2,867,481) ................... (1,669,383)
------------
NET OTHER ASSETS AND LIABILITIES - 2.1% ............. 5,044,082
------------
NET ASSETS - 100.0% ................................. $234,901,717
============

----------
(a) All percentages shown in the Portfolio of Investments are based on net
assets.

(b) Call options were written on this entire Common Stock position and are
fully covered by the Common Stock position.

(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of September 30, 2009,
the aggregate gross unrealized appreciation for all securities in which
there was an excess of value over tax cost was $15,856,111 and the
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value was $33,824,695.

(e) Call options were written on a portion of this Common Stock position and
are fully covered by the Common Stock position.

(f) Call options on securities indices were written on a portion of the Common
Stock positions that were not covered by call options on individual equity
securities held in the Fund's Portfolio.

ADR American Depositary Receipt

See Notes to Quarterly Portfolio of Investments

Page 6

FIRST TRUST ENHANCED EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 2009 (UNAUDITED)

VALUATION INPUTS

A summary of the inputs used to value the Fund's investments as of September 30,
2009 is as follows (see Note 1A -Portfolio Valuation in the Notes to Quarterly
Portfolio of Investments):

ASSETS TABLE

LEVEL 2 LEVEL 3
TOTAL MARKET LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/09 PRICES INPUTS INPUTS
------------ ------------ ----------- ------------

Common Stocks* .................... $211,542,253 $211,542,253 $-- $--
Master Limited Partnerships* ...... 10,858,300 10,858,300 -- --
Exchange-Traded Funds* ............ 9,126,465 9,126,465 -- --
------------ ------------ --- ---
Total Investments ................. $231,527,018 $231,527,018 $-- $--
============ ============ === ===

LIABILITIES TABLE

LEVEL 2 LEVEL 3
TOTAL MARKET LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
9/30/09 PRICES INPUTS INPUTS
------------ ------------ ----------- ------------

Call Options Written .............. $(1,669,383) $(1,669,383) $-- $--
=========== =========== === ===

* See the Portfolio of Investments for industry breakdown.

See Notes to Quarterly Portfolio of Investments

Page 7

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS

FIRST TRUST ENHANCED EQUITY INCOME FUND
SEPTEMBER 30, 2009 (UNAUDITED)

1. VALUATION AND INVESTMENT PRACTICES

A. PORTFOLIO VALUATION:

The net asset value ("NAV") of the Common Shares of First Trust Enhanced Equity
Income Fund (the "Fund") is determined daily as of the close of regular trading
on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on
each day the NYSE is open for trading. The NAV per Common Share is calculated by
dividing the value of all assets of the Fund (including accrued interest and
dividends), less all liabilities (including accrued expenses, the value of call
options written (sold) and dividends declared but unpaid), by the total number
of Common Shares outstanding.

The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value in
accordance with valuation procedures adopted by the Fund's Board of Trustees.
Portfolio securities listed on any exchange other than the NASDAQ National
Market ("NASDAQ") and the London Stock Exchange Alternative Investment Market
("AIM") are valued at the last sale price on the business day as of which such
value is being determined. Securities listed on the NASDAQ or the AIM are valued
at the official closing price on the business day as of which such value is
being determined. If there has been no sale on such day or no official closing
price in the case of securities traded on the NASDAQ or the AIM, the securities
are valued at the mean of the most recent bid and asked prices on such day.
Portfolio securities traded on more than one securities exchange are valued at
the last sale price or official closing price, as applicable, on the business
day as of which such value is being determined at the close of the exchange
representing the principal market for such securities. Portfolio securities
traded in the over-the-counter market, but excluding securities trading on the
NASDAQ and the AIM, are valued at the closing bid prices. Short-term investments
that mature in less than 60 days when purchased are valued at amortized cost.

The Fund values exchange-traded options and other derivative contracts at the
closing price on the exchange on which they are principally traded, or if not
traded, or no closing price is available, at the mean between the last bid and
asked price.

The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:

- Level 1 - Level 1 inputs are quoted prices in active markets for
identical securities. An active market is a market in which
transactions for the security occur with sufficient
frequency and volume to provide pricing information on an
ongoing basis.

- Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly and include the following:

- Quoted prices for similar securities in active markets.

- Quoted prices for identical or similar securities in
markets that are non-active. A non-active market is a
market where there are few transactions for the
security, the prices are not current, or price
quotations vary substantially either over time or among
market makers, or in which little information is
released publicly.

- Inputs other than quoted prices that are observable for
the security (for example, interest rates and yield
curves observable at commonly quoted intervals,
volatilities, prepayment speeds, loss severities,
credit risks, and default rates).

- Inputs that are derived principally from or
corroborated by observable market data by correlation
or other means.

- Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs
reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing
the security.

The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. A summary
of the inputs used to value the Fund's investments as of September 30, 2009, is
included with the Fund's Portfolio of Investments.

