UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-21549
ENERGY INCOME AND GROWTH FUND
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
WHEATON, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
WHEATON, IL 60187
(Name and address of agent for service)
Registrant's telephone number, including area code: 630-765-8000
Date of fiscal year end: NOVEMBER 30
Date of reporting period: FEBRUARY 28, 2009
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.
ITEM 1. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
ENERGY INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (a) (b)
FEBRUARY 28, 2009 (UNAUDITED)
SHARES DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------
MASTER LIMITED PARTNERSHIPS - 113.0%
OIL, GAS & CONSUMABLE FUELS - 113.0%
25,000 Buckeye GP Holdings, L.P. ........................... $ 390,000
465,471 Clearwater Natural Resources, L.P. (c)
(d) (e) ........................................... 465,471
148,050 Copano Energy, LLC .................................. 2,105,271
74,300 Duncan Energy Partners, L.P. ........................ 1,211,833
145,947 Enbridge Energy Partners, L.P. ...................... 4,155,111
7,582 Encore Energy Partners, L.P. ........................ 98,945
183,000 Energy Transfer Equity, L.P. ........................ 3,592,290
253,870 Energy Transfer Partners, L.P. ...................... 9,192,633
232,803 Enterprise GP Holdings, L.P. ........................ 4,555,955
459,998 Enterprise Products Partners L.P. ................... 9,926,757
93,709 EV Energy Partner, L.P. ............................. 1,383,145
39,928 Exterran Partners, L.P. ............................. 489,118
88,393 Global Partners, L.P. ............................... 945,805
242,700 Holly Energy Partners, L.P. ......................... 6,183,996
147,836 Inergy Holdings, L.P. ............................... 4,121,668
132,000 Inergy, L.P. ........................................ 2,972,640
205,771 Kinder Morgan Energy Partners, L.P. ................. 9,488,101
398,239 Magellan Midstream Holdings, L.P. ................... 6,339,965
302,756 Magellan Midstream Partners, L.P. ................... 9,627,641
79,719 MarkWest Energy Partners, L.P. ...................... 857,776
102,788 Natural Resource Partners, L.P. ..................... 2,130,795
125,126 NuStar Energy, L.P. ................................. 5,773,313
200,000 NuStar GP Holdings, LLC ............................. 3,790,000
89,630 ONEOK Partners, L.P. ................................ 3,797,623
95,000 Penn Virginia Resource Partners, L.P. ............... 1,106,750
245,921 Plains All American Pipeline, L.P. .................. 9,477,795
59,500 Quicksilver Gas Services, L.P. ...................... 725,900
15,000 Sunoco Logistics Partners, L.P. ..................... 824,850
27,000 TC Pipelines, L.P. .................................. 698,490
60,000 TransMontaigne Partners, L.P. ....................... 1,023,000
46,200 Williams Partners, L.P. ............................. 505,890
60,000 Williams Pipeline Partners, L.P. .................... 951,600
------------
TOTAL MASTER LIMITED PARTNERSHIPS
(Cost $93,923,636) .................................. 108,910,127
------------
CANADIAN INCOME TRUSTS - 1.1%
OIL, GAS & CONSUMABLE FUELS - 1.1%
83,700 Keyera Facilities Income Fund ...................... 1,041,480
------------
TOTAL CANADIAN INCOME TRUSTS
(Cost $994,840)...................................... 1,041,480
------------
COMMON STOCKS - 18.4%
GAS UTILITIES - 9.6%
253,000 ONEOK, Inc. (f) ..................................... 5,652,020
149,800 UGI Corp. (g) ....................................... 3,593,702
------------
9,245,722
------------
See Notes to Quarterly Portfolio of Investments
Page 1
ENERGY INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
FEBRUARY 28, 2009 (UNAUDITED)
SHARES DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------
COMMON STOCKS - (CONTINUED)
OIL, GAS & CONSUMABLE FUELS - 8.7%
75,409 Enbridge Energy Management, LLC (h) ................. $ 2,066,209
35,000 Enbridge, Inc. (g) .................................. 1,042,650
1,566 Kinder Morgan Management, LLC (h) ................... 65,312
164,500 Spectra Energy Corp. (f) ............................ 2,138,500
265,300 Williams Companies, Inc. (f) ........................ 2,997,890
------------
8,310,561
------------
CAPITAL MARKETS - 0.1%
20,000 NGP Capital Resources Co. ........................... 121,200
------------
TOTAL COMMON STOCKS ................................. 17,677,483
------------
(Cost $28,565,836)
RIGHTS - 0.0%
OIL, GAS & CONSUMABLE FUELS - 0.0%
17 Clearwater Natural Resources, L.P. - Rights
(c) (d) (e) ....................................... 0
------------
TOTAL RIGHTS .......................................... 0
------------
(Cost $0)
WARRANTS - 0.0%
OIL, GAS & CONSUMABLE FUELS - 0.0%
48,956 Abraxas Petroleum Corp. - Warrants,
Expiration 05/25/12 (c) (e) ......................... 5,787
------------
TOTAL WARRANTS ...................................... 5,787
------------
(Cost $0)
TOTAL INVESTMENTS - 132.5% .......................... 127,634,877
(Cost $123,484,312) (i)
NUMBER OF
CONTRACTS DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------
CALL OPTIONS WRITTEN - (0.4%)
Enbridge, Inc.
