UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21496
Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income 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: May 31, 2010
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
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("OMB") control number. Please direct comments concerning the accuracy of the
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burden to 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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
SEMI-ANNUAL
REPORT
FOR THE SIX MONTHS ENDED
MAY 31,2010
(GRAPHIC)
MACQUARIE/FIRST TRUST
GLOBAL INFRASTRUCTURE/
UTILITIES DIVIDEND &
INCOME FUND
(MACQUARIE LOGO) (FOUR CORNERS LOGO) (FIRST TRUST LOGO)
CAPITAL MANAGEMENT
TABLE OF CONTENTS
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND &
INCOME FUND (MFD)
SEMI-ANNUAL REPORT
MAY 31,2010
Shareholder Letter ........................................................ 1
At A Glance ............................................................... 2
Portfolio Commentary ...................................................... 3
Portfolio of Investments .................................................. 9
Statement of Assets and Liabilities ....................................... 15
Statement of Operations ................................................... 16
Statements of Changes in Net Assets ....................................... 17
Statement of Cash Flows ................................................... 18
Financial Highlights ...................................................... 19
Notes to Financial Statements ............................................. 20
Additional Information .................................................... 28
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended. Forward-looking statements include statements regarding the
goals, beliefs, plans or current expectations of First Trust Advisors L.P.
("First Trust" or the "Advisor") and/or Macquarie Capital Investment Management
LLC ("Macquarie" or "MCIM") and/or Four Corners Capital Management, LLC ("Four
Corners") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income
Fund (the "Fund" or "MFD") to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. When evaluating the information included in this report, you are
cautioned not to place undue reliance on these forward-looking statements, which
reflect the judgment of First Trust and/or MCIM and/or Four Corners and their
respective representatives only as of the date hereof. We undertake no
obligation to publicly revise or update these forward-looking statements to
reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objective.
The Fund is subject to market risk, which is the possibility that the market
values of securities owned by the Fund will decline and that the value of the
Fund shares may therefore be less than what you paid for them. Accordingly, you
can lose money investing in the Fund. See "Risk Considerations" in the Notes to
Financial Statements for a discussion of certain other risks of investing in the
Fund.
Performance data quoted represents past performance, which is no guarantee
of future results, and current performance may be lower or higher than the
figures shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and common share price will fluctuate and Fund shares,
when sold, may be worth more or less than their original cost.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your
investment. It includes details about the Fund and presents data and analysis
that provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary by the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of
MCIM and Four Corners are just that: informed opinions. They should not be
considered to be promises or advice. The opinions, like the statistics, cover
the period through the date on the cover of this report. The risks of investing
in the Fund are spelled out in the prospectus, the Statement of Additional
Information, this report and other Fund regulatory filings.
MCIM, FOUR CORNERS AND THE FUND ARE NOT DEPOSIT TAKING INSTITUTIONS FOR THE
PURPOSES OF THE BANKING ACT OF 1959 (COMMONWEALTH OF AUSTRALIA) AND THEIR
OBLIGATIONS DO NOT REPRESENT DEPOSITS OR OTHER LIABILITIES OF MACQUARIE BANK
LIMITED ABN 46 008 583 542. MACQUARIE BANK LIMITED DOES NOT GUARANTEE OR
OTHERWISE PROVIDE ASSURANCE IN RESPECT OF THE OBLIGATIONS OF MCIM, FOUR CORNERS
OR THE FUND.
SHAREHOLDER LETTER
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND &
INCOME FUND (MFD)
SEMI-ANNUAL REPORT
MAY 31,2010
Dear Shareholders:
I am pleased to present you with the semi-annual report for your investment in
Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund
(the "Fund").
First Trust Advisors L.P. ("First Trust") has always believed that staying
invested in quality products and having a long-term horizon can help investors
reach their financial goals. The past eighteen months have been challenging, but
successful investors understand that the success they have achieved is typically
because of their long-term investment perspective through all kinds of markets.
The report you hold contains detailed information about your investment; a
portfolio commentary from the Fund's management team that provides a recap of
the period; a performance analysis and a market and Fund outlook. Additionally,
you will find the Fund's financial statements for the six month period covered
by this report. I encourage you to read this document and discuss it with your
financial advisor.
First Trust offers a variety of products that can fit many financial plans to
help those investors who are seeking long-term financial success. You may want
to talk to your advisor about the other investments we offer that might fit your
financial plan.
At First Trust we continue to be committed to making available up-to-date
information about your investments so you and your financial advisor have
current information on your portfolio. We value our relationship with you, and
we thank you for the opportunity to assist you in achieving your financial
goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
President of Macquarie/First Trust Global
Infrastructure/Utilities Dividend & Income Fund
Page 1
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
"AT A GLANCE"
AS OF MAY 31, 2010 (UNAUDITED)
FUND STATISTICS
Symbol on New York Stock Exchange MFD
Common Share Price $ 10.65
Common Share Net Asset Value ("NAV") $ 12.89
Premium (Discount) to NAV (17.38)%
Net Assets Applicable to Common Shares $117,042,042
Current Quarterly Distribution per Common Share (1) $ 0.1500
Current Annualized Distribution per Common Share $ 0.6000
Current Distribution Rate on Closing Common Share Price (2) 5.63%
Current Distribution Rate on NAV (2) 4.65%
COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
(PERFORMANCE GRAPH)
Common Share Price NAV
------------------ -----
5/31/09 9.75 12.26
6/5/09 10.22 12.21
6/12/09 10.4 12.51
6/19/09 10.01 12.23
6/26/09 10.13 12.33
7/2/09 9.96 12.21
7/10/09 9.7 11.93
7/17/09 10.21 12.58
7/24/09 10.61 12.92
7/31/09 10.58 13.07
8/7/09 10.78 13.01
8/14/09 10.76 13.02
8/21/09 10.67 13.01
8/28/09 10.7 13.17
9/4/09 10.72 13.12
9/11/09 11.12 13.57
9/18/09 11.72 13.88
9/25/09 11.52 13.64
10/2/09 11.41 13.52
10/9/09 11.9 13.96
10/16/09 11.86 14.1
10/23/09 11.93 14.18
10/30/09 11.15 13.63
11/6/09 11.45 13.99
11/13/09 11.72 14.36
11/20/09 11.58 14.21
11/27/09 11.65 14.25
12/4/09 11.97 14.53
12/11/09 11.98 14.54
12/18/09 12.07 14.57
12/24/09 12.4 14.89
12/31/09 12.39 15.02
1/8/10 12.73 15.47
1/15/10 12.94 15.27
1/22/10 12.28 14.77
1/29/10 11.88 14.47
2/5/10 11.73 14.1
2/12/10 12.05 14.36
2/19/10 12.29 14.63
2/26/10 12.33 14.62
3/5/10 12.79 15.04
3/12/10 12.91 15.17
3/19/10 12.73 15.01
3/26/10 12.62 14.9
4/1/10 12.8 15.33
4/9/10 12.94 15.53
4/16/10 12.93 15.42
4/23/10 12.89 15.34
4/30/10 12.33 14.81
5/7/10 11.07 13.43
5/14/10 11.4 13.63
5/21/10 10.45 12.77
5/31/10 10.65 12.89
PERFORMANCE
Average Annual Total Return
----------------------------
Inception
6 Months Ended 1 Year Ended 5 Years Ended (3/25/2004)
5/31/2010 5/31/2010 5/31/2010 to 5/31/2010
-------------- ------------ ------------- ------------
Fund Performance (3)
NAV -7.90% 10.76% 0.55% 5.20%
Market Value -6.84% 15.07% -0.95% 1.24%
Index Performance
S&P 500 Utilities Total Return Index -1.37% 12.31% 2.85% 6.83%
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
--------------- -----------
Spark Infrastructure Group 5.1%
Severn Trent plc 4.5
Atlantia SpA 4.3
Transurban Group 4.2
Abertis Infraesturcturas S.A. 3.7
Red Electrica Corp. S.A. 3.6
GDF Suez 3.3
Enterprise Products Partners, L.P. 2.8
Magellan Midstream Partners, L.P. 2.7
PG&E Corp. 2.5
----
Total 36.7%
====
% OF TOTAL
COUNTRY INVESTMENTS
------- -----------
United States(5) 41.2
Australia 16.7
Spain 8.5
Canada 8.5
United Kingdom 7.8
France 6.5
Italy 5.4
Germany 3.3
Japan 1.1
Switzerland 1.0
-----
Total 100.0%
=====
% OF TOTAL
INDUSTRY CLASSIFICATION(4) INVESTMENTS
-------------------------- -----------
Transportation Infrastructure 21.2%
Electric Utilities 13.7
Gas Utilities 13.2
Multi-Utilities 12.1
Water Utilities 4.5
Power Generation 2.4
Oil, Gas & Consumable Fuels 2.3
Energy Equipment & Services 2.1
Diversified Consumer Services 0.9
Construction & Engineering 0.9
----
Total 73.3%
====
(1) Most recent distribution paid or declared through 5/31/2010. Subject to
change in the future.
