As filed with the Securities and Exchange Commission on October 26, 2007.
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1933 Act File No. 333-116023
1940 Act File No. 811-21586
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement.
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
FIRST TRUST ENHANCED EQUITY INCOME FUND
(formerly known as First Trust/Fiduciary Asset Management Covered Call Fund)
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
FIRST TRUST ENHANCED EQUITY INCOME FUND
(FORMERLY KNOWN AS FIRST TRUST/FIDUCIARY ASSET MANAGEMENT COVERED CALL FUND)
1001 WARRENVILLE ROAD
SUITE 300
LISLE, ILLINOIS 60532
October 29, 2007
Dear Shareholder:
The accompanying materials relate to the Special Meeting of
Shareholders (referred to as the "Meeting") of First Trust Enhanced Equity
Income Fund (formerly known as First Trust/Fiduciary Asset Management Covered
Call Fund) (the "Fund"). The Meeting will be held at the offices of First Trust
Advisors L.P., 1001 Warrenville Road, Suite 300, Lisle, Illinois 60532, on
Tuesday, January 8, 2008, at 4:00 p.m. Central Time.
At the Meeting, you will be asked to vote on a proposal to approve a
new investment sub-advisory agreement with a new sub-adviser for the Fund, to
vote on a proposal to approve a change in the concentration policy of the Fund
and to transact such other business as may properly come before the Meeting and
any adjournments thereof. The proposals are described in the accompanying Notice
of Special Meeting of Shareholders and Proxy Statement.
YOUR PARTICIPATION AT THE MEETING IS VERY IMPORTANT. If you cannot
attend the Meeting, you may participate by proxy. As a Shareholder, you cast one
vote for each share of the Fund that you own and a proportionate fractional vote
for any fraction of a share that you own.
Please take a few moments to read the enclosed materials and then cast
your votes on the enclosed proxy card.
VOTING TAKES ONLY A FEW MINUTES. EACH SHAREHOLDER'S VOTES ARE
IMPORTANT. YOUR PROMPT RESPONSE WILL BE MUCH APPRECIATED.
After you have voted on the proposals, please be sure to sign your
proxy card and return it in the enclosed postage-paid envelope.
We appreciate your participation in this important Meeting. Thank you.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board
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IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE PROPOSALS OR HOW
TO VOTE YOUR SHARES, CALL YOUR FUND'S PROXY SOLICITOR, THE ALTMAN GROUP, AT
(800) 926-7043 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN TIME.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense involved in validating your
vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration.
3. All Other Accounts: The capacity of the individual signing the
proxy should be indicated unless it is reflected in the form of registration.
For example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr., UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
FIRST TRUST ENHANCED EQUITY INCOME FUND
1001 WARRENVILLE ROAD
SUITE 300
LISLE, ILLINOIS 60532
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on January 8, 2008
October 29, 2007
To the Shareholders of the above Fund:
Notice is hereby given that the Special Meeting of Shareholders
(referred to as the "Meeting") of First Trust Enhanced Equity Income Fund
(formerly known as First Trust/Fiduciary Asset Management Covered Call Fund)
(the "Fund"), a Massachusetts business trust, will be held at the offices of
First Trust Advisors L.P., 1001 Warrenville Road, Suite 300, Lisle, Illinois
60532, on Tuesday, January 8, 2008, at 4:00 p.m. Central Time, for the following
purposes:
1. To approve a new investment sub-advisory agreement among
the Fund, First Trust Advisors L.P., as investment adviser, and
Chartwell Investment Partners, L.P., as investment sub-adviser;
2. To approve a change in the Fund's concentration policy
from one that prohibits it from investing 25% or more of its total
assets in securities of issuers in any single industry or sector of the
economy to one that prohibits it from investing 25% or more of its
total assets in securities of issuers in any single industry; and
3. To transact such other business as may properly come
before the Meeting and any adjournments thereof.
The Board of Trustees has fixed the close of business on October 15,
2007 as the record date for the determination of Shareholders entitled to notice
of and to vote at the Meeting and any adjournments or postponements thereof.
By order of the Board of Trustees,
/s/ W. Scott Jardine
W. Scott Jardine
Secretary
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SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO PROMPTLY
COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE WHICH
DOES NOT REQUIRE POSTAGE IF MAILED IN THE CONTINENTAL UNITED STATES.
INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE
COVER. IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE PROPOSALS
OR HOW TO VOTE YOUR SHARES, CALL YOUR FUND'S PROXY SOLICITOR, THE ALTMAN GROUP,
AT (800) 926-7043 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN TIME.
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This page intentionally left blank.
FIRST TRUST ENHANCED EQUITY INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS
January 8, 2008
1001 WARRENVILLE ROAD
SUITE 300
LISLE, ILLINOIS 60532
PROXY STATEMENT
October 29, 2007
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Trustees (the "Board") of First Trust Enhanced Equity
Income Fund (formerly known as First Trust/Fiduciary Asset Management Covered
Call Fund) (the "Fund"), a Massachusetts business trust, for use at the Special
Meeting of Shareholders of the Fund to be held on Tuesday, January 8, 2008, at
4:00 p.m. Central Time, at the offices of First Trust Advisors L.P., 1001
Warrenville Road, Suite 300, Lisle, Illinois 60532, and at any adjournments or
postponements thereof (referred to collectively as the "Meeting"). A Notice of
Special Meeting of Shareholders and a proxy card accompany this Proxy Statement.
Proxy solicitations will be made, beginning on or about October 29,
2007, primarily by mail. However proxy solicitations may also be made by
telephone or personal interviews conducted by (i) officers of the Fund; (ii) The
Altman Group ("Altman"), a proxy solicitor that will provide proxy solicitation
services in connection with the proposals; (iii) First Trust Advisors L.P.
("First Trust Advisors" or the "Adviser"), the investment adviser of the Fund;
(iv) PFPC Inc. ("PFPC"), the administrator, accounting agent and transfer agent
of the Fund and a subsidiary of The PNC Financial Services Group Inc.; or (v)
any affiliates of those entities.
The Fund's most recent annual and semi-annual reports are available
upon request, without charge, by writing to the Adviser at 1001 Warrenville
Road, Suite 300, Lisle, Illinois 60532, by calling (800) 988-5891 or by visiting
the Fund's website at http://www.ftportfolios.com. This Proxy Statement and the
enclosed proxy card will first be mailed to shareholders on or about October 29,
2007.
The costs of preparing, printing and mailing this Proxy Statement and
its enclosures and all other costs in connection with the solicitation of
proxies (including amounts charged by Altman for its proxy solicitation
services, which amounts are expected to be approximately $41,000), will be paid
by Chartwell Investment Partners, L.P. and the Adviser. They will also reimburse
brokerage firms and others for their expenses in forwarding solicitation
materials to the beneficial owners of Fund shares.
If the enclosed proxy card is properly executed and returned in time to
be voted at the Meeting, the Fund shares represented thereby will be voted in
accordance with the instructions marked thereon. If no instructions are marked
on the enclosed proxy card, Fund shares represented thereby will be voted in the
discretion of the persons named on the proxy card. Accordingly, unless
instructions to the contrary are marked thereon, a proxy will be voted FOR the
proposal to approve the new investment sub-advisory agreement, FOR the proposal
to approve the change in concentration policy of the Fund and at the discretion
of the named proxies on any other matters that may properly come before the
Meeting and any adjournments thereof as deemed appropriate. Any shareholder who
has given a proxy has the right to revoke it at any time prior to its exercise
either by attending the Meeting and voting his or her shares in person, or by
timely submitting a letter of revocation or a later-dated proxy to the Fund at
the above address. A list of shareholders entitled to notice of and to be
present and to vote at the Meeting will be available at the offices of the Fund,
1001 Warrenville Road, Suite 300, Lisle, Illinois 60532, for inspection by any
shareholder during regular business hours beginning 10 days prior to the date of
the Meeting. Shareholders will need to show valid identification and proof of
share ownership to be admitted to the Meeting or to inspect the list of
shareholders.
Under the By-Laws of the Fund, a quorum is constituted by the presence
in person or by proxy of the holders of thirty-three and one-third percent
(33-1/3%) of the voting power of the outstanding shares entitled to vote on a
matter. For the purposes of establishing whether a quorum is present, all shares
present and entitled to vote, including abstentions and broker non-votes (i.e.,
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or the persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter), shall be counted. Any meeting of shareholders may be postponed prior to
the meeting with notice to the shareholders entitled to vote at that meeting.