350 @ 35 due July 09 .................................... (12,250)
------------
ONEOK, Inc.
1,150 @ 30 due July 09 .................................... (48,875)
1,180 @ 32.5 due July 09 .................................. (29,500)
------------
(78,375)
------------
Spectra Energy Corp.
945 @ 17.5 due June 09 .................................. (14,175)
500 @ 17.5 due Sep 09 ................................... (17,500)
------------
(31,675)
------------
UGI Corp.
300 @ 25 due Apr 09. .................................... (28,500)
1,198 @ 25 due July 09 .................................... (209,650)
------------
(238,150)
------------
See Notes to Quarterly Portfolio of Investments
Page 2
ENERGY INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
FEBRUARY 28, 2009 (UNAUDITED)
NUMBER OF
CONTRACTS DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------
CALL OPTIONS WRITTEN - (CONTINUED)
Williams Companies, Inc.
300 @ 20 due May 09 ..................................... $ (1,500)
453 @ 25 due May 09 ..................................... (2,265)
------------
(3,765)
------------
TOTAL CALL OPTIONS WRITTEN .......................... (364,215)
(Premiums received $1,488,111)
NET OTHER ASSETS AND LIABILITIES - 2.3% ............. 2,225,019
OUTSTANDING LOAN - (8.5)% ........................... (8,150,000)
SERIES B ENERGY NOTES PAYABLE (j) - (25.9)% ......... (25,000,000)
------------
NET ASSETS - 100.0%.................................. $ 96,345,681
============
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) All or a portion of the securities are available to serve as collateral on
the outstanding loan.
(c) This security is restricted and cannot be offered for public sale without
first being registered under the Securities Act of 1933, as amended (the
"1933 Act"). Prior to registration, restricted securities may only be
resold in transactions exempt from registration. (See Note 1D - Restricted
Securities in the Notes to Quarterly Portfolio of Investments).
(d) This security is fair valued in accordance with valuation procedures
adopted by the Fund's Board of Trustees.
(e) Non-income producing security.
(f) Call options were written on a portion of the Common Stock position. The
underlying portion of this Common Stock position is pledged as collateral.
(g) Call options were written on this entire Common Stock position. All Common
Stocks relating to this call position are pledged as collateral.
(h) Non-income producing security which pays regular in-kind distributions.
(i) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of February 28, 2009,
the aggregate gross unrealized appreciation for all securities in which
there was an excess of value over tax cost was $33,675,736 and the
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value was $29,525,171.
(j) Series B Energy Notes were redeemed in full on March 13, 2009.
SECURITY VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 28,
2009 is as follows (See Note 1A - Portfolio Valuation in the Notes to Quarterly
Portfolio of Investments):
VALUATION INPUTS INVESTMENTS
------------------------------------------------- ------------
Level 1 - Quoted Prices ......................... $127,163,619
Level 1 - Written Options ....................... (364,215)
Level 2 - Other Significant Observable Inputs ... --
Level 3 - Significant Unobservable Inputs ....... 471,258
------------
TOTAL ........................................... $127,270,662
============
The following table presents the Fund's investments measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) for the period
presented.