(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share Price or NAV, as applicable, as of 5/31/2010. Subject to
change in the future.
(3) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by the
Dividend Reinvestment Plan, and changes in NAV per share for net asset
value returns and changes in Common Share price for market value returns.
Total returns do not reflect sales load and are not annualized for periods
less than one year. Past performance is not indicative of future results.
(4) Represents the industry classification breakdown for the Core Component of
the Fund's portfolio, which includes Common Stock, Master Limited
Partnerships, Canadian Income Trust securities and Rights. It excludes the
Senior Loan Component of the Fund's portfolio, which industry
classifications are disclosed in the Portfolio of Investments and makes up
the remaining 26.7% of the Fund's portfolio.
(5) The percentage of United States securities includes 26.7% of Senior
Floating-Rate Loan interests.
Page 2
PORTFOLIO COMMENTARY
SUB-ADVISORS
Macquarie Capital Investment Management LLC ("MCIM") and Four Corners Capital
Management, LLC ("Four Corners") are the Sub-Advisors of the Macquarie/First
Trust Global Infrastructure/Utilities Dividend & Income Fund ("MFD" or the
"Fund"). Both MCIM and Four Corners operate within the Macquarie Funds Group
("MFG") and are wholly-owned, indirect subsidiaries of Macquarie Group Limited
("Macquarie").
The Fund's Core Component, which consists primarily of equity securities and
equity-like securities issued by infrastructure issuers, is managed by MCIM,
which started operations in 2004 with the launch of the Fund. MCIM and its
Australia-based affiliates, managed approximately $1.7 billion of assets as of
May 31, 2010, in MFG's Global Infrastructure Securities portfolios, which
includes the Fund.
The Fund's Senior Loan Component, which consists of senior secured floating-rate
corporate loans ("Senior Loans"), is managed by Four Corners. Four Corners was
founded in 2001 and became a wholly-owned, indirect subsidiary of Macquarie in
2008. Four Corners managed over $2.1 billion of assets as of May 31, 2010, with
an emphasis on Senior Loans.
Macquarie Group is a global provider of banking, financial, advisory, investment
and funds management services. Macquarie Funds Group, with approximately $200
billion in funds under management (as of May 31, 2010) is the global investment
management business of Macquarie. Macquarie Funds Group offers a diverse range
of products including managed funds, funds-based structured products, hedge
funds and fund of funds.
PORTFOLIO MANAGEMENT TEAM
Mr. Jon Fitch announced his retirement from Macquarie Group and resigned as
Co-Portfolio Manager of MFD's Core Component, effective May 31, 2010. Thus, Mr.
Andrew Maple-Brown became sole Portfolio Manager of MFD's Core Component as of
June 1, 2010. Mr. Maple-Brown continues to be supported by Macquarie Funds
Group's Infrastructure Securities team, which is one of the largest and most
experienced investment teams specializing in the listed infrastructure sector.
MFD's current portfolio management team is as follows:
ANDREW MAPLE-BROWN
CO-PORTFOLIO MANAGER, MFD CORE COMPONENT (SOLE PORTFOLIO MANAGER EFFECTIVE JUNE
1, 2010)
PORTFOLIO MANAGER, MACQUARIE CAPITAL INVESTMENT MANAGEMENT LLC
Mr. Maple-Brown joined the MFG investment team in Sydney, Australia, in 2007 as
a Portfolio Manager, relocated to New York in August 2009, and assumed direct
responsibilities for the management of the team's North America-based portfolios
(including MFD) at that time. Mr. Maple-Brown joined Macquarie Group in August
2001 in the Debt Markets area, where his focus was primarily on infrastructure
transactions, and particularly public-private partnerships. Prior to Macquarie,
Mr. Maple-Brown spent over four years at Lend Lease in its Project Finance
group. In his roles at Lend Lease and Macquarie Debt Markets, Mr. Maple-Brown
has had in excess of ten years experience in financing infrastructure and
structured property transactions. Mr. Maple-Brown has a Bachelor of Engineering
(1st Class Hons, Mechanical) and a Bachelor of Commerce from the University of
Sydney and a Masters of Applied Finance from Macquarie University.
JON FITCH
CO-PORTFOLIO MANAGER, MFD CORE COMPONENT (RESIGNATION EFFECTIVE MAY 31,2010)
SENIOR PORTFOLIO MANAGER, MACQUARIE CAPITAL INVESTMENT MANAGEMENT LLC
Mr. Fitch has been active in the analysis of infrastructure and utilities stocks
since 1997 and has over 21 years of business experience encompassing business
management, equity analysis, strategic consulting and banking. In addition to
MFD, Mr. Fitch is also the portfolio manager of 14 other funds (including
another U.S. closed-end fund) that invest in global infrastructure securities
with similar investment objectives. From 1997 to 2000, Mr. Fitch led the equity
research coverage of the infrastructure and utilities sector in Australia for
Macquarie Securities Limited ("MSL"), a wholly-owned subsidiary of Macquarie
Group. From 2001 to 2003, Mr. Fitch was located in Hong Kong, where he was
responsible for establishing a Hong Kong-based equity research team and research
coverage for a number of Asian infrastructure and utility companies. Mr. Fitch
returned to Australia in mid-2003, where he was responsible for coverage of
Australian utilities and energy stocks for MSL. In February 2004, Mr. Fitch was
named Chief Investment Officer of the Fund's investment team. Mr. Fitch has a
Bachelor of Commerce in Marketing from the University of New South Wales, a
Masters of Business in Accounting and Finance from the University of Technology
Sydney and a Graduate Diploma in Applied Finance and Investment from the
Securities Institute of Australia. Mr. Fitch is also a Fellow of the Financial
Services Institute of Australasia.