B. OPTION CONTRACTS:

COVERED OPTIONS. The Fund may write (sell) covered call options ("options") on
all or a portion of the equity securities held in the Fund's portfolio and on
securities indices as determined to be appropriate by Chartwell Investment
Partners, L.P ("Chartwell" or the "Sub-Advisor"), consistent with the Fund's
investment objective. The number of options the

Page 8

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)

FIRST TRUST ENHANCED EQUITY INCOME FUND
SEPTEMBER 30, 2009 (UNAUDITED)

Fund can write (sell) is limited by the amount of equity securities the Fund
holds in its portfolio. Options on securities indices are designed to reflect
price fluctuations in a group of securities or a segment of the securities
market rather than price fluctuations in a single security and are similar to
options on single securities, except that the exercise of securities index
options requires cash settlement payments and does not involve the actual
purchase or sale of securities. The Fund will not write (sell) "naked" or
uncovered options. If certain equity securities held in the Fund's portfolio are
not covered by a related call option on the individual equity security,
securities index options may be written on all or a portion of such uncovered
securities. By writing (selling) options, the Fund seeks to generate additional
income, in the form of premiums received, for writing (selling) the options, and
to provide a partial hedge against a market decline in the underlying equity
security. Options are marked-to-market daily and their value will be affected by
changes in the value and dividend rates of the underlying equity securities,
changes in interest rates, changes in the actual or perceived volatility of the
securities markets and the underlying equity securities and the remaining time
to the options' expiration. The value of options may also be adversely affected
if the market for the options becomes less liquid or trading volume diminishes.

Options the Fund writes (sells) will either be exercised, expire or be cancelled
pursuant to a closing transaction. If the price of the underlying equity
security exceeds the option's exercise price, it is likely that the option
holder will exercise the option. If an option written (sold) by the Fund is
exercised, the Fund would be obligated to deliver the underlying equity security
to the option holder upon payment of the exercise price. In this case, the
option premium received by the Fund will be added to the amount realized on the
sale of the underlying equity security for purposes of determining gain or loss.
If the price of the underlying equity security is less than the option's
exercise price, the option will likely expire without being exercised. The
option premium received by the Fund will, in this case, be treated as short-term
capital gain on the expiration date of the option. The Fund may also elect to
close out its position in an option prior to its expiration by purchasing an
option of the same series as the option written (sold) by the Fund.

The options that the Fund writes (sells) give the option holder the right, but
not the obligation, to purchase a security from the Fund at the strike price on
or prior to the option's expiration date. The ability to successfully implement
the Fund's covered call investment strategy depends on the ability of Chartwell
to predict pertinent market movements, which cannot be assured. Thus, the use of
options may require the Fund to sell portfolio securities at inopportune times
or for prices other than current market value, which may limit the amount of
appreciation the Fund can realize on an investment, or may cause the Fund to
hold a security that it might otherwise sell. As the writer (seller) of a
covered option, the Fund forgoes, during the option's life, the opportunity to
profit from increases in the market value of the security covering the option
above the sum of the premium and the exercise price of the option, but has
retained the risk of loss should the price of the underlying security decline.
Once an option writer (seller) has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying security to the option holder at the
exercise price.

The Fund is subject to equity price risk in the normal course of pursuing its
investment objective. Over-the-Counter ("OTC") options have the risk of the
potential inability of counterparties to meet the terms of their contracts. The
Fund's maximum equity price risk for purchased options is limited to the premium
initially paid. In addition, certain risks may arise upon entering into option
contracts including the risk that an illiquid secondary market will limit the
Fund's ability to close out an option contract prior to the expiration date and
that a change in the value of the option contract may not correlate exactly with
changes in the value of the securities hedged.

C. SECURITIES TRANSACTIONS:

Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.

Distributions received from the Fund's investments in Master Limited
Partnerships ("MLPs) generally are comprised of return of capital from the MLP
to the extent of the cost basis of such MLP investments.

Page 9

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)

FIRST TRUST ENHANCED EQUITY INCOME FUND
SEPTEMBER 30, 2009 (UNAUDITED)

2. WRITTEN OPTION ACTIVITY

Written option activity for the nine months ended September 30, 2009 was as
follows:

NUMBER
OF
CONTRACTS PREMIUMS
--------- ------------

WRITTEN OPTIONS
Options outstanding at January 1, 2009 ...... 58,717 $ 8,449,321
Options written ............................. 579,383 69,153,452
Options expired ............................. (166,413) (12,325,924)
Options exercised ........................... (15,958) (1,314,911)
Options closed .............................. (428,602) (61,094,457)
-------- ------------
Options outstanding at September 30, 2009 ... 27,127 $ 2,867,481
======== ============

Page 10

ITEM 2. CONTROLS AND PROCEDURES.

(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).

(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
quarter that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.

ITEM 3. EXHIBITS.

Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) FIRST TRUST ENHANCED EQUITY INCOME FUND

By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President
and Chief Executive Officer
(principal executive officer)

Date NOVEMBER 23, 2009
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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.

Date NOVEMBER 23, 2009
----------------------------------------------------------------------------

By (Signature and Title)* /S/ MARK R. BRADLEY
-------------------------------------------------------
Mark R. Bradley, Treasurer, Controller,
Chief Financial Officer and Chief Accounting Officer
(principal financial officer)

Date NOVEMBER 23, 2009
----------------------------------------------------------------------------

* Print the name and title of each signing officer under his or her signature.