Any meeting of shareholders may, by action of the chairman of the meeting, be
adjourned to permit further solicitation of proxies without further notice with
respect to one or more matters to be considered at such meeting to a designated
time and place, whether or not a quorum is present with respect to such matter.
In addition, upon motion of the chairman of the meeting, the question of
adjournment may be submitted to a vote of the shareholders, and in that case,
any adjournment with respect to one or more matters must be approved by the vote
of holders of a majority of the shares present and entitled to vote with respect
to the matter or matters adjourned, and without further notice. Unless a proxy
is otherwise limited in this regard, any shares present and entitled to vote at
a meeting, including broker non-votes, may, at the discretion of the proxies
named therein, be voted in favor of such an adjournment or adjournments.
The close of business on October 15, 2007 has been fixed as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of and to vote at the Meeting and any adjournments or postponements
thereof.
The Fund has one class of shares of beneficial interest, par value
$0.01 per share, known as common shares ("Shares"). On the Record Date, the Fund
had 19,973,164 Shares outstanding. Shares of the Fund are listed on the New York
Stock Exchange under the ticker symbol "FFA."
The vote of a majority of the outstanding voting securities of the Fund
will be required for the approval of the new investment sub-advisory agreement
for the Fund. The vote of a majority of the outstanding voting securities of the
Fund will also be required for the approval of the new concentration policy of
the Fund. The "vote of a majority of the outstanding voting securities" is
defined in the Investment Company Act of 1940, as amended (together with the
rules and regulations thereunder, the "1940 Act"), as the vote of the lesser of
(i) 67% or more of the shares of the Fund present at the Meeting if the holders
of more than 50% of the outstanding shares of the Fund are present in person or
represented by proxy; or (ii) more than 50% of the outstanding shares of the
Fund. Abstentions and broker non-votes will have the effect of a vote against a
proposal. Shareholders of record on the Record Date are entitled to one vote for
each Share the shareholder owns and a proportionate fractional vote for any
fraction of a Share the shareholder owns.
-2-
In order that your Shares may be represented at the Meeting, you are
requested to:
o indicate your instructions on the proxy card;
o date and sign the proxy card;
o mail the proxy card promptly in the enclosed envelope which
requires no postage if mailed in the continental United States;
and
o allow sufficient time for the proxy card to be received by
5:00 p.m. Eastern Time, on Monday, January 7, 2008. (However,
proxies received after this date may still be voted in the
event the Meeting is adjourned or postponed to a later date.)
-3-
PROPOSAL 1: APPROVAL OF A NEW INVESTMENT SUB-ADVISORY AGREEMENT FOR THE FUND
AS DESCRIBED BELOW, THE FUND'S PREVIOUS INVESTMENT SUB-ADVISORY
AGREEMENT AMONG THE FUND, THE ADVISER AND FIDUCIARY ASSET MANAGEMENT, LLC
AUTOMATICALLY TERMINATED ON SEPTEMBER 14, 2007. ON SEPTEMBER 21, 2007, THE BOARD
DETERMINED THAT IT WOULD BE IN THE BEST INTERESTS OF THE FUND TO SELECT
CHARTWELL INVESTMENT PARTNERS, L.P. AS THE NEW INVESTMENT SUB-ADVISER FOR THE
FUND AND APPROVED, SUBJECT TO SHAREHOLDER APPROVAL, A NEW INVESTMENT
SUB-ADVISORY AGREEMENT AMONG THE FUND, THE ADVISER AND CHARTWELL INVESTMENT
PARTNERS, L.P. (THE "NEW SUB-ADVISORY AGREEMENT"). IN ADDITION, AS PERMITTED BY
THE 1940 ACT, ON SEPTEMBER 14, 2007, THE BOARD OF TRUSTEES OF THE FUND,
INCLUDING A MAJORITY OF THE TRUSTEES WHO ARE NOT "INTERESTED PERSONS" OF THE
FUND AS THAT TERM IS DEFINED IN THE 1940 ACT (SUCH TRUSTEES, THE "INDEPENDENT
TRUSTEES"), APPROVED AN INTERIM INVESTMENT SUB-ADVISORY AGREEMENT AMONG THE
FUND, THE ADVISER AND CHARTWELL INVESTMENT PARTNERS, L.P., WHICH IS CURRENTLY IN
EFFECT AND WILL CONTINUE TO BE IN EFFECT FOR 150 DAYS AFTER THE CLOSING OF THE
TRANSACTION DESCRIBED BELOW OR UNTIL SHAREHOLDERS APPROVE THE NEW SUB-ADVISORY
AGREEMENT, WHICHEVER OCCURS FIRST (UNLESS TERMINATED SOONER IN ACCORDANCE WITH
ITS TERMS). THE BOARD RECOMMENDS THAT SHAREHOLDERS APPROVE THE NEW SUB-ADVISORY
AGREEMENT.
BACKGROUND AND REASON FOR VOTE
On August 26, 2004, the Fund entered into an investment sub-advisory
agreement (the "Prior Sub-Advisory Agreement") with the Adviser and Fiduciary
Asset Management, LLC ("FAMCO" or the "Prior Sub-Adviser"). In April 2007, FAMCO
and Piper Jaffray Companies ("Piper Jaffray") entered into a definitive
agreement (the "Transaction Agreement") pursuant to which Piper Jaffray agreed
to acquire FAMCO (the "Transaction"). The Transaction was consummated on
September 14, 2007 and resulted in a change in control of the Prior Sub-Adviser,
which constituted an "assignment" of the Prior Sub-Advisory Agreement, as that
term is used in the 1940 Act. Pursuant to the terms of the Prior Sub-Advisory
Agreement and the requirements of the 1940 Act, the Prior Sub-Advisory Agreement
automatically terminated upon its assignment.
At a meeting of the Board held on September 14, 2007, the Board, after
careful consideration of a variety of factors and possible alternatives to the
Fund's investment sub-advisory arrangement (see "BOARD CONSIDERATIONS" below),
determined that the appointment of Chartwell Investment Partners, L.P.
("Chartwell"), an investment adviser registered with the Securities and Exchange
Commission (the "SEC") pursuant to the Investment Advisers Act of 1940, was in
the best interests of the Fund. Accordingly, as permitted under the 1940 Act,
the Board unanimously approved an interim investment sub-advisory agreement (the
"Interim Sub-Advisory Agreement") among the Adviser, the Fund and Chartwell to
ensure the continuation of investment sub-advisory services to the Fund upon the
termination of the Prior Sub-Advisory Agreement. The Interim Sub-Advisory
Agreement has been in effect since September 14, 2007. In addition, at its
meeting on September 21, 2007, the Board approved, subject to shareholder
approval, the New Sub-Advisory Agreement among the Fund, the Adviser and
Chartwell.
Pursuant to Rule 15a-4 under the 1940 Act, the Interim Sub-Advisory
Agreement will be in effect no longer than through February 11, 2008 (i.e., 150
days after the termination of the Prior Sub-Advisory Agreement described above).
If shareholders of the Fund do not approve the New Sub-Advisory Agreement by
that date, the Interim Sub-Advisory Agreement will remain in effect through that
date, and the Board will take such action as it deems to be in the best
-4-
interests of the Fund, which might include seeking approval of a new investment
sub-advisory agreement or taking any other steps deemed appropriate by the
Board. The Interim Sub-Advisory Agreement will automatically terminate upon the
approval by shareholders of the New Sub-Advisory Agreement. In addition, the
Interim Sub-Advisory Agreement may be terminated by action of the Board or by a
vote of the majority of the outstanding voting securities of the Fund upon 60
days' written notice.
CHARTWELL
General Information/Investment Philosophy
Chartwell, located at 1235 Westlakes Drive, Berwyn, Pennsylvania 19312,
is an SEC-registered investment adviser. Founded in 1997, Chartwell is a
primarily employee-owned investment firm focusing on institutional,
sub-advisory, and private client relationships. The firm is a research-based
equity and fixed-income manager with a disciplined, team-oriented investment
process. As of August 31, 2007, Chartwell had 53 employees and approximately
$5.6 billion of assets under management.
Chartwell's investment philosophy is centered on dividends as a key
component of total return and a proven route to strong risk-adjusted performance
in the U.S. equity markets. According to Chartwell, it employs fundamental,
research driven, bottom-up analysis in its quest to build well diversified
portfolios from within the highest two quintiles of dividend yielding equity
securities. By coupling this approach with an out-of-the-money option overwrite
strategy, Chartwell attempts to deliver an above average income stream while
seeking the opportunity for capital appreciation.