Page 3
PORTFOLIO COMMENTARY - (CONTINUED)
ROBERT I. BERNSTEIN, CFA
CO-PORTFOLIO MANAGER, MFD SENIOR LOAN COMPONENT
CHIEF INVESTMENT OFFICER, FOUR CORNERS CAPITAL MANAGEMENT, LLC
Mr. Bernstein is responsible for managing Four Corners'investment activities. He
has over 18 years of experience in leveraged finance including senior secured
loans, high-yield bonds and private equity investments. Prior to joining Four
Corners, Mr. Bernstein was a partner of The Yucaipa Companies, a Los
Angeles-based private equity firm, where he completed M&A transactions and
leveraged financings valued in excess of $4 billion. Previously, Mr. Bernstein
was a Vice President in Bankers Trust's leveraged finance group, where he
arranged senior loan and high-yield bond financings for financial sponsors and
corporate issuers. Mr. Bernstein also worked in GE Capital's restructuring
group, where he focused primarily on asset-based loans to distressed borrowers.
Mr. Bernstein received an MBA in Finance from the University of Chicago and a
BBA in Finance magna cum laude from Hofstra University. He holds a Chartered
Financial Analyst designation. Mr. Bernstein also served as an infantry officer
in the U.S. Marine Corps.
DREW R. SWEENEY
CO-PORTFOLIO MANAGER, MFD SENIOR LOAN COMPONENT
SENIOR VICE PRESIDENT, FOUR CORNERS CAPITAL MANAGEMENT, LLC
Mr. Sweeney's responsibilities include co-portfolio management of the Four
Corners' retail funds as well as coverage of the media and entertainment, cable
and satellite industries. Mr. Sweeney has 15 years of investment experience
including 12 years in senior secured loans and high-yield bonds. Mr. Sweeney
joined Four Corners in 2005 from American Express Asset Management Group, Inc.
where he was primarily responsible for managing investments of senior secured
loans and high-yield bonds in the gaming, lodging, leisure, homebuilding, and
building product sectors. Prior to joining American Express, Mr. Sweeney worked
at Four Corners and ING Capital Advisors LLC managing investments of senior
secured loans in the media sector. Previously, Mr. Sweeney was an Associate at
First Union Securities in the Financial Sponsors and Diversified Industries
Groups. Mr. Sweeney received an MBA from the Kenan-Flagler Business School at
the University of North Carolina at Chapel Hill and a BS from Rutgers
University.
COMMENTARY
INVESTMENT OBJECTIVE
The investment objective of the Macquarie/First Trust Global
Infrastructure/Utilities Dividend & Income Fund ("MFD" or the "Fund") is to seek
a high level of current return consisting of dividends, interest and other
similar income while attempting to preserve capital. The Fund seeks to achieve
its investment objective by investing predominantly in the securities of
companies that are involved in the management, ownership and/or operation of
infrastructure and utility assets and are expected to offer reasonably
predictable income and attractive yields. The Fund seeks to manage its
investments and expenses so that a significant portion of its distributions to
the Fund's common shareholders will qualify as tax-advantaged dividends, subject
to the continued availability of favorable tax treatment for such qualifying
dividends.
Under normal market conditions, MFD seeks to invest more than 50% of the Fund's
total assets outside the United States. These investments focus on developed
economies. MCIM believes that international diversity has two major benefits for
investors:
1. It offers investors exposure to the fundamentals of different
economies, thereby affording an alternative to U.S.-domiciled
investments; and
2. By investing in carefully selected developed economies, MFD is
expected to provide investors with exposure to a much broader range of
infrastructure/utility businesses.
A typical profile of an infrastructure business would be one whose assets
provide essential public services which are difficult to replace, have a
strategic competitive advantage, demonstrate inelastic demand, and have low
sensitivity to cyclical volatility, courtesy of their essential nature and high
margins.
There can be no assurance that the Fund's investment objective will be achieved.
The Fund may not be appropriate for all investors.
Page 4
PORTFOLIO COMMENTARY - (CONTINUED)
MARKET RECAP
The performance of the Fund for the six-month period ended May 31, 2010 was set
against the backdrop of global equity markets pulling back in the latter half of
the period following a year-long rally that had started in early March 2009.
Global markets declined largely on concerns about the strength and
sustainability of the global economic recovery in the face of sovereign debt
concerns in several European economies. Over the period covered by this report,
global equity markets were relatively flat overall in local currency terms.
PERFORMANCE ANALYSIS - CORE COMPONENT
As shown in the performance table of this report, MFD's Net Asset Value ("NAV")
total return for the period was negative and underperformed the S&P 500
Utilities Total Return Index ("Index"). Although the Fund is not managed toward
any benchmark and invests in a global portfolio of infrastructure stocks in a
range of currencies and senior secured loans, we believe that this Index offers
a broad frame of reference.
In our view, there were three factors driving the Core Component's contribution
to the Fund's negative NAV total return during the period:
- the rise of the U.S. Dollar against several major currencies,
particularly the Euro, had a negative effect as the Fund has a large
majority of its investments outside the United States and was not
currency hedged during the period(1);
- many European infrastructure equities pulled back alongside the
European equity markets due to sovereign debt concerns across the
region; and
- outside of Europe, there were a number of notable stocks in the
regulated and user demand sectors which contributed to or detracted
from performance.
These factors are discussed in further detail below.
RESURGENCE OF THE U.S. DOLLAR
As the Fund was not hedged for currency during the period(1), the dominant
contributor to the Fund's negative return was the sharp rise of the U.S. Dollar
during the period, particularly against the troubled Euro.
Against the U.S. Dollar over the period, the Euro, British Pound, and Australian
Dollar depreciated by 18%, 12%, and 8%, respectively, while the Canadian Dollar
slightly appreciated by 1%. These four currencies represented approximately 55%
of the Fund's security positions at the period's end.
While currencies have the potential for short-term volatility, we believe that
investors in a global equity portfolio, such as in the Fund's Core Component,
often seek the diversification to their overall portfolios provided by foreign
currency exposure.
EUROPEAN MARKET WEAKNESS
While clouds of volcanic ash from Iceland's Eyjafjallajokull volcano grounded
over 100,000 flights to and within much of Europe over almost a week in April,
it was the cloud of uncertainty over the continent (particularly Greece, Spain,
Portugal, Ireland, and Italy) that weighed most heavily on global markets for
much of the period. Ratings agencies cut Greece's debt rating to sub-investment
grade and lowered Portugal and Spain's ratings as well, adding to fears that a
European debt problem could slow the European and global recoveries.
European equity markets underperformed given these negative developments.
Infrastructure equities were not immune from this weakness despite continued
positive news at the operational level at many of these companies. The larger
negative returns (in local currency terms) among the Fund's holdings were in
Southern Europe: toll road operator Abertis Infraestructuras and electricity
transmission company Red Electrica in Spain and Italian toll road operator
Atlantia. German and French stocks posted mixed returns, in local currency
terms. These holdings were among the Fund's largest stock detractors from
absolute performance in U.S. Dollar terms.
----------
(1) See Note 8 - Subsequent Events in the Notes to Financial Statements
regarding certain Fund investment strategy changes, including the Fund's
ability in the future to enter into currency hedges for defensive purposes.
Page 5
PORTFOLIO COMMENTARY - (CONTINUED)
With approximately 23% of the Fund (at period-end) invested in stocks listed on
exchanges in the Eurozone, we have been monitoring developments very closely.
The Fund has had no exposure to Greece or Portugal. We have updated our
valuation models to reflect what we expect will generally be lower economic
growth and interest rates for a longer period. Offsetting the negative impact of
fiscal consolidation upon economic growth, we believe the weaker Euro will have
somewhat of a positive impact on certain infrastructure companies with exposure
to European exports, such as Hamburger Hafen und Logistik, a German seaport
owner and operator in the city of Hamburg.