ASSETS AT FAIR VALUE USING SIGNIFICANT
UNOBSERVABLE INPUTS (LEVEL 3) INVESTMENTS
------------------------------------------------- ------------
Balance as of November 30, 2008 ................. $ 2,806,705
Change in unrealized appreciation
(depreciation) ............................... (2,335,447)
------------
Balance as of February 28, 2009 ................. $ 471,258
============
Net unrealized depreciation from Level 3 investments held as of February 28,
2009 was $8,130,302.
See Notes to Quarterly Portfolio of Investments
Page 3
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
ENERGY INCOME AND GROWTH FUND
FEBRUARY 28, 2009 (UNAUDITED)
1. VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of Energy Income and Growth
Fund (the "Fund") is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. The NAV per Common Share is calculated by dividing
the value of all assets of the Fund (including accrued dividends and interest),
less all liabilities (including accrued expenses, dividends declared but unpaid
and deferred income taxes and any borrowings of the Fund) by the total number of
shares outstanding. The Fund will rely to some extent on information provided by
the Master Limited Partnerships ("MLPs"), which is not necessarily timely, to
estimate taxable income allocable to the MLP units held in the Fund's portfolio
and to estimate the associated deferred tax asset or liability. From time to
time, the Fund will modify its estimates and/or assumptions regarding its
deferred tax liability as new information becomes available. To the extent the
Fund modifies its estimates and/or assumptions, the NAV of the Fund will likely
fluctuate.
The Fund's investments are valued at market value or, in the absence of market
value with respect to any portfolio securities, at fair value according to
procedures adopted by the Fund's Board of Trustees. Portfolio securities listed
on any exchange other than the NASDAQ National Market ("NASDAQ") are valued at
the last sale price on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at
the mean of the most recent bid and asked prices on such day. Securities traded
on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by
NASDAQ. Portfolio securities traded on more than one securities exchange are
valued at the last sale price on the business day as of which such value is
being determined at the close of the exchange representing the principal market
for such securities. Portfolio securities traded in the over-the-counter market,
but excluding securities traded on the NASDAQ, are valued at the closing bid
prices. Fixed-income securities with a remaining maturity of 60 days or more
will be valued by the Fund using a pricing service. Short-term investments that
mature in less than 60 days when purchased are valued at amortized cost.
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 157, Fair Value Measurements
("FAS 157"), effective for fiscal years beginning after November 15, 2007. This
standard clarifies the definition of fair value for financial reporting,
establishes a framework for measuring fair value and requires additional
disclosures about the use of fair value measurements. The three levels of the
fair value hierarchy under FAS 157 are described below:
- Level 1 - quoted prices in active markets for identical investments
- Level 2 - other significant observable inputs (including quoted prices
for similar investments, interest rates, prepayment speeds,
credit risk, etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. A summary
of the inputs used to value the Fund's investments as of February 28, 2009 is
included in the Fund's Portfolio of Investments.
B. OPTION CONTRACTS:
COVERED OPTIONS. The Fund may write (sell) covered call or put options
("options") on all or a portion of the common stock of energy companies held in
the Fund's portfolio as determined to be appropriate by Energy Income Partners,
LLC (the "Sub-Advisor"). The number of options the Fund can write (sell) is
limited by the amount of common stock of energy companies the Fund holds in its
portfolio. The Fund will not write (sell) "naked" or uncovered options. By
writing (selling) options, the Fund seeks to generate additional income, in the
form of premiums received for writing (selling) the options, and provide a
partial hedge against a market decline in the underlying equity security.
Options are marked-to-market daily and their value will be affected by changes
in the value and dividend rates of the underlying equity securities, changes in
interest rates, changes in the actual or perceived volatility of the securities
markets and the underlying equity securities and the remaining time to the
options' expiration. The value of options may also be adversely affected if the
market for the options becomes less liquid or smaller.