In connection with the termination of the Prior Sub-Advisory Agreement
and appointment of Chartwell as sub-adviser under the Interim Sub-Advisory
Agreement, the Board also approved two important changes involving the Fund.
First, the Fund's name was changed from First Trust/Fiduciary Asset Management
Covered Call Fund to First Trust Enhanced Equity Income Fund, effective
September 30, 2007. Second, a change in the Fund's investment strategy was
adopted, which will become effective on or about November 19, 2007. Although the
Fund's investment objective will remain to provide a high level of current
income and gains and, to a lesser extent, capital appreciation, and the Fund
will seek to achieve this objective by investing in a diversified portfolio of
equity securities and writing (selling) call options, beginning on or about
November 19, 2007, it will no longer be required to write (or sell) call options
on at least 80% of the Fund's managed assets. Instead, it will write (sell) call
options in amounts Chartwell deems appropriate and consistent with the Fund's
investment objective. In addition, Chartwell intends to write index call options
in certain cases as an alternative to writing calls on individual equity
securities.
-5-
Organizational Information
Chartwell is a Pennsylvania limited partnership. The general partner of
Chartwell is Chartwell GP, Inc. ("Chartwell GP"), a Pennsylvania corporation
that has elected to be treated as an "S corporation" for federal tax purposes.
The address of Chartwell GP is 1235 Westlakes Drive, Berwyn, Pennsylvania 19312.
Chartwell GP owns 1% of Chartwell and currently has 11 equal shareholders, eight
of whom are employees or retired employees of Chartwell, and three of whom are
limited partners of Maverick Partners, L.P. ("Maverick"). Maverick, a
Pennsylvania limited partnership whose general partner is Bobcat Partners, L.P.,
a Pennsylvania limited partnership, was formed in 1997 for the sole purpose of
investing seed capital to fund the start of Chartwell's operations. Limited
partnership interests in Maverick are currently held by various individuals.
Maverick currently holds a minority ownership interest in Chartwell and is not
actively involved in the operations of Chartwell. The remainder of the ownership
interests in Chartwell (approximately 75%) are held by approximately 35
employees and retired employees of Chartwell.
The operations of Chartwell and Chartwell GP are governed by the board
of directors of Chartwell GP (the "Chartwell GP Board"). The names and principal
occupations of the persons who are principal executive officers of Chartwell
and/or Chartwell GP and/or members of the Chartwell GP Board are set forth
below:
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NAME POSITION(S) WITH CHARTWELL AND CHARTWELL GP AND PRINCIPAL OCCUPATION
--------------------- -------------------------------------------------------------------------------------
Edward N. Antoian Board Member and Vice President (Chartwell GP); Managing Partner and Senior Portfolio
Manager (Chartwell)
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G. Gregory Hagar Treasurer and Secretary (Chartwell GP); Managing Partner, Chief Financial Officer
and Chief Compliance Officer (Chartwell)
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Michael T. Kennedy Board Member (Chartwell GP); Private Investor
--------------------- -------------------------------------------------------------------------------------
Michael J. McCloskey Vice President (Chartwell GP); Managing Partner, President and Director of Client
Services and Marketing (Chartwell)
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Timothy J. Riddle Board Member and President (Chartwell GP); Managing Partner and Chief Executive
Officer (Chartwell)
--------------------- -------------------------------------------------------------------------------------
Bernard P. Schaffer Board Member and Vice President (Chartwell GP); Managing Partner and Senior
Portfolio Manager (Chartwell)
--------------------- -------------------------------------------------------------------------------------
The address of each of the individuals listed above is 1235 Westlakes Drive,
Berwyn, Pennsylvania 19312.
There are currently no officers or trustees of the Fund who are also
officers, employees or directors of, or owners of an interest in, Chartwell or
its parents or subsidiaries. No officers or trustees of the Fund have had any
material interest, direct or indirect, in any material transactions since the
beginning of the most recently completed fiscal year of the Fund, or in any
material proposed transactions, to which Chartwell or any of its parents or
subsidiaries were or are to be a party. Since the beginning of the most recently
completed fiscal year of the Fund, no officer or trustee of the Fund has
purchased or sold any interest in Chartwell or in any of its parents or
subsidiaries.
-6-
Portfolio Manager Information
It is currently anticipated that the portfolio managers identified
below (who are acting as such under the Interim Sub-Advisory Agreement) will
continue to be responsible for the day-to-day management of the Fund's
portfolio:
BERNARD P. SCHAFFER. Mr. Schaffer, Senior Portfolio Manager, is a
Managing Partner of Chartwell. Prior to joining Chartwell, Mr. Schaffer was
employed as a Senior Portfolio Manager at Delaware Investment Advisers
("Delaware") from 1990 to 1997, managing approximately $1.0 billion for
institutional accounts in the value style. Prior to joining Delaware, he was a
Senior Vice President at Prudential Securities.
KEVIN A. MELICH. Mr. Melich, Senior Portfolio Manager, is a
Managing Partner of Chartwell. Prior to joining Chartwell, Mr. Melich was
employed as a Senior Portfolio Manager at Delaware from 1983 to 1997. There he
managed over $1.6 billion for institutional accounts in the value style. From
1979 to 1983, Mr. Melich was a Partner with the economics consulting firm, A.B.
Laffer Associates. From 1964 to 1979, he was the Senior Investment Officer and
Manager of the Trust and Investment Division of Security Trust Company.
DOUGLAS W. KUGLER. Mr. Kugler, Portfolio Manager, is a Principal of
Chartwell. From 1993 to 2003, Mr. Kugler held several positions at Morgan
Stanley Investment Management (Miller Anderson & Sherrerd) including Head of
Mutual Fund Administration and Vice President and Treasurer of the MAS Funds,
Junior Associate in the Equity Department, and, his last position held prior to
joining Chartwell, Senior Associate and Analyst for the Large Cap Value team.
Prior to joining Morgan Stanley, Mr. Kugler was an Assistant Vice President and
Senior Accounting Officer at Provident Financial Processing Corporation.
Other Funds Advised and Sub-Advised by Chartwell
Chartwell acts as investment adviser or investment sub-adviser for six
registered investment companies, for which Chartwell manages a total of
approximately $1.9 billion in assets as of August 31, 2007. One of these
registered investment companies is the Chartwell Dividend and Income Fund, Inc.
(the "Chartwell Fund"), a balanced fund with equity and fixed income securities
portions. The investment objective of the Chartwell Fund with respect to its
equity portion is similar to that of the Fund. Information about the size of the
Chartwell Fund and the annual rate of compensation paid to Chartwell for its
services as investment adviser to the Chartwell Fund is set forth below:
------------------------------------------- ----------------------------------------- -----------------------------------------
FUND NAME ASSETS UNDER MANAGEMENT AS OF ANNUAL RATE OF COMPENSATION
SEPTEMBER 30, 2007
------------------------------------------- ----------------------------------------- -----------------------------------------
Chartwell Dividend and Income Fund, Inc. Approximately $204 million managed 0.85% of managed assets (contractual
assets (approximately $149 million net fee of 0.95% with fee waiver of 0.10%)
assets taking into account leverage)
------------------------------------------- ----------------------------------------- -----------------------------------------
THE PRIOR SUB-ADVISORY AGREEMENT
The Prior Sub-Advisory Agreement, dated August 26, 2004, was approved
by the Board of Trustees, including a majority of the Independent Trustees, on
June 7, 2004 and by the initial shareholder of the Fund on August 17, 2004.
Since the beginning of the Fund's last fiscal year, the continuation of the
Prior Sub-Advisory Agreement was approved by the Board twice, most recently on
March 12, 2007 prior to the announcement of the Transaction. The Prior
Sub-Advisory Agreement provided for its automatic termination in the event of an
"assignment," as defined in the 1940 Act. As described above, a change in
-7-
ownership and control of the Prior Sub-Adviser therefore terminated the Prior
Sub-Advisory Agreement on September 14, 2007.
COMPARISON OF THE NEW SUB-ADVISORY AGREEMENT AND PRIOR SUB-ADVISORY AGREEMENT
The terms of the New Sub-Advisory Agreement are substantially similar
to those of the Prior Sub-Advisory Agreement, except for the effective date and
the differences noted below. Except for the effective date and termination
provisions, the terms of the Interim Sub-Advisory Agreement, which is currently
in effect, are substantially similar to those of the New Sub-Advisory Agreement.
The rate of compensation paid to Chartwell under both the Interim Sub-Advisory
Agreement and the New Sub-Advisory Agreement is the same as that paid to the
Prior Sub-Adviser under the Prior Sub-Advisory Agreement.