Consistent with the essential service nature of infrastructure and thus their
typically resilient demand through the economic cycle, we do not expect the
operations and earnings of most of our infrastructure companies to be materially
adversely affected by the European sovereign debt crisis. Indeed, our main focus
has been on identifying opportunities where we believe the fall in share price
is exaggerated relative to the impact on our forecast earnings. For example, the
stock of Abertis Infraestructuras fell around 18% over the period on concern
about Spain, but we estimate this company is only around 25% exposed to the
Spanish economy. In our view, it was oversold, which created an attractive
buying opportunity.
Over the period, the Fund's overall weighting in Eurozone countries was reduced
from over 29% to 23% at period end. We have selectively rotated among stocks
where relative valuations have changed because of the somewhat undifferentiated
selling in some European equity markets. It is in situations such as this that
we believe investors who are focused on the fundamentals and able to filter out
the short-term noise can lay the foundations for potential future
outperformance.
OTHER NOTABLE FUND STOCK CONTRIBUTORS AND DETRACTORS
The major sector contributors to the Fund's return for the period were Gas
Utilities, Airports within Transportation Infrastructure and Water Utilities.
The major sector detractor was Toll Roads. On a country level, the major
positive contributor was the United States, while Australia and Spain were the
largest detractors.
While the Gas Utilities sector was not immune to the broad market weakness late
in the period, the strong fundamentals of the sector remain intact in our view.
U.S.-listed Master Limited Partnerships ("MLPs") that own pipeline and
associated energy infrastructure assets make up over half of the Fund's
investment in the Gas Utilities sector. These holdings outperformed the broader
Infrastructure sector over the period. Company announcements among the MLP
holdings throughout the period continued to reflect sound operational
performance and a favorable outlook. We continue to believe that the pipeline
stocks held by the Fund have conservative management, limited exposure to volume
and commodity price risk and offer relatively predictable earnings, sound
balance sheets, defensive and very predictable cash flows, attractive yields and
good growth prospects. Enterprise Products Partners LP and Magellan Midstream
Partners LP were among the Fund's top stock contributors for the period.
On a local currency level, the Airports subsector within Transportation
Infrastructure also performed well, with generally positive earnings and
underlying passenger traffic data. Airline industry body IATA (whose members
represent over 90% of the world's international air traffic) reported that
demand continues to improve further. In the first quarter of 2010, international
air travel was up an annualized 9% and air freight was up 26%. IATA also
reported that international economy class travel was back to pre-crisis levels
following a strong increase in the March quarter. Among the stronger performers
were Fraport in Germany, Zurich Airport in Switzerland.
The Water Utilities sector performed well due to the Fund's UK holdings. The
regulated UK water companies accepted the final determination for regulated
water and waste water tariffs for the period 2010 through 2015. The acceptance,
together with the announced capital structure policies, were well received by
the market. Late in the period, Severn Trent reported a good earnings result. It
also benefited from a higher than expected UK inflation number. The market
understands that inflation protection is one of the attractive characteristics
of the UK water companies, as the regulator permits them to pass inflation
through to customers by way of higher tariffs and thus revenue.
The Toll Roads subsector within Transportation Infrastructure was affected by
the general weakness in Spanish and Italian markets, and Australian toll road
operator Transurban, which weakened after the company rejected a takeover offer
from three institutional investors. After Transurban's rejection, one of the
bidders exited the register and the stock settled back closer to pre-takeover
offer levels.
Among the top stock contributors was U.S.-based electricity transmission company
ITC Holdings ("ITC"). It benefited from a study by the Midwest Independent
Transmission System Operator that showed high voltage transmission is needed to
integrate renewable energy, consistent with ITC's proposed $11 billion (USD)
transmission line called the Green Power Express. ITC also raised its 2009/2010
earnings guidance on higher than previously expected project completion.
Northland Power Income Fund also made a strong contribution. It benefited from
the fourth quarter of 2009 and full year results that were ahead of
expectations. The company was also awarded a contract to build a natural
gas-fired plant backed by a 20-year agreement for 100% of the output.
Page 6
PORTFOLIO COMMENTARY - (CONTINUED)
PORTFOLIO COMPOSITION
As of May 31, 2010, the Fund's Core Component held positions in 35 global
infrastructure stocks, representing 10 countries and 10 Infrastructure sectors.
During the period, the Fund's weightings in Transportation Infrastructure,
Electric Utilities, Gas Utilities, and Water Utilities were reduced and the
weightings in Multi-Utilities was increased.
PERFORMANCE ANALYSIS - SENIOR LOAN COMPONENT
The Senior Loan Component is intended to help provide the Fund with a stable,
floating-rate income stream over the Fund's floating-rate leverage cost. As
floating-rate debt instruments whose interest rates are set at a credit spread
(the risk premium) over short-term interest rates, Senior Loans provide income
that tends to rise and fall as short-term rates fluctuate, with an approximate
60-to-90-day lag.
After the S&P LSTA Leveraged Loan Index ("Index") posted its worst return in
history in 2008 (down 29.0%), the Index had a remarkable recovery and finished
2009 with the best return in Senior Loan market history (up 51.6%). The recovery
has extended into 2010, with Index returns up 3.8% through May, 2010 and up over
61.9% since the lows of December, 2008. For the Fund's last six months ended May
31, 2010, Index returns were up 6.8%.
Technical conditions have remained strong for most of 2010. Strong high-yield
bond issuance has been used to repay Senior Loans, and these repayments have
only been slightly offset by Senior Loan new issuance. The net result has been a
14% reduction in the amount of outstanding Senior Loans from their peak on
December 31, 2008 ($596.1 million)(2). As of March 26, 2010, the amount of
outstanding Senior Loans stood at $513 billion. In addition to reduced supply,
2010 has also witnessed increased demand as retail investors search for low
duration alternatives.
Along with continuing strong technical conditions, fundamental conditions have
been improving in 2010. The default rate, as measured by number of Senior Loan
issuers, has more than halved from its peak in November, 2009 of 10.8% to 4.6%
at the end of May 2010(3).
Notwithstanding the strong technical and improving fundamental conditions in the
Senior Loan market, we believe that broad-based macroeconomic concerns weigh on
global markets as fiscal imbalances come into focus, unemployment remains
stubbornly high, real estate remains weak and the European sovereign debt crisis
looms large in the minds of investors still reeling from the U.S. credit crisis.
Additionally, the correlation of the loan market with broader risk markets has
increased, and the market return fell over 2.0% in May 2010 as concern
surrounding the European debt crisis and the "flash crash" that occurred in the
U.S. equity markets spilled into the Senior Loan market.
LEVERAGE
While the global equity markets were down over the six months ending May 31,
2010, the senior loan component was up 3.8% during the same period. The Fund's
leverage is match funded with senior loans and therefore the impact of leverage
was positive to MFD's performance. Leverage was also a contributor to
performance for the previous six-month period ending November 30, 2009.
PERFORMANCE RELATIVE TO THE INDEX
The S&P 500 Utilities Total Return Index ("Index") is a broad barometer of the
performance of utility stocks (not including all infrastructure industries)
solely in the U.S. By comparison, the Fund is not managed toward any benchmark
and invests in a global portfolio of infrastructure stocks in a range of
currencies and Senior Loans.
In our view, the Fund underperformed the Index due to (1) its underweight
position in Electric Utilities, (2) the underweight to the stronger U.S. dollar,
and (3) the overweight position in Transportation Infrastructure securities,
which are not represented in the more narrowly focused Index.
----------
(2) Standard & Poor's Leveraged Commentary & Data. Leveraged Lending Review
1Q10.
(3) Standard & Poor's Leveraged Commentary & Data News. Default rate continues
to fall in May, beating recent expectations, June 1, 2010.
