UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number
811-21681
 
Guggenheim Enhanced Equity Income Fund
(Exact name of registrant as specified in charter)
 
227 West Monroe Street, Chicago, IL 60606
(Address of principal executive offices) (Zip code)
 
Amy J. Lee
227 West Monroe Street, Chicago, IL 60606
(Name and address of agent for service)

Registrant’s telephone number, including area code: (312) 827-0100

Date of fiscal year end: December 31
Date of reporting period: January 1, 2016 – March 31, 2016
 
 
Item 1.    Schedule of Investments.
Attached hereto.
 
 
Guggenheim Enhanced Equity Income Fund
  
SCHEDULE OF INVESTMENTS (Unaudited)
March 31, 2016
 
   
Shares
    
Value
EXCHANGE-TRADED FUNDS† - 148.5%
    
SPDR S&P 500 ETF Trust1,2
503,074
  
$
103,411,891
iShares S&P 500 Growth ETF2
361,405
    
41,883,225
iShares S&P 500 Value ETF2
403,214
    
36,265,067
iShares Russell 2000 Index ETF1,2
229,222
    
25,356,538
PowerShares QQQ Trust Series 11,2
231,545
    
25,284,714
Total Exchange-Traded Funds
      
(Cost $241,190,821)
      
232,201,435
SHORT TERM INVESTMENTS† - 1.2%
      
Dreyfus Treasury Prime Cash Management Institutional Shares, 0.00%3
$
1,937,661
    
1,937,661
Total Short Term Investments
      
(Cost $1,937,661)
      
1,937,661
Total Investments - 149.7%
      
(Cost $243,128,482)
  
$
234,139,096
 
 
Contracts
      
 
(100 shares per Contract)
    
Value
OPTIONS WRITTEN† - (1.0)%
    
Call options on:
      
S&P 500 Index Expiring April 2016 with strike price of $2,065.00*
245
  
$
(388,325)
NASDAQ 100 Index Expiring April 2016 with strike price of $4,500.00*
113
    
(452,000)
Russell 2000 Index Expiring April 2016 with strike price of $1,110.00*
456
    
(688,560)
Total Call Options
    
(1,528,885)
Total Options Written
      
(Premiums received $1,695,113)
  
(1,528,885)
Other Assets & Liabilities, net - (48.7)%
  
(76,211,161)
Total Net Assets - 100.0%
$
156,399,050
 
*
Non-income producing security.
†
Value determined based on Level 1 inputs —See Note 2
1
Security represents cover for outstanding written options.
2
Security has been physically segregated as collateral for borrowings outstanding. As of March 31, 2016, the total market value of segregated securities was $232,201,435.
3
Rate indicated is the 7-day yield as of March 31, 2016.
S&P
Standard & Poor’s
 
The following table summarizes the inputs used to value the Fund’s investments at March 31, 2016 (See Note 2 in the Notes to Schedule of Investments):
 
   
 
    
Level 2
    
Level 3
        
   
Level 1
Quoted Prices
    
Significant
Observable
Inputs
    
Significant Unobservable
Inputs
    
Total
  
Assets
                        
Exchange-Traded Funds
  
$
232,201,435
    
$
–
    
$
–
    
$
232,201,435
  
Short Term Investments
    
1,937,661
      
–
      
–
      
1,937,661
  
Total Assets
  
$
234,139,096
    
$
–
    
$
–
    
$
234,139,096
  
Liabilities
                                
Options Written
  
$
1,528,885
    
$
–
    
$
–
    
$
1,528,885
  
Total Liabilities
  
$
1,528,885
    
$
–
    
$
–
    
$
1,528,885
  
 
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current fiscal period.

For the period ended March 31, 2016, there were no transfers between levels.
 
NOTES TO SCHEDULE OF INVESTMENTS (Unaudited)
                                                       

For information on the Guggenheim Enhanced Equity Income Fund’s (the “Fund”) policy regarding valuation of investments and other significant accounting policies, please refer to the Fund’s most recent semiannual or annual shareholder report.

1.
Significant Accounting Policies
 
The Fund operates as an investment company and accordingly follows the Investment Company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.

The preparation of the financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.

The following is a summary of the significant accounting policies followed by the Fund.

The Board of Trustees of the Fund (the “Board”) has adopted policies and procedures for the valuation of the Fund’s investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Fund’s securities or other assets.

Valuations of the Fund’s securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed and will review the valuation of all assets which have been fair valued for reasonableness. The Fund’s officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used by, and valuations provided by, the pricing services.

Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. Eastern time on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date, which may not necessarily represent the last sale price. If there has been no sale on such exchange or NASDAQ on such day, the security is valued at the mean of the most recent bid and ask prices on such day.

Open-end investment companies (“Mutual Funds”) are valued at their NAV as of the close of business on the valuation date. Exchange Traded Funds (“ETFs”) and closed-end investment companies are valued at the last quoted sales price.

Exchange-traded options are valued at the mean between the bid and ask prices on the principal exchange on which they are traded.

Short-term debt securities with a maturity of 60 days or less at acquisition and repurchase agreements are valued at amortized cost, provided such amount approximates market value.

Investments for which market quotations are not readily available are fair valued as determined in good faith by Guggenheim Funds Investment Advisors, LLC (“GFIA” or the “Adviser”), subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value.” Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to: (i) the type of security, (ii) the initial cost of the security, (iii) the existence of any contractual restrictions on the security’s disposition, (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies, (v) quotations or evaluated prices from broker-dealers and/or pricing services, (vi) information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange traded securities), (vii) an analysis of the company’s financial statements, and (viii) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold (e.g. the existence of pending merger activity, public offerings or tender offers that might affect the value of the security).
 
 
2.
Fair Value Measurement

In accordance with GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.).

Level 3— significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions.

The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.

Independent pricing services are used to value a majority of the Fund’s investments. When values are not available from a pricing service, they will be determined under the valuation policies that have been reviewed and approved by the Board. In any event, values are determined using a variety of sources and techniques, including: market prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information and analysis.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.

3.
Federal Income Taxes
 
As of March 31, 2016, the cost of investments and accumulated unrealized appreciation/depreciation on investments for federal income tax purposes are as follows:
 
Cost of
Investments for
Tax Purposes
Gross Tax
Unrealized
Appreciation
Gross Tax Unrealized
Depreciation
Net Tax Unrealized
Depreciation
$243,405,369
$  -
$(9,266,273)
 $(9,266,273)
 
 
Item 2.    Controls and Procedures.

(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “Investment Company Act”)) as of a date within 90 days of the filing date of this report and have concluded, based on such evaluation,  that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant on this Form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b) There was no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the registrant’s last fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting.

Item 3.    Exhibits.

  A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act (17 CFR 270.30a-2(a)), is 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.

Guggenheim Enhanced Equity Income Fund 

By:        /s/ Donald C. Cacciapaglia
Name:   Donald C. Cacciapaglia
Title:     President and Chief Executive Officer


Date:     May 26, 2016


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/ Donald C. Cacciapaglia
Name:   Donald C. Cacciapaglia
Title:     President and Chief Executive Officer

Date:     May 26, 2016




By:        /s/ John L. Sullivan
Name:   John L. Sullivan
Title:     Chief Financial Officer, Chief Accounting Officer and Treasurer

Date:     May 26, 2016