Below is a brief comparison of certain terms of the Prior Sub-Advisory
Agreement to the corresponding terms of the New Sub-Advisory Agreement. For a
more complete understanding of the New Sub-Advisory Agreement, please refer to
the form of the New Sub-Advisory Agreement provided in Appendix A hereto.
Advisory Services. The advisory services to be provided by Chartwell to
the Fund under the New Sub-Advisory Agreement will be substantially similar to
those advisory services previously provided by the Prior Sub-Adviser under the
Prior Sub-Advisory Agreement. Both the Prior Sub-Advisory Agreement and the New
Sub-Advisory Agreement provide that the sub-adviser will furnish an investment
program in respect of, make investment decisions for, and place all orders for
the purchase and sale of securities for the Fund's investment portfolio, all on
behalf of the Fund and subject to the supervision of the Fund's Board and the
Adviser. As was the case under the Prior Sub-Advisory Agreement, under the New
Sub-Advisory Agreement, the sub-adviser is required to monitor the Fund's
investments and to comply with the provisions of the Fund's Declaration of Trust
and By-Laws and the stated investment objectives, policies and restrictions of
the Fund. In addition, under the Prior Sub-Advisory Agreement, the Prior
Sub-Adviser agreed to vote all proxies solicited by or with respect to the
issuers of securities of the Fund corresponding to assets of the Fund's
investment portfolio allocated by the Adviser to the sub-adviser. Although this
obligation is not explicitly set forth in the New Sub-Advisory Agreement,
Chartwell has undertaken to vote such proxies.
Brokerage. As was the case under the Prior Sub-Advisory Agreement, the
New Sub-Advisory Agreement authorizes the sub-adviser to select the brokers or
dealers that will execute the purchases and sales of portfolio investments for
the Fund, and directs the sub-adviser to use its commercially reasonable efforts
to obtain best execution, which includes most favorable net results and
execution of the Fund's orders, taking into account all appropriate factors,
including price, dealer spread or commission, size and difficulty of the
transaction and research or other services provided.
Fees. As was the case under the Prior Sub-Advisory Agreement, under the
New Sub-Advisory Agreement, the Adviser pays the sub-adviser a portfolio
management fee on a monthly basis. Both the Prior Sub-Advisory Agreement and the
New Sub-Advisory Agreement provide that for services provided and expenses
assumed, the Adviser will pay the sub-adviser a fee equal to the annual rate of
0.50% of the Fund's "Managed Assets." The term "Managed Assets" means the
average daily gross assets of the Fund, minus the sum of the Fund's accrued and
unpaid dividends on any outstanding common shares and accrued liabilities
(including the value of call options written (sold)).
-8-
In addition, under the Prior Sub-Advisory Agreement, the Prior
Sub-Adviser agreed to pay one half of certain offering costs and organizational
costs of the Fund. Because that provision is no longer relevant, it will not be
included in the New Sub-Advisory Agreement.
During the fiscal year of the Fund ended December 31, 2006, the
aggregate fees paid by the Adviser to the Prior Sub-Adviser under the Prior
Sub-Advisory Agreement were $1,876,541.28.
Payment of Expenses. Under the Prior Sub-Advisory Agreement, the Prior
Sub-Adviser agreed to pay all expenses it incurred in connection with its
activities under such Agreement other than the cost of securities and other
assets (including brokerage commissions, if any) purchased for the Fund. Under
the New Sub-Advisory Agreement, the sub-adviser agrees to pay all expenses it
incurs in connection with its activities under such Agreement other than (i) the
cost of securities and other assets purchased for the Fund and (ii) the costs
directly associated with purchasing and selling securities and other assets for
the Fund, if any, including, but not limited to, brokerage commissions, stamps,
duties, taxes and custody fees related to transfers.
Limitation on Liability. The New Sub-Advisory Agreement provides that
the sub-adviser will not be liable for, and the Fund and the Adviser will not
take any action against the sub-adviser to hold the sub-adviser liable for, any
error of judgment or mistake of law or for any loss suffered by the Fund or the
Adviser in connection with the performance of the sub-adviser's duties under the
Agreement, except for a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the sub-adviser in the performance of its duties
under the Agreement, or by reason of its reckless disregard of its obligations
and duties under the Agreement. The Prior Sub-Advisory Agreement included a
provision generally similar to the foregoing.
Continuance. The Prior Sub-Advisory Agreement was originally in effect
for an initial term of two years and could be continued thereafter for
successive one-year periods if such continuance was specifically approved at
least annually in the manner required by the 1940 Act. If the shareholders of
the Fund approve the New Sub-Advisory Agreement, the New Sub-Advisory Agreement
will expire on June 30, 2009, unless continued. Thereafter, the New Sub-Advisory
Agreement may be continued for successive one-year periods if such continuance
is specifically approved at least annually in the manner required by the 1940
Act.
Termination. As was the case under the Prior Sub-Advisory Agreement,
the New Sub-Advisory Agreement provides for termination at any time without the
payment of any penalty by the Adviser or the sub-adviser upon 60 days' written
notice to the other parties, and also provides for termination by the Fund by
action of the Board or by a vote of a majority of the outstanding voting
securities of the Fund upon 60 days' written notice to the sub-adviser without
the payment of any penalty.
In addition, the Prior Sub-Advisory Agreement was, and the New
Sub-Advisory Agreement is, terminable at any time without the payment of any
penalty by the Adviser, by the Board or by vote of a majority of the outstanding
voting securities of the Fund in the event that it is established by a court of
competent jurisdiction that the sub-adviser or any of its officers or directors
has taken any action that results in a breach of the material covenants of the
sub-adviser set forth in the Agreement.
-9-
RELATED AGREEMENT
On September 14, 2007, Chartwell and the Adviser entered into an
agreement separate from the Interim Sub-Advisory Agreement to address certain
matters pertaining to the Fund (such agreement, the "Related Agreement"). Among
other things, under the Related Agreement, Chartwell is obligated to reimburse
the Adviser for a portion of certain "incentive fee" payments payable by the
Adviser to certain underwriters of the Fund's initial public offering up to
specified limits ("Reimbursement Payments"). Until the termination of Prior
Sub-Advisory Agreement on September 14, 2007, the Prior Sub-Adviser was
obligated to make Reimbursement Payments under an agreement similar to the
Related Agreement. If the Interim Sub-Advisory Agreement is terminated and the
New Sub-Advisory Agreement does not become effective, Chartwell will have no
obligation to make Reimbursement Payments to the Adviser following the
termination of the Interim Sub-Advisory Agreement.
BOARD CONSIDERATIONS
The Board, including a majority of the Independent Trustees, approved
the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement
(collectively, the "Agreements") at meetings held on September 14, 2007 and
September 21, 2007, respectively. The Board determined that the terms of the
Agreements are fair and reasonable and in the best interests of the Fund.
In April 2007, the Board was informed that FAMCO had entered into the
Transaction Agreement with Piper Jaffray and that, if the Transaction was
consummated, the Prior Sub-Advisory Agreement would terminate pursuant to its
terms and the requirements of the 1940 Act. In light of the potential
termination of the Prior Sub-Advisory Agreement, the Board, over the course of
several months, requested and evaluated all information it deemed reasonably
necessary to evaluate the various alternatives the Fund could pursue if the
Transaction were completed. As part of the review process, the Board met on
several occasions with representatives of First Trust Advisors to discuss the
Transaction. The Independent Trustees also asked that written requests for
information be sent on their behalf to FAMCO and Piper Jaffray. On June 11,
2007, the Board met with representatives of FAMCO and Piper Jaffray and received
a presentation on the Transaction. The Board was able to ask questions about the
possible effects of the Transaction on the services provided by FAMCO to the
Fund. At the June 11th meeting, the Board also requested that the Adviser
research and provide information on potential alternative sub-advisers for its
July meeting. At the July 18, 2007 meeting, the Board met with representatives
of Chartwell and received a presentation regarding Chartwell's investment style.
Throughout the entire review process, the Independent Trustees were advised by
their independent legal counsel.
As a result of the consummation of the Transaction and the termination
of the Prior Sub-Advisory Agreement, the Board held a special meeting on
September 14, 2007 to consider how to proceed. At this meeting, the Adviser
recommended to the Board that Chartwell serve as the new sub-adviser for the
Fund. Based on its consideration of all the information received prior to the
closing of the Transaction, the Board appointed Chartwell as the interim
sub-adviser to the Fund, pursuant to the Interim Sub-Advisory Agreement. At a
special meeting on September 21, 2007, the Board approved the New Sub-Advisory
Agreement and determined to recommend it to shareholders of the Fund for their
approval. The Board noted that, at the request of the Independent Trustees,
First Trust Advisors and/or Chartwell had agreed to bear the costs associated
with soliciting shareholder approval of the New Sub-Advisory Agreement.