Page 7
PORTFOLIO COMMENTARY - (CONTINUED)
DISTRIBUTIONS
During the six-month period covered by this report, the Fund announced two
regularly scheduled quarterly distributions totaling $0.30 per share. The
distributions at this level have allowed the Fund to preserve capital by
aligning the distributions with the Fund's current earnings level.
MARKET AND FUND OUTLOOK
The global economic recovery continues to develop, with growth led by Asia
followed by the United States, while Europe lags. Uncertainty over the European
sovereign debt and fiscal situation remains and markets are likely to remain
vigilant and looking for signs that policy makers can make significant progress.
We believe that many of the Fund's holdings have organic growth opportunities
through investments that we expect will provide attractive returns and enhance
earnings over time. Furthermore, the Infrastructure sector on an operational
level has generally continued to perform strongly over the period. Overall, we
continue to see resilient infrastructure earnings. Combined with these factors,
the equity market sell-off toward the end of the period created a number of
attractive investment opportunities for the Fund, with such businesses well
positioned in the current uncertain environment.
In our view, the Fund holds strategically well positioned, high-quality
infrastructure stocks and is well balanced with holdings in both the user demand
and regulated/contracted sectors.
We believe that the Fund provides U.S. investors with an attractive vehicle to
access the broad global universe of listed infrastructure securities. We
continue to appreciate your investment in the Fund.
Page 8
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a)
MAY 31, 2010 (UNAUDITED)
SHARES DESCRIPTION VALUE
------ ------------------------------------------------------ -----------
COMMON STOCKS - 80.0%
AUSTRALIA - 22.4%
1,834,283 Asciano Group (b) (c) (d) ............................ $ 2,460,822
1,665,193 Australian Infrastructure Fund (b) (c) ............... 2,363,367
1,968,630 Intoll Group (c) ..................................... 1,721,562
734,721 MAP Group (b) (c) .................................... 1,710,415
4,848,062 SP AusNet (b) (c) .................................... 3,469,145
8,274,839 Spark Infrastructure Group (b) (c) (e) ............... 7,942,052
1,795,231 Transurban Group (b) (c) ............................. 6,611,757
-----------
26,279,120
-----------
CANADA - 4.0%
73,339 Enbridge, Inc. (b) ................................... 3,293,426
42,174 TransCanada Corp. (b) ................................ 1,398,997
-----------
4,692,423
-----------
FRANCE - 8.8%
20,898 Aeroports de Paris (b) (c) ........................... 1,419,979
49,534 Electricte de France (b) (c) ......................... 2,168,606
169,828 GDF Suez (b) (c) ..................................... 5,253,473
32,610 Vinci S.A. (b) (c) ................................... 1,455,112
-----------
10,297,170
-----------
GERMANY - 4.5%
81,735 E. On AG (b) (c) ..................................... 2,476,684
87,621 Hamburger Hafen Und Logistik AG (b) (c) .............. 2,772,102
-----------
5,248,786
-----------
ITALY - 7.2%
363,818 Atlantia SpA (b) (c) ................................. 6,715,641
467,217 Terna SpA (b) (c) .................................... 1,743,157
-----------
8,458,798
-----------
JAPAN - 1.4%
386,000 Tokyo Gas Co. Ltd. (c) ............................... 1,684,394
-----------
SPAIN - 11.2%
405,011 Abertis Infraestructuras S.A. (b) (c) ................ 5,761,245
105,210 Enagas S.A. (b) (c) .................................. 1,707,986
142,609 Red Electrica Corp. S.A. (b) (c) ..................... 5,594,805
-----------
13,064,036
-----------
SWITZERLAND - 1.3%
5,220 Flughafen Zuerich AG (b) (c) ......................... 1,497,957
-----------
UNITED KINGDOM - 10.4%
253,355 National Grid plc .................................... 1,829,386
208,415 Scottish and Southern Energy plc (b) (c) ............. 3,152,442
414,432 Severn Trent plc (b) (c) ............................. 7,137,846
-----------
12,119,674
-----------
See Notes to Financial Statements
Page 9
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MAY 31, 2010 (UNAUDITED)
SHARES DESCRIPTION VALUE
------ ------------------------------------------------------ -----------
COMMON STOCKS - (CONTINUED)
UNITED STATES - 8.8%
54,316 ITC Holdings Corp. (b) ............................... $ 2,862,996
93,900 PG&E Corp. (b) ....................................... 3,896,850
44,088 SemGroup Corp., Class A (b) (c) (d) .................. 1,238,873
117,300 Spectra Energy Corp. (b) ............................. 2,347,173
-----------
10,345,892
-----------
TOTAL COMMON STOCKS
(Cost $104,001,200) .................................. 93,688,250
-----------
SHARES/
UNITS DESCRIPTION VALUE
------- ------------------------------------------------------ -----------
MASTER LIMITED PARTNERSHIPS - 10.7%
UNITED STATES - 10.7%
86,016 Energy Transfer Partners, L.P. (b) ................... 3,793,306
131,150 Enterprise Products Partners, L.P. (b) ............... 4,406,640
98,281 Magellan Midstream Partners, L.P. (b) ................ 4,302,742
-----------
TOTAL MASTER LIMITED PARTNERSHIPS
(Cost $9,987,402) .................................... 12,502,688
-----------
CANADIAN INCOME TRUSTS - 7.4%
327,110 Consumers' Waterheater Income Fund (b) ............... 1,485,733
299,997 Northland Power Income Fund (b) ...................... 3,728,583
206,949 Pembina Pipeline Income Fund (b) ..................... 3,427,519
-----------
TOTAL CANADIAN INCOME TRUSTS
(Cost $7,118,453) .................................... 8,641,835
-----------
RIGHTS - 0.3%
SPAIN - 0.2%
381,392 Abertis Infraestructuras S.A., expires 6/07/10 (d) ... 275,666
-----------
UNITED KINGDOM - 0.1%
62,066 National Grid plc, expires 6/11/10 (d) ............... 123,192
-----------
TOTAL RIGHTS
(Cost $0) ............................................ 398,858
-----------
PRINCIPAL RATINGS (F) STATED
VALUE DESCRIPTION MOODY'S S&P RATE (G) MATURITY (H) VALUE
--------- ------------------------------------------- ----------- ------------ ------------ ------------
SENIOR FLOATING-RATE LOAN INTERESTS - 35.9%
CABLE & SATELLITE - 4.1%
$1,488,608 Charter Communications Operating, LLC,
Incremental Term Loan B-2 .............. Ba2 BB+ 7.25% 03/06/14 1,488,375
See Notes to Financial Statements
Page 10
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MAY 31, 2010 (UNAUDITED)
PRINCIPAL RATINGS (F) STATED
VALUE DESCRIPTION MOODY'S S&P RATE (G) MATURITY (H) VALUE
--------- ------------------------------------------- ----------- ------------ ------------ ------------
SENIOR FLOATING-RATE LOAN INTERESTS - (CONTINUED)
CABLE & SATELLITE - (CONTINUED)
$ 500,000 Charter Communications Operating, LLC,
Term Loan C ............................ Ba2 BB+ 3.55% 09/06/16 $ 465,447
1,488,372 CSC Holdings, Inc.,
Term Loan B-2, Extended Maturity ....... Baa3 BBB- 2.09% 03/29/16 1,461,209