Options the Fund writes (sells) will either be exercised, expire or be cancelled
pursuant to a closing transaction. If the price of the underlying equity
security exceeds the option's exercise price, it is likely that the option
holder will exercise the option. If an option written (sold) by the Fund is
exercised, the Fund would be obligated to deliver the underlying equity security
to the option holder upon payment of the strike price. In this case, the option
premium received by the Fund will be added to the amount realized on the sale of
the underlying security for purposes of determining gain or loss. If the price
of the underlying equity security is less than the option's strike price, the
option will likely expire without being exercised. The option premium received
by the Fund will, in this case, be treated as short-term capital gain on the
expiration date of the option. The Fund may also elect to close out its position
in an option prior to its expiration by purchasing an option of the same series
as the option written (sold) by the Fund.
Page 4
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
ENERGY INCOME AND GROWTH FUND
FEBRUARY 28, 2009 (UNAUDITED)
The options that the Fund writes (sells) give the option holder the right, but
not the obligation, to purchase a security from the Fund at the strike price on
or prior to the option's expiration date. The ability to successfully implement
the writing (selling) of covered call options depends on the ability of the
Sub-Advisor to predict pertinent market movements, which cannot be assured.
Thus, the use of options may require the Fund to sell portfolio securities at
inopportune times or for prices other than current market value, which may limit
the amount of appreciation the Fund can realize on an investment, or may cause
the Fund to hold a security that it might otherwise sell. As the writer (seller)
of a covered option, the Fund foregoes, during the option's life, the
opportunity to profit from increases in the market value of the security
covering the option above the sum of the premium and the strike price of the
option, but has retained the risk of loss should the price of the underlying
security decline. The writer (seller) of an option has no control over the time
when it may be required to fulfill its obligation as a writer (seller) of the
option. Once an option writer (seller) has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying security to the
option holder at the exercise price.
C. SECURITIES TRANSACTIONS:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Distributions received from the Fund's investments in MLPs generally are
comprised of return of capital from the MLP to the extent of the cost basis of
such MLP investments.
D. RESTRICTED SECURITIES:
The Fund may invest up to 35% of its Managed Assets, which is the gross asset
value of the Fund minus accrued liabilities (excluding the principal amount of
any borrowings), in restricted securities. Restricted securities are securities
that cannot be offered for public sale without first being registered under the
1933 Act. Prior to registration, restricted securities may only be resold in
transactions exempt from registration. The Fund holds the restricted securities
at February 28, 2009 shown in the following table. The Fund does not have the
right to demand that such securities be registered. Restricted securities are
valued at fair value in accordance with procedures adopted by the Fund's Board
of Trustees and in accordance with provisions of the Investment Company Act of
1940, as amended.
VALUE
ACQUISITION PER CARRYING % OF
SECURITY DATE SHARES SHARE COST VALUE NET ASSETS
-------- ----------- ------- ----- ---------- -------- -----------
Clearwater Natural
Resources, L.P. 08/01/05 465,471 $1.00 $8,601,560 $465,471 0.48%
Clearwater Natural
Resources, L.P.
Rights 08/01/05 17 0.00 0 0 0.00
Abraxas Petroleum Corp. -
Warrants 05/25/07 48,956 0.12 0 5,7870 0.01
------- ---------- -------- ----
514,444 $8,601,560 $471,258 0.49%
======= ========== ======== ====
2. OPTION ACTIVITY
Written option activity for the three months ended February 28, 2009 was as
follows:
NUMBER
OF
WRITTEN OPTIONS CONTRACTS PREMIUMS
-------------------------------------------- --------- ----------
Options outstanding at November 30, 2008 ... 4,546 $ 534,868
Options written ............................ 5,623 1,371,753
Options expired ............................ (2,215) (203,992)
Options exercised .......................... -- --
Options closed ............................. (1,578) (214,518)
------ ----------
Options outstanding at February 28, 2009 ... 6,376 $1,488,111
====== ==========
Page 5
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal quarter that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) ENERGY INCOME AND GROWTH FUND
By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date APRIL 27, 2009
----------------------------------------------------------------------------
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 (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date APRIL 27, 2009
----------------------------------------------------------------------------
By (Signature and Title)* /S/ MARK R. BRADLEY
-------------------------------------------------------
Mark R. Bradley, Treasurer, Controller,
Chief Financial Officer and Chief Accounting Officer
(principal financial officer)
Date APRIL 27, 2009
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.