-10-
To reach its determination, the Board considered its duties under the
1940 Act, as well as under the general principles of state law in reviewing and
approving advisory contracts; the requirements of the 1940 Act in such matters;
the fiduciary duty of investment advisers with respect to advisory agreements
and compensation; the standards used by courts in determining whether investment
company boards have fulfilled their duties; and the factors to be considered by
the Board in voting on such agreements. To assist the Board in its evaluation of
the Agreements, the Independent Trustees received a report from Chartwell
responding to a request for information from the Adviser and counsel to the
Independent Trustees. The report, among other things, outlined the services to
be provided by Chartwell (including the relevant personnel responsible for these
services and their experience); the sub-advisory fee for the Fund as compared to
fees charged to other clients of Chartwell; the nature of expenses to be
incurred in providing services to the Fund and the potential for economies of
scale, if any; financial data on Chartwell; any fall-out benefits to Chartwell;
and information on Chartwell's compliance program. The Independent Trustees also
met separately on a number of occasions with their independent legal counsel to
discuss the information provided by Chartwell and the Adviser. The Board applied
its business judgment to determine whether the arrangements between the Fund,
the Adviser and Chartwell are reasonable business arrangements from the Fund's
perspective as well as from the perspective of shareholders.
In reviewing the Agreements, the Board considered the nature, quality
and extent of services to be provided by Chartwell under the Agreements. The
Board noted the disciplined, team-oriented investment process of Chartwell and
Chartwell's investment style. The Board considered, in particular, Chartwell's
experience as adviser to another closed-end fund, the Chartwell Dividend and
Income Fund. The Board considered the investment performance of the Fund under
FAMCO, and also considered performance information for a carve-out of the equity
and covered call component of the Chartwell Dividend and Income Fund. In light
of the information presented and the considerations made, the Board concluded
that the nature, quality and extent of services to be provided to the Fund by
Chartwell under the Agreements are expected to be satisfactory.
The Board considered the sub-advisory fees to be paid under the
Agreements, noting that they would be the same as the fees paid under the Prior
Sub-Advisory Agreement. The Board considered the proposed sub-advisory fee and
how it would relate to the overall management fee structure of the Fund, noting
that the fees to be paid to Chartwell would be paid by the Adviser from its
advisory fee. The Board also considered information provided by Chartwell as to
the fees it charges to other clients, noting, in particular, that its advisory
fee to the Chartwell Dividend and Income Fund was higher than the sub-advisory
fee for the Fund. On the basis of all the information provided on the fees of
the Fund, the Board concluded that the sub-advisory fees to be paid under the
Agreements were reasonable and appropriate in light of the nature, quality and
extent of services expected to be provided by Chartwell under the Agreements.
The Board considered that the Fund's fee structure does not enable
shareholders to benefit from any economies of scale achieved by Chartwell. The
Board concluded that in light of the size of the Fund, the fees to be paid under
the Agreements as well as under the investment management agreement with the
Adviser reflect an appropriate sharing of any economies of scale. With respect
to Chartwell's anticipated profitability under the Agreements, the Board noted
that the sub-advisory fee rate was negotiated at arm's length between the
Adviser and Chartwell, and that Chartwell would be paid by the Adviser. Based on
the information provided, the Board concluded that the profitability of the
Agreements to Chartwell was anticipated to be not unreasonable. The Board
-11-
considered the fall-out benefits expected to be realized by Chartwell from its
relationship with the Fund, including possible soft dollar arrangements.
Based on all of the information considered and the conclusions reached,
the Board, including a majority of the Independent Trustees, determined that the
terms of the Agreements are fair and reasonable and that the approval of the
Agreements is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.
SHAREHOLDER APPROVAL AND REQUIRED VOTE
To become effective, the New Sub-Advisory Agreement must be approved by
a vote of a majority of the outstanding voting securities of the Fund. The "vote
of a majority of the outstanding voting securities" is defined in the 1940 Act
as the vote of the lesser of (i) 67% or more of the Shares of the Fund present
at the Meeting if the holders of more than 50% of the outstanding Shares of the
Fund are present in person or represented by proxy; or (ii) more than 50% of the
outstanding Shares of the Fund. For purposes of determining the approval of the
New Sub-Advisory Agreement, abstentions and broker non-votes will have the
effect of a vote against the proposal.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 1. IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING PROPOSAL
1 OR HOW TO VOTE YOUR SHARES, CALL YOUR FUND'S PROXY SOLICITOR, THE ALTMAN
GROUP, AT (800) 926-7043 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN TIME.
-12-
PROPOSAL 2: APPROVAL OF CHANGE IN CONCENTRATION POLICY
AS DESCRIBED BELOW, IN CONNECTION WITH THE APPROVAL OF THE NEW
SUB-ADVISORY AGREEMENT DESCRIBED IN PROPOSAL 1 AND THE BOARD-ADOPTED CHANGE IN
INVESTMENT STRATEGY RELATING TO THE FUND'S WRITING (SELLING) OF CALL OPTIONS
DESCRIBED IN PROPOSAL 1 ABOVE (ABOUT WHICH SHAREHOLDERS HAVE BEEN PREVIOUSLY
NOTIFIED), THE FUND IS SEEKING APPROVAL OF A CHANGE IN ITS CONCENTRATION POLICY
SO THAT THE FUND WILL NO LONGER BE PROHIBITED FROM INVESTING 25% OR MORE OF ITS
TOTAL ASSETS IN ANY SINGLE SECTOR OF THE ECONOMY. TO PERMIT THE FUND TO INVEST
IN ACCORDANCE WITH ITS NEW INVESTMENT MANDATE, YOU ARE BEING ASKED TO APPROVE
THE PROPOSAL DESCRIBED BELOW.
BACKGROUND AND DESCRIPTION OF PROPOSED CHANGE
Certain investment restrictions of the Fund are matters of fundamental
policy and may not be changed with respect to the Fund without the approval of
the shareholders of the Fund. Under the 1940 Act, all funds are required to have
a fundamental policy about the concentration of their investments in a
particular industry or group of industries. The staff of the SEC has taken the
position that the investment of 25% or more of a fund's total assets in one or
more issuers conducting their principal activities in the same industry or group
of industries constitutes concentration. A broad group of industries may be
referred to as a "sector." For example, the financial sector consists of, among
others, the insurance and banking industries. Other examples of sectors include
technology, telecommunications and healthcare, each of which consists of a
particular group of industries.
The following chart contains the Fund's current fundamental investment
policy regarding concentration and its proposed replacement. If the proposal is
approved, the Fund will no longer be prohibited from investing 25% or more of
its total assets in any single sector of the economy, although it will continue
to be prohibited from concentrating its total assets in any particular industry.
The current policy prohibiting the Fund from investing 25% or more of its total
assets in securities of issuers in a sector of the economy may cause the
sub-adviser to forego investment opportunities that the sub-adviser may consider
to have greater potential than other investments. The proposed change will
provide the sub-adviser with the flexibility to respond to market developments,
and with the ability to invest more of the Fund's assets in a particular sector.
-------------------------------------- ----------------------------------
CURRENT FUNDAMENTAL PROPOSED FUNDAMENTAL
INVESTMENT POLICY INVESTMENT POLICY
--------------------------------------- ----------------------------------
The Fund may not invest 25% or more The Fund may not invest 25% or more
of its total assets in ecurities of of its total assets in securities
issuers in any single industry or sector of issuers in any single industry,
of the economy, provided there shall be provided there shall be no limita-
no limitation on the purchase of tion on the purchase of obligations
obligations issued or guaranteed by the issued or guaranteed by the U.S.
U.S. Government, its agencies or Government, its agencies or
instrumentalities. instrumentalities.
-------------------------------------- ----------------------------------
At the special meeting of the Board of Trustees of the Fund held on
September 21, 2007, First Trust Advisors recommended to the Board that the
Fund's current fundamental investment policy concerning concentration be
modified as shown above to provide additional flexibility, thereby facilitating
the Fund's ability to invest in accordance with its new investment mandate
referred to above. At the same meeting, the Board of Trustees of the Fund,
including a majority of the Independent Trustees, approved such change, subject
to approval by shareholders of the Fund. The 1940 Act requires that such changes
in the Fund's fundamental investment policy be approved by the shareholders of
the Fund in order for them to become effective. In the event shareholders do not
-13-
approve such change, the Fund will continue to be managed and operated in
accordance with its current fundamental investment policy regarding
concentration, as shown above.