500,000 CSC Holdings, Inc.,
Term Loan B-3, Extended Maturity ....... Baa3 BBB- 2.09% 03/29/16 490,090
675,856 UPC Broadband Holdings B.V., Term Loan T .. Ba3 B+ 3.93% 12/31/16 652,764
324,144 UPC Broadband Holdings B.V., Term Loan X .. Ba3 B+ 2.18% 12/31/17 310,773
------------
4,868,658
------------
ELECTRIC UTILITIES - 9.4%
2,362,041 Astoria Generating Co.,
Acquisitions, LLC, Term Loan B ......... B1 BB- 2.01% - 2.03% 02/23/12 2,252,206
2,266,757 Calpine Corp.,
First Priority Term Loan ............... B1 B+ 3.17% 03/29/14 2,125,794
319,848 Covanta Energy Corp.,
Synthetic Letter of Credit ............. Ba1 BB 1.79% 02/09/14 305,988
630,200 Covanta Energy Corp.,
Term Loan .............................. Ba1 BB 1.81% - 1.94% 02/09/14 602,892
1,000,000 Mirant North America, LLC, Revolving Credit
Facility ............................... Ba2 BB 2.10% 01/14/12 940,000
816,465 Mirant North America, LLC, Term Loan ...... Ba2 BB 2.10% 01/03/13 791,388
2,025,275 NRG Energy, Inc., Synthetic Letter of
Credit ................................. Baa3 BB+ 2.04% 02/01/13 1,942,883
527,627 NRG Energy, Inc., Term Loan ............... Baa3 BB+ 2.04% - 2.10% 02/01/13 506,162
1,007,806 Riverside Energy Center, LLC, Term Loan ... Ba3 BB- 4.59% 06/24/11 1,002,767
99,979 Rocky Mountain Energy Center, LLC, Letter
of Credit .............................. Ba3 BB- 4.69% 06/24/11 99,479
392,215 Rocky Mountain Energy Center, LLC,Term
Loan ................................... Ba3 BB- 4.59% 06/24/11 390,254
------------
10,959,813
------------
ENVIRONMENTAL & FACILITIES SERVICES - 1.7%
18,020 EnergySolutions, LLC, Synthetic Letter of
Credit ................................. Ba2 NR (i) 4.10% 06/07/13 17,615
1,641,509 EnergySolutions, LLC,
Synthetic Letter of Credit, Add-On ..... Ba2 NR (i) 4.10% 08/09/13 1,604,576
115,633 EnergySolutions, LLC, Term Loan
(Duratek) .............................. Ba2 NR (i) 4.03% 06/07/13 113,031
217,087 EnergySolutions, LLC, Term Loan
(EnergySolutions) ...................... Ba2 NR (i) 4.03% 06/07/13 212,203
------------
1,947,425
------------
See Notes to Financial Statements
Page 11
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MAY 31, 2010 (UNAUDITED)
PRINCIPAL RATINGS (F) STATED
VALUE DESCRIPTION MOODY'S S&P RATE (G) MATURITY (H) VALUE
--------- ------------------------------------------- ----------- ------------ ------------ ------------
SENIOR FLOATING-RATE LOAN INTERESTS - (CONTINUED)
GAS UTILITIES - 0.7%
$ 817,303 Atlas Pipeline Partners, L.P., Term Loan .. B1 B 6.75% 07/27/14 $ 811,854
------------
HEALTH CARE FACILITIES - 4.5%
469,758 HCA Inc., Term Loan B ..................... Ba3 BB 2.54% 11/18/13 443,921
1,626,573 HCA Inc., Term Loan B-2 ................... Ba3 BB 3.54% 03/31/17 1,572,185
795,000 Health Management Associates Inc., Term
Loan B ................................. B1 BB- 2.04% 02/28/14 745,643
945,840 Lifepoint Hospitals Inc., Term Loan B ..... Ba1 BB 2.13% 04/15/12 914,706
1,673,948 Select Medical Corp., Term Loan B-1 ....... Ba2 BB- 4.23% 08/22/14 1,616,755
------------
5,293,210
------------
HEALTH CARE SERVICES - 1.6%
95,851 CHS/Community Health Systems, Inc.,
Delayed Draw Term Loan ................. Ba3 BB 2.79% 07/25/14 89,609
1,871,778 CHS/Community Health Systems, Inc.,
Term Loan .............................. Ba3 BB 2.60% - 2.79% 07/25/14 1,749,879
------------
1,839,488
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 5.0%
792,748 Bicent Power, LLC, Term Loan First Lien ... B1 BB- 2.30% 06/30/14 714,133
63,395 Coleto Creek Power, L.P., Synthetic Letter
of Credit .............................. B1 B+ 3.04% 06/28/13 57,689
815,747 Coleto Creek Power, L.P., Term Loan, First
Lien ................................... B1 B+ 3.04% - 3.10% 06/28/13 742,330
1,462,837 Dynegy Holdings Inc., Synthetic Letter of
Credit ................................. Ba2 B+ 4.11% 04/02/13 1,391,524
37,163 Dynegy Holdings Inc., Term Loan B ......... Ba2 B+ 2.56% 04/02/13 35,351
933,333 Longview Power, LLC, Delayed Draw Term
Loan ................................... B2 BB- 2.56% 02/28/14 822,500
266,667 Longview Power, LLC, Synthetic Letter of
Credit ................................. B2 BB- 2.56% 02/28/14 235,000
800,000 Longview Power, LLC, Term Loan B .......... B2 BB- 2.56% 02/28/14 705,000
1,496,164 Texas Competitive Electric Holdings Co.,
LLC, Initial Term Loan B3 .............. B1 B+ 3.79% - 3.80% 10/10/14 1,142,695
------------
5,846,222
------------
MANAGED HEALTH CARE - 4.0%
703,311 IASIS Healthcare Corp., Delayed Draw Term
Loan ................................... Ba2 B+ 2.35% 03/15/14 662,871
See Notes to Financial Statements
Page 12
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MAY 31, 2010 (UNAUDITED)
PRINCIPAL RATINGS (F) STATED
VALUE DESCRIPTION MOODY'S S&P RATE (G) MATURITY (H) VALUE
--------- ------------------------------------------- ----------- ------------ ------------ ------------
SENIOR FLOATING-RATE LOAN INTERESTS - (CONTINUED)
MANAGED HEALTH CARE - (CONTINUED)
$ 190,890 IASIS Healthcare Corp., Synthetic Letter of
Credit ................................. Ba2 B+ 2.35% 03/15/14 $ 179,914
2,032,169 IASIS Healthcare Corp., Term Loan ......... Ba2 B+ 2.35% 03/15/14 1,915,319
2,000,000 Vanguard Health Systems Inc., Term
Loan B ................................. Ba2 B+ 5.00% 01/29/16 1,973,000
------------
4,731,104
------------
MULTI-UTILITIES - 1.6%
2,000,000 KGEN, LLC, Synthetic Letter of Credit ..... B1 BB- 2.06% 02/08/14 1,880,000
------------
OIL & GAS EQUIPMENT & SERVICES - 0.1%
120,331 Targa Resources, Inc., Term Loan .......... Ba3 B+ 6.00% 07/05/16 120,090
------------
OIL & GAS EXPLORATION & PRODUCTION - 0.6%
376,170 SemCrude, L.P., Prefunded Synthetic
Letter of Credit ....................... NR NR 8.50% 11/30/12 371,155
19,799 SemCrude, L.P., Prefunded Synthetic
Letter of Credit (OID) ................. NR NR 8.50% 11/30/12 19,534
346,889 SemCrude, L.P., Term Loan, Second Lien .... NR NR 9.00% (j) 11/30/16 349,491
------------
740,180
------------
OIL & GAS STORAGE & TRANSPORTATION - 1.7%
1,000,000 Energy Transfer Equity, L.P., Term
Loan B ................................. Ba2 BB- 2.09% 11/01/12 978,571
1,000,000 Enterprise GP Holdings, L.P. Term Loan B .. Ba2 BB- 2.55% 11/08/14 970,000
------------
1,948,571
------------
WIRELESS TELECOMMUNICATION SERVICES - 0.9%
1,057,562 Windstream Corp., Term Loan B2 ............ Baa3 BB+ 3.06% 12/17/15 1,038,790
------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS
(Cost $43,459,189) ........................ 42,025,405
------------
TOTAL INVESTMENTS - 134.3%
(Cost $164,566,244) (k) ................... 157,257,036
OUTSTANDING LOAN - (38.0)% ................ (44,500,000)
NET OTHER ASSETS AND LIABILITIES - 3.7% ... 4,285,006
------------
NET ASSETS - 100.0% ....................... $117,042,042
============
----------
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) All or a portion of this security is available to serve as collateral on
the outstanding loan.