RISKS
If the change in fundamental investment policy described above is
approved by shareholders, the Fund will no longer be restricted with respect to
its investments in sectors of the economy. Accordingly, the Fund may become
overweighted in certain sectors in comparison to the market as a whole, even
though it will continue to be prohibited from concentrating its total assets in
any particular industry. The sectors in which the Fund may be overweighted could
vary from time to time.
As noted above, sectors are comprised of groups of industries. A risk
of investing significantly in a sector is the possibility that stocks within the
same group of industries will decline in price due to sector-specific market or
economic developments. More specifically, if shareholders approve the change and
if the Fund invests a significant portion of its assets in a particular sector,
the Fund will be subject to the risk that companies in that sector are likely to
react similarly to legislative or regulatory changes, economic, business or
other developments, adverse market conditions and/or increased competition
affecting that sector.
SHAREHOLDER APPROVAL AND REQUIRED VOTE
To become effective, the change in concentration policy must be
approved by a vote of a majority of the outstanding voting securities of the
Fund. The "vote of a majority of the outstanding voting securities" is defined
in the 1940 Act as the vote of the lesser of (i) 67% or more of the Shares of
the Fund present at the Meeting if the holders of more than 50% of the
outstanding Shares of the Fund are present in person or represented by proxy; or
(ii) more than 50% of the outstanding Shares of the Fund. For purposes of
determining the approval of the change in concentration policy, abstentions and
broker non-votes will have the effect of a vote against the proposal.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 2. IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING PROPOSAL
2 OR HOW TO VOTE YOUR SHARES, CALL YOUR FUND'S PROXY SOLICITOR, THE ALTMAN
GROUP, AT (800) 926-7043 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN TIME.
-14-
ADDITIONAL INFORMATION
INFORMATION ABOUT THE ADVISER
First Trust Advisors L.P., 1001 Warrenville Road, Suite 300, Lisle,
Illinois 60532, serves as the Fund's investment adviser.
INFORMATION ABOUT THE ADMINISTRATOR
PFPC acts as the Fund's administrator and accounting agent and is
located at 4400 Computer Drive, Westborough, Massachusetts 01581. PFPC is a
leading provider of full service mutual fund shareholder and record keeping
services. In addition to its mutual fund transfer agent and record keeping
service, PFPC provides other services through its own subsidiary business units.
BENEFICIAL OWNERSHIP
As of August 31, 2007, the Trustees of the Fund beneficially owned the
following number of Shares of the Fund:
----------------------------------- ----------------
TRUSTEE SHARES OWNED
----------------------------------- ----------------
Interested Trustee
----------------------------------- ----------------
James A. Bowen 0
----------------------------------- ----------------
Independent Trustees
----------------------------------- ----------------
Richard E. Erickson 238
----------------------------------- ----------------
Thomas R. Kadlec 850
----------------------------------- ----------------
Robert F. Keith 0
----------------------------------- ----------------
Niel B. Nielson 243
----------------------------------- ----------------
As of August 31, 2007, each Trustee beneficially owned less than 1% of
the Shares outstanding of the Fund.
As of August 31, 2007, the Trustees and officers as a group
beneficially owned 1,331 Shares of the Fund, which is less than 1% of the Fund's
Shares outstanding.
To the knowledge of the Fund, based solely on reports filed with the
SEC, as of September 30, 2007, no single shareholder or "group" (as that term is
used in Section 13(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
beneficially owned more than 5% of the Fund's outstanding Shares, except as
described below:
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED % OUTSTANDING SHARES
BENEFICIALLY OWNED
Claymore Securities Defined Portfolios 2,011,858 10.07%
2455 Corporate West Drive
Lisle, IL 60532
-15-
The information shown above is based solely upon information presented in
Schedule 13G, filed with the SEC on May 4, 2007 by Claymore Securities, Inc.
Pursuant to the Schedule 13G, each of the various series of the Claymore
Securities Defined Portfolios has sole voting power over the shares beneficially
owned. The Fund does not have any knowledge of the identity of the ultimate
beneficiaries of these Shares.
SHAREHOLDER PROPOSALS
To be considered for presentation at the Annual Meeting of Shareholders
of the Fund to be held in 2008, a shareholder proposal submitted pursuant to
Rule 14a-8 of the 1934 Act must be received at the offices of the Fund at 1001
Warrenville Road, Suite 300, Lisle, Illinois 60532, not later than November 17,
2007.
Any proposals by shareholders may only be brought before an annual
meeting of the Fund if timely written notice (the "Shareholder Notice") is
provided to the Secretary of the Fund. In accordance with the advance notice
provisions included in the Fund's By-Laws, unless a greater or lesser period is
required under applicable law, to be timely, the Shareholder Notice must be
delivered to or mailed and received at the Fund's address, 1001 Warrenville
Road, Suite 300, Lisle, Illinois 60532, Attn: W. Scott Jardine, not less than
forty-five (45) days nor more than sixty (60) days prior to the first
anniversary date of the date of the proxy statement released to shareholders for
the preceding year's annual meeting. However, if and only if the annual meeting
is not scheduled to be held within a period that commences thirty (30) days
before the first anniversary date of the annual meeting for the preceding year
and ends thirty (30) days after such anniversary date (an annual meeting date
outside such period being referred to herein as an "Other Annual Meeting Date"),
such Shareholder Notice must be given as described above by the later of the
close of business on (i) the date forty-five (45) days prior to such Other
Annual Meeting Date or (ii) the tenth (10th) business day following the date
such Other Annual Meeting Date is first publicly announced or disclosed.
Timely submission of a proposal does not mean that such proposal will
be included in a proxy statement.
SHAREHOLDER COMMUNICATIONS
Shareholders of the Fund who want to communicate with the Board of
Trustees or any individual Trustee should write the Fund to the attention of the
Fund Secretary, W. Scott Jardine. The letter should indicate that you are a Fund
shareholder. If the communication is intended for a specific Trustee and so
indicates, it will be sent only to that Trustee. If a communication does not
indicate a specific Trustee it will be sent to the chair of the Nominating and
Governance Committee of the Board and the outside counsel to the Independent
Trustees for further distribution as deemed appropriate by such persons.
FISCAL YEAR
The fiscal year end for the Fund is December 31.
ANNUAL REPORT DELIVERY
Annual reports will be sent to shareholders of record of the Fund
following the Fund's fiscal year end. The Fund will furnish, without charge, a
copy of its annual report and/or semi-annual report as available upon request.
-16-
Such written or oral requests should be directed to the Fund at 1001 Warrenville
Road, Suite 300, Lisle, Illinois 60532 or by calling (800) 988-5891.
Please note that only one annual or semi-annual report or proxy
statement may be delivered to two or more shareholders of the Fund who share an
address, unless the Fund has received instructions to the contrary. To request a
separate copy of an annual or semi-annual report or proxy statement, or for
instructions as to how to request a separate copy of such documents or as to how
to request a single copy if multiple copies of such documents are received,
shareholders should contact the Fund at the address and phone number set forth
above. Pursuant to a request, a separate copy will be delivered promptly.
OTHER MATTERS TO COME BEFORE THE MEETING
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment or postponement of the
Meeting, the persons named on the enclosed proxy card will vote thereon
according to their best judgment in the interests of the Fund.
October 29, 2007
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
-------------------------------------------------------------------------------
IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE PROPOSALS FOR
THE FUND OR HOW TO VOTE YOUR SHARES, CALL YOUR FUND'S PROXY SOLICITOR, THE
ALTMAN GROUP, AT (800) 926-7043 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN
TIME.
--------------------------------------------------------------------------------
-17-
APPENDIX A
FORM OF NEW INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this [____] day of [______], 2008 by and among
First Trust Enhanced Equity Income Fund (formerly known as First Trust/Fiduciary
Asset Management Covered Call Fund), a Massachusetts business trust (the
"Fund"), First Trust Advisors L.P., an Illinois limited partnership and a
registered investment adviser with the Securities and Exchange Commission
("SEC") (the "Manager"), and Chartwell Investment Partners, L.P., a Pennsylvania
limited partnership and a registered investment adviser with the SEC (the
"Sub-Adviser").