(c) This security is fair valued in accordance with procedures adopted by the
Fund's Board of Trustees.
(d) Non-income producing security.
See Notes to Financial Statements
Page 13
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MAY 31,2010 (UNAUDITED)
(e) This security is restricted and cannot be offered for public sale without
first being registered under the Securities Act of 1933, as amended. Prior
to registration, restricted securities may only be resold in transactions
exempt from registration (see Note 2F - Restricted Securities in the Notes
to Financial Statements).
(f) Ratings below Baa3 by Moody's Investors Service, Inc. or BBB- by Standard &
Poor's Ratings Group are considered to be below investment grade.
(g) Senior Loans in which the Fund invests generally pay interest at rates
which are periodically predetermined by reference to a base lending rate
plus a premium. These base lending rates are generally (i) the lending rate
offered by one or more major European banks, such as the London Inter-Bank
Offered Rate ("LIBOR"), (ii) the prime rate offered by one or more United
States banks or (iii) the certificate of deposit rate.
(h) Senior Loans generally are subject to mandatory and/or optional prepayment.
As a result, the actual remaining maturity of Senior Loans may be
substantially less than the stated maturities shown.
(i) This Senior Loan Interest was privately-rated upon issuance. The rating
agency does not provide ongoing surveillance on the rating.
(j) Interest for the period commencing on November 30, 2009 and ending on
December 31, 2011 shall be payable, at the Borrowers' option, (i) in cash
at a rate per annum equal to 9% ("Cash Interest") or (ii) in
Payment-in-Kind interest at a rate per annum equal to 11%, and, commencing
on January 1, 2012, shall be payable as Cash Interest.
(k) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of May 31, 2010, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $7,295,950 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $14,605,158.
NR Not Rated
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of May 31, 2010
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
5/31/2010 PRICES INPUTS** INPUTS
------------ ----------- ------------ ------------
Common Stocks:
Australia ........................... $ 26,279,120 $ -- $ 26,279,120 $--
Canada .............................. 4,692,423 4,692,423 -- --
France .............................. 10,297,170 -- 10,297,170 --
Germany ............................. 5,248,786 -- 5,248,786 --
Italy ............................... 8,458,798 -- 8,458,798 --
Japan ............................... 1,684,394 -- 1,684,394 --
Spain ............................... 13,064,036 -- 13,064,036 --
Switzerland ......................... 1,497,957 -- 1,497,957 --
United Kingdom ...................... 12,119,674 1,829,386 10,290,288 --
United States ....................... 10,345,892 9,107,019 1,238,873 --
------------ ----------- ------------ ---
Total Common Stock ............... 93,688,250 15,628,828 78,059,422
------------ ----------- ------------ ---
Master Limited Partnerships * .......... 12,502,688 12,502,688 -- --
Canadian Income Trusts ................. 8,641,835 8,641,835 -- --
Rights * ............................... 398,858 398,858 --
Senior Floating-Rate Loan Interests * .. 42,025,405 -- 42,025,405 --
------------ ----------- ------------ ---
Total Investments ...................... $157,257,036 $37,172,209 $120,084,827 $--
============ =========== ============ ===
* See the Portfolio of Investments for country or industry breakout.
** A significant number of foreign securities were fair valued as of May 31,
2010 due to significant market movement in the U.S. subsequent to the
closing of the foreign markets.
See Notes to Financial Statements
Page 14
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31,2010 (UNAUDITED)
ASSETS:
Investments, at value
(Cost $164,566,244) ........................................................................ $ 157,257,036
Cash .......................................................................................... 4,338,386
Prepaid expenses .............................................................................. 18,161
Receivables:
Investment securities sold ................................................................. 4,264,680
Dividends .................................................................................. 1,301,462
Interest ................................................................................... 173,724
-------------
Total Assets ............................................................................ 167,353,449
-------------
LIABILITIES:
Outstanding loan .............................................................................. 44,500,000
Payables:
Investment securities purchased ............................................................ 5,233,497
Investment advisory fees (includes Sub-Advisory fees of $262,213) .......................... 437,022
Legal fees ................................................................................. 32,235
Audit and tax fees ......................................................................... 31,622
Printing fees .............................................................................. 25,213
Custodian fees ............................................................................. 17,959
Administrative fees ........................................................................ 13,306
Interest and fees on loan .................................................................. 10,154
Trustees' fees and expenses ................................................................ 6,395
Transfer agent fees ........................................................................ 4,004
-------------
Total Liabilities ....................................................................... 50,311,407
-------------
NET ASSETS .................................................................................... $ 117,042,042
=============
NET ASSETS CONSIST OF:
Paid-in capital ............................................................................... $ 168,468,234
Par value ..................................................................................... 90,780
Accumulated net investment income (loss) ...................................................... (1,911,791)
Accumulated net realized gain (loss) on investments and foreign currency transactions ......... (42,295,835)
Net unrealized appreciation (depreciation) on investments and foreign currency translation .... (7,309,346)
-------------
NET ASSETS .................................................................................... $ 117,042,042
=============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) .......................... $ 12.89
=============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized) ... 9,077,963
=============
See Notes to Financial Statements
Page 15
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31,2010 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $303,486) ............... $ 2,868,767
Interest ............................................................. 813,778
Other ................................................................ 32,506
------------
Total investment income ........................................... 3,715,051
------------
EXPENSES:
Investment advisory fees (includes Sub-Advisory fees of $513,728) .... 856,213
Interest and fees on loan ............................................ 428,358
Administrative fees .................................................. 81,340
Custodian fees ....................................................... 66,943
Printing fees ........................................................ 40,827
Legal fees ........................................................... 37,872
Trustees' fees and expenses .......................................... 19,450
Audit and tax fees ................................................... 18,422
Transfer agent fees .................................................. 17,096
Other ................................................................ 35,639
------------
Total expenses .................................................... 1,602,160
------------
NET INVESTMENT INCOME (LOSS) ......................................... 2,112,891
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ....................................................... (162,366)
Foreign currency transactions ..................................... (155,666)
------------
Net realized gain (loss) ............................................. (318,032)
------------
Net change in unrealized appreciation (depreciation) on:
Investments ....................................................... (12,218,134)
Foreign currency translation ...................................... (145,796)
------------
Net change in unrealized appreciation (depreciation) ................. (12,363,930)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) .............................. (12,681,962)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... $(10,569,071)
============
See Notes to Financial Statements
Page 16
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR
5/31/2010 ENDED
(UNAUDITED) 11/30/2009
------------ ------------
OPERATIONS:
Net investment income (loss) ............................................... $ 2,112,891 $ 4,140,047