WHEREAS, the Fund is a closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Fund has retained the Manager to serve as the investment
manager for the Fund pursuant to an Investment Management Agreement between the
Manager and the Fund (as such agreement may be modified from time to time, the
"Management Agreement");
WHEREAS, the Management Agreement provides that the Manager may,
subject to the initial and periodic approvals required under Section 15 of the
1940 Act, appoint a sub-adviser at its own cost and expense for the purpose of
furnishing certain services required under the Management Agreement;
WHEREAS, the Fund and the Manager desire to retain the Sub-Adviser to
furnish investment advisory services for the Fund's investment portfolio, upon
the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Appointment. The Fund and the Manager hereby appoint the
Sub-Adviser to provide certain sub-investment advisory services to the Fund for
the period and on the terms set forth in this Agreement. The Sub-Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided. The Sub-Adviser shall, for all purposes herein
provided, be deemed an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for nor represent the
Fund or Manager in any way, nor otherwise be deemed an agent of the Fund or the
Manager.
2. Services to Be Performed. Subject always to the supervision of the
Fund's Board of Trustees and the Manager, the Sub-Adviser will act as
sub-adviser for, and manage on a discretionary basis the investment and
reinvestment of the assets of the Fund, furnish an investment program in respect
of, make investment decisions for, and place all orders for the purchase and
sale of securities for the Fund's investment portfolio, all on behalf of the
Fund and as described in the Fund's most recent effective registration statement
on Form N-2 as declared effective by the SEC, and as the same may thereafter be
amended from time to time. In the performance of its duties, the Sub-Adviser
will in all material respects (a) satisfy any applicable fiduciary duties it may
have to the Fund, (b) monitor the Fund's investments, and (c) comply with the
provisions of the Fund's Declaration of Trust and By-laws, as amended from time
to time and communicated by the Fund or the Manager to the Sub-Adviser in
writing, and the stated investment objectives, policies and restrictions of the
Fund as such objectives, policies and restrictions may subsequently be changed
by the Fund's Board of Trustees and communicated by the Fund or the Manager to
the Sub-Adviser in writing. The Fund or the Manager has provided the Sub-Adviser
with current copies of the Fund's Declaration of Trust, By-laws, prospectus,
statement of additional information and any amendments thereto, and any
objectives, policies or limitations not appearing therein as they may be
relevant to the Sub-Adviser's performance under this Agreement.
The Sub-Adviser is authorized to select the brokers or dealers that
will execute the purchases and sales of portfolio investments for the Fund, and
is directed to use its commercially reasonable efforts to obtain best execution,
which includes most favorable net results and execution of the Fund's orders,
taking into account all appropriate factors, including price, dealer spread or
commission, size and difficulty of the transaction and research or other
services provided. Subject to approval by the Fund's Board of Trustees and
compliance with the policies and procedures adopted by the Board of Trustees for
the Fund and to the extent permitted by and in conformance with applicable law
(including Rule 17e-1 of the 1940 Act), the Sub-Adviser may select brokers or
dealers affiliated with the Sub-Adviser. It is understood that the Sub-Adviser
will not be deemed to have acted unlawfully, or to have breached a fiduciary
duty to the Fund, or be in breach of any obligation owing to the Fund under this
Agreement, or otherwise, solely by reason of its having caused the Fund to pay a
member of a securities exchange, a broker or a dealer a commission for effecting
a securities transaction for the Fund in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Sub-Adviser determined in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Sub-Adviser's
overall responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion.
In addition, the Sub-Adviser may, to the extent permitted by applicable
law, aggregate purchase and sale orders of securities placed with respect to the
assets of the Fund with similar orders being made simultaneously for other
accounts managed by the Sub-Adviser or its affiliates, if in the Sub-Adviser's
reasonable judgment such aggregation shall result in an overall economic benefit
to the Fund, taking into consideration the selling or purchase price, brokerage
commissions and other expenses. In the event that a purchase or sale of an asset
of the Fund occurs as part of any aggregate sale or purchase orders, the
objective of the Sub-Adviser and any of its affiliates involved in such
transaction shall be to allocate the securities so purchased or sold, as well as
expenses incurred in the transaction, among the Fund and other accounts in a
fair and equitable manner. Nevertheless, the Fund and the Manager acknowledge
that under some circumstances, such allocation may adversely affect the Fund
with respect to the price or size of the securities positions obtainable or
salable. Whenever the Fund and one or more other investment advisory clients of
the Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in a manner believed by the Sub-Adviser
to be equitable to each, although such allocation may result in a delay in one
or more client accounts being fully invested that would not occur if such an
allocation were not made. Moreover, it is possible that due to differing
investment objectives or for other reasons, the Sub-Adviser and its affiliates
may purchase securities of an issuer for one client and at approximately the
same time recommend selling or sell the same or similar types of securities for
another client.
The Sub-Adviser will not arrange purchases or sales of securities
between the Fund and other accounts advised by the Sub-Adviser or its affiliates
unless (a) such purchases or sales are in accordance with applicable law
(including Rule 17a-7 of the 1940 Act) and the Fund's policies and procedures,
A-2
(b) the Sub-Adviser determines the purchase or sale is in the best interests of
the Fund, and (c) the Fund's Board of Trustees has approved these types of
transactions.
The Fund may adopt policies and procedures that modify or restrict the
Sub-Adviser's authority regarding the execution of the Fund's portfolio
transactions provided herein. Such policies and procedures and any amendments
thereto will be communicated by the Manager to the Sub-Adviser.
The Sub-Adviser will communicate to the officers and Trustees of the
Fund such information relating to transactions for the Fund as they may
reasonably request. In no instance will the Fund's portfolio securities be
purchased from or sold to the Manager, the Sub-Adviser or any affiliated person
of either the Fund, the Manager, or the Sub-Adviser, except as may be permitted
under the 1940 Act.
The Sub-Adviser further agrees that it:
(a) will use the same degree of skill and care in providing
such services as it uses in providing services to other fiduciary
accounts for which it has investment responsibilities;
(b) will (i) conform in all material respects to all
applicable rules and regulations of the SEC, (ii) comply in all
material respects with all policies and procedures adopted by the Board
of Trustees for the Fund and communicated to the Sub-Adviser in writing
and, (iii) conduct its activities under this Agreement in all material
respects in accordance with any applicable law and regulations of any
governmental authority pertaining to its investment advisory
activities;
(c) will report to the Manager and to the Board of Trustees
of the Fund on a quarterly basis and will make appropriate persons
available for the purpose of reviewing with representatives of the
Manager and the Board of Trustees on a regular basis at such times as
the Manager or the Board of Trustees may reasonably request in writing
regarding the management of the Fund, including, without limitation,
review of the general investment strategies of the Fund, the
performance of the Fund's investment portfolio in relation to relevant
standard industry indices and general conditions affecting the
marketplace and will provide various other reports from time to time as
reasonably requested by the Manager or the Board of Trustees of the
Fund; and
(d) will prepare and maintain such books and records with
respect to the Fund's securities and other transactions for the Fund's
investment portfolio as required for registered investment advisers
under applicable law or as otherwise requested by the Manager and will
prepare and furnish the Manager and Fund's Board of Trustees such
periodic and special reports as the Board or the Manager may reasonably
request. The Sub-Adviser further agrees that all records that it
maintains for the Fund are the property of the Fund and the Sub-Adviser
will surrender promptly to the Fund any such records upon the request
of the Manager or the Fund (provided, however, that the Sub-Adviser
shall be permitted to retain copies thereof); and shall be permitted to
retain originals (with copies to the Fund) to the extent required under
Rule 204-2 of the Investment Advisers Act of 1940 or other applicable
law.
3. Expenses. During the term of this Agreement, the Sub-Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than (i) the cost of securities and other assets purchased for
the Fund, and (ii) the costs directly associated with purchasing and selling
A-3
securities and other assets for the Fund, if any, including, but not limited to,
brokerage commissions, stamps, duties, taxes and custody fees related to
transfers.
4. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Manager will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a portfolio
management fee (the "Management Fee") equal to the annual rate of 0.50% of the
Fund's Managed Assets (as defined below). For purposes of calculating the
Management Fee, Managed Assets means the average daily gross assets of the Fund,
minus the sum of the Fund's accrued and unpaid dividends on any outstanding
common shares and accrued liabilities (including the value of call options
written (sold)). The Management Fee shall be payable in arrears on or about the
first day of each month during the term of this Agreement.
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.
5. Services to Others. The Fund and the Manager acknowledge that the
Sub-Adviser now acts, or may in the future act, as an investment adviser to
other managed accounts and as investment adviser or sub-investment adviser to
one or more other investment companies. In addition, the Fund and the Manager
acknowledge that the persons employed by the Sub-Adviser to assist in the
Sub-Adviser's duties under this Agreement will not devote their full time to
such efforts. It is also agreed that the Sub-Adviser may use any supplemental
research obtained for the benefit of the Fund in providing investment advice to
its other investment advisory accounts and for managing its own accounts.
6. Limitation of Liability. The Sub-Adviser shall not be liable for,
and the Fund and the Manager will not take any action against the Sub-Adviser to
hold the Sub-Adviser liable for, any error of judgment or mistake of law or for
any loss suffered by the Fund or the Manager (including, without limitation, by
reason of the purchase, sale or retention of any security) in connection with
the performance of the Sub-Adviser's duties under this Agreement, except for a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser in the performance of its duties under this Agreement,
or by reason of its reckless disregard of its obligations and duties under this
Agreement.
7. Term; Termination; Amendment. This Agreement shall become effective
with respect to the Fund on [____], 2008 (the "Effective Date") provided that it
has been approved in the manner required by the 1940 Act, and shall remain in
full force until June 30, 2009, unless sooner terminated as hereinafter
provided. This Agreement, however, shall continue in force from year to year
thereafter, but only as long as such continuance is specifically approved for
the Fund at least annually in the manner required by the 1940 Act and the rules
and regulations thereunder; provided, however, that if the continuation of this
Agreement is not approved for the Fund, the Sub-Adviser may continue to serve in
such capacity for the Fund in the manner and to the extent permitted by the 1940
Act and the rules and regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Manager or the Sub-Adviser upon sixty (60) days' written notice to the
other parties. This Agreement may also be terminated by the Fund by action of
A-4
the Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund upon sixty (60) days' written notice to the
Sub-Adviser by the Fund without payment of any penalty.
This Agreement may be terminated at any time without the payment of any
penalty by the Manager, the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Fund in the event that it
shall have been established by a court of competent jurisdiction that the
Sub-Adviser or any officer or director of the Sub-Adviser has taken any action
that results in a breach of the material covenants of the Sub-Adviser set forth
herein.
The terms "assignment" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the 1940 Act and the
rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 4 earned prior to such termination and for any additional
period during which Sub-Adviser serves as such for the Fund, subject to
applicable law.
8. Compliance Certification. From time to time the Sub-Adviser shall
provide such certifications with respect to Rule 38a-1 under the 1940 Act as are
reasonably requested by the Fund or the Manager. In addition, the Sub-Adviser
will, from time to time, provide a written assessment of its compliance program
in conformity with current industry standards that is reasonably acceptable to
the Fund to enable the Fund to fulfill its obligations under Rule 38a-1 under
the 1940 Act.
9. Notice. Any notice under this Agreement shall be sufficient in all
respects if given in writing and delivered by commercial courier providing proof
of delivery and addressed as follows or addressed to such other person or
address as such party may designate for receipt of such notice.
If to the Manager or the Fund: If to the Sub-Adviser:
First Trust Enhanced Equity Income Fund Chartwell Investment Partners, L.P.
First Trust Advisors L.P. 1234 Westlakes Drive, Suite 400
1001 Warrenville Road, Suite 300 Berwyn, Pennsylvania 19312
Lisle, Illinois 60532 Attention: Maria E. Pollack
Attention: Secretary
If by Facsimile: (610) 722-5644
If by Facsimile: (630) 241-8650
10. Limitations on Liability. All parties hereto are expressly put on
notice of the Fund's Declaration of Trust and all amendments thereto, a copy of
which is on file with the Secretary of the Commonwealth of Massachusetts, and
the limitation of shareholder and trustee liability contained therein and a copy
of which has been provided to the Sub-Adviser prior to the date hereof. This
Agreement is executed on behalf of the Fund by the Fund's officers in their
capacity as officers and not individually and is not binding upon any of the
Trustees, officers or shareholders of the Fund individually but the obligations
imposed upon the Fund by this Agreement are binding only upon the assets and
property of the Fund, and persons dealing with the Fund must look solely to the
assets of the Fund for the enforcement of any claims.
A-5
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement will be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
12. Applicable Law. This Agreement shall be construed in accordance
with applicable federal law and (except as to Section 10 hereof, which shall be
construed in accordance with the laws of Massachusetts) the laws of the State of
Illinois.
13. Amendment, Etc. This Agreement may only be amended, or its
provisions modified or waived, in a writing signed by the party against which
such amendment, modification or waiver is sought to be enforced.
14. Authority. Each party represents to the others that it is duly
authorized and fully empowered to execute, deliver and perform this Agreement.
The Fund represents that engagement of the Sub-Adviser has been duly authorized
by the Fund and is in accordance with the Fund's Declaration of Trust and other
governing documents of the Fund.
15. Severability. Each provision of this Agreement is intended to be
severable from the others so that if any provision or term hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remaining provisions and terms hereof; provided,
however, that the provisions governing payment of the Management Fee described
in Section 4 are not severable.
16. Entire Agreement. This Agreement constitutes the sole and entire
agreement of the parties hereto with respect to the subject matter expressly set
forth herein.
IN WITNESS WHEREOF, the Fund, the Manager and the Sub-Adviser have
caused this Agreement to be executed as of the day and year first above written.
FIRST TRUST ADVISORS L.P. CHARTWELL INVESTMENT PARTNERS, L.P.
By: __________________________________ By: _____________________________
Title: _____________________________ Title: _______________________
FIRST TRUST ENHANCED EQUITY INCOME FUND
By: ___________________________________
Title: ______________________________
A-6
[BLANK INSIDE BACK COVER]
[BLANK BACK COVER]
PROXY CARD
PLEASE FOLD ALONG THE PERFORMATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Proxy - FIRST TRUST ENHANCED EQUITY INCOME FUND
(formerly known as FIRST TRUST/FIDUCIARY ASSET MANAGEMENT COVERED CALL FUND)
--------------------------------------------------------------------------------
PROXY SOLICITED BY THE BOARD OF TRUSTEES
SPECIAL MEETING ON JANUARY 8, 2008
The undersigned holder of shares of the First Trust Enhanced Equity Income Fund
(the "Fund"), a Massachusetts business trust, hereby appoints W. Scott Jardine,
Mark R. Bradley and Kristi A. Maher as attorneys and proxies for the
undersigned, with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all shares of the Fund that
the undersigned is entitled to vote at the Special Meeting of Shareholders of
the Fund (the "Meeting") to be held at the offices of First Trust Advisors L.P.,
1001 Warrenville Road, Suite 300, Lisle, IL 60532, at 4:00 p.m. Central time on
the date indicated above, and any adjournments and postponements thereof. The
undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders and the Proxy Statement dated October 29, 2007, and hereby
instructs said attorneys and proxies to vote said shares as indicated hereon. In
their discretion, the proxies are authorized to vote upon such other business as
may properly come befo re the Meeting. A majority of the proxies present and
acting at the Meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the power and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.
PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
FIRST TRUST ENHANCED EQUITY INCOME FUND
(formerly known as FIRST TRUST/FIDUCIARY ASSET MANAGEMENT COVERED CALL FUND)
MR. A SAMPLE
DESIGNATION (IF ANY)
ADD 1
ADD 2
ADD 3
ADD 4
ADD 5
ADD 6
Using a BLACK INK pen, mark your
votes with an X as shown in this
example. Please do not write
outside the designated areas. [X]
--------------------------------------------------------------------------------
Special Meeting Proxy Card
--------------------------------------------------------------------------------
PLEASE FOLD ALONG THE PERFORMATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
A Proposals -- The Board of Trustees recommends a vote FOR Proposal 1 and
Proposal 2
For Against Abstain
1. Approval of New Investment Sub-Advisory Agreement. [ ] [ ] [ ]
For Against Abstain
2. Approval of Change in Concentration Policy. [ ] [ ] [ ]
This proxy, if properly executed, will be voted in the manner directed by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1 AND PROPOSAL 2.
B Non-Voting Items
Change of Address -- Please print new address below.
Comments -- Please print your comments below.
C Authorized Signature(s) -- This section must be completed for your vote
to be counted. -- Date and Sign Below
Please sign exactly as your name appears on this Proxy. If joint owners, EITHER
may sign this proxy. When signing as attorney, executor, administrator, trustee,
guardian or corporate officer, please give full title.
Date (mm/dd/yyyy) -- Please print date below.
____/____/____
Signature 1 -- Please keep signature within the box.
_______________________________________
Signature 2 -- Please keep signature with the box.
________________________________________
STOCK# 00SJEC