Net realized gain (loss) ................................................... (318,032) (20,265,525)
Net change in unrealized appreciation (depreciation) ....................... (12,363,930) 48,126,849
------------ ------------
Net increase (decrease) in net assets resulting from operations ............ (10,569,071) 32,001,371
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ...................................................... (2,723,389) (957,151)
Return of capital .......................................................... -- (4,489,627)
------------ ------------
Total distributions to shareholders ........................................ (2,723,389) (5,446,778)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from Common Shares reinvested ..................................... -- --
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions .. -- --
------------ ------------
Total increase (decrease) in net assets .................................... (13,292,460) 26,554,593
NET ASSETS:
Beginning of period ........................................................ 130,334,502 103,779,909
------------ ------------
End of period .............................................................. $117,042,042 $130,334,502
============ ============
Accumulated net investment income (loss) at end of period .................. $ (1,911,791) $ (1,301,293)
============ ============
CAPITAL SHARE TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period ....................................... 9,077,963 9,077,963
Common Shares issued as reinvestment under the Dividend Reinvestment Plan .. -- --
------------ ------------
Common Shares at end of period ............................................. 9,077,963 9,077,963
============ ============
See Notes to Financial Statements
Page 17
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31,2010 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations ................ $(10,569,071)
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash used in operating activities:
Purchases of investments .................................................... (76,414,639)
Sales, maturities and paydowns of investments ............................... 68,542,262
Net amortization/accretion of premium/discount on investments ............... (231,707)
Net realized gain/loss on investments ....................................... 162,366
Net change in unrealized appreciation (depreciation) on investments ......... 12,218,134
CHANGES IN ASSETS AND LIABILITIES:
Decrease in dividends receivable (a) ........................................ 29,100
Increase in interest receivable ............................................. (41,098)
Decrease in prepaid expenses ................................................ 81,070
Increase in interest and fees on loan payable ............................... 2,279
Increase in investment advisory fees payable ................................ 34,913
Decrease in audit and tax fees payable ...................................... (29,578)
Increase in legal fees payable .............................................. 17,194
Decrease in printing fees payable ........................................... (8,224)
Increase in transfer agent fees payable ..................................... 1,266
Increase in administrative fees payable ..................................... 426
Decrease in custodian fees payable .......................................... (6,065)
Decrease in Trustees' fees and expenses payable ............................. (316)
Decrease in other liabilities ............................................... (3,231)
------------
CASH USED IN OPERATING ACTIVITIES .............................................. $(6,214,919)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Common Shareholders from net investment income ................ (4,085,084)
Issuances of loan .............................................................. 8,600,000
------------
CASH PROVIDED BY FINANCING ACTIVITIES .......................................... 4,514,916
-----------
Decrease in cash ............................................................... (1,700,003)
Cash at beginning of period .................................................... 6,038,389
-----------
CASH AT END OF PERIOD .......................................................... $ 4,338,386
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees .............................. $ 337,313
===========
----------
(a) Includes net change in unrealized appreciation (depreciation) on foreign
currency of ($145,796).
See Notes to Financial Statements
Page 18
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED YEAR YEAR YEAR SIX MONTHS YEAR YEAR
5/31/2010 ENDED ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 11/30/2009 11/30/2008 11/30/2007 11/30/2006 (a) 5/31/2006 5/31/2005
----------- ---------- ---------- ---------- -------------- --------- ---------
Net asset value,
beginning of period ........................ $ 14.36 $ 11.43 $ 25.03 $ 25.99 $ 24.04 $ 23.43 $ 19.24
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.23 0.46 1.33 1.33 0.90 1.61 1.23
Net realized and unrealized
gain (loss) ................................ (1.40) 3.07 (13.23) 4.25 3.39 1.28 4.65
-------- -------- -------- -------- -------- -------- --------
Total from investment operations .............. (1.17) 3.53 (11.90) 5.58 4.29 2.89 5.88
-------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income ......................... (0.30) (0.11) (0.93) (2.11) (0.66) (1.65) (1.69)
Net realized gain ............................. -- -- (0.73) (4.43) (1.68) (0.63) --
Return of capital ............................. -- (0.49) (0.04) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions ........................... (0.30) (0.60) (1.70) (6.54) (2.34) (2.28) (1.69)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period ................ $ 12.89 $ 14.36 $ 11.43 $ 25.03 $ 25.99 $ 24.04 $ 23.43
======== ======== ======== ======== ======== ======== ========
Market value, end of period ................... $ 10.65 $ 11.73 $ 8.60 $ 23.78 $ 23.93 $ 21.04 $ 20.87
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN BASED ON NET
ASSET VALUE (b) (c) ........................ (7.90)% 33.75% (48.98)% 21.87% 18.22% 13.50% 32.15%
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN BASED ON
MARKET VALUE (b) ........................... (6.84)% 45.08% (59.56)% 25.75% 24.37% 11.52% 27.96%
======== ======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .......... $117,042 $130,335 $103,780 $225,548 $233,379 $215,861 $210,388
Ratio of total expenses to average
net assets ................................. 2.41%(d) 2.86% 3.72% 3.63% 3.97%(d) 3.59% 2.78%
Ratio of total expenses to average
net assets, excluding interest
expense and fees ........................... 1.77%(d) 1.92% 1.80% 1.73% 1.73%(d) 1.79% 1.78%
Ratio of net investment income
to average net assets ...................... 3.18%(d) 3.76% 6.44% 4.65% 6.94%(d) 6.73% 5.65%
Portfolio turnover rate ....................... 43% 80% 23% 53% 14% 60% 43%
DEBT:
Loan outstanding (in 000's) ................... $ 44,500 $ 35,900 $ 38,900 $ 84,000 $ 83,500 $ 83,000 $ 75,000
Asset coverage per $1,000 of
indebtedness (e) ........................... $ 3,630 $ 4,630 $ 3,668 $ 3,685 $ 3,795 $ 3,601 $ 3,805
----------
(a) The Fund's fiscal year end was changed from May 31 to November 30.
(b) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by the
Dividend Reinvestment Plan, and changes in net asset value per share for
net asset value returns and changes in Common Share price for market value
returns. Total returns do not reflect sales load and are not annualized for
periods less than one year. Past performance is not indicative of future
results.
(c) In 2008, the Fund received reimbursements from the investment sub-advisor
in the amount of $332,025. If this reimbursement was not received, the NAV
total return for the year ended November 30, 2008 would have been (49.16)%.
(d) Annualized.
(e) Calculated by taking the Fund's total assets less the Fund's total
liabilities (not including the loan outstanding), and dividing by the
outstanding loan balance in 000's.
See Notes to Financial Statements
Page 19
NOTES TO FINANCIAL STATEMENTS
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2010 (UNAUDITED)
1.FUND DESCRIPTION
Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund
(the "Fund") is a non-diversified, closed-end management investment company
organized as a Massachusetts business trust on January 21, 2004 and is
registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund trades
under the ticker symbol MFD on the New York Stock Exchange ("NYSE").
The Fund's investment objective is to seek a high level of current return
consisting of dividends, interest and other similar income while attempting to
preserve capital. In pursuit of this objective, the Fund seeks to manage its
investments and expenses so that a significant portion of its distributions to
the Fund's Common Shareholders will qualify as tax-advantaged dividends, subject
to the continued availability of favorable tax treatment for such qualifying
dividends. The Fund seeks to achieve its investment objective by investing in a
non-diversified portfolio of equity, debt, preferred or convertible securities
and other instruments (for instance, other instruments could include Canadian
income trusts and Australian stapled securities) issued by U.S. and non-U.S.
issuers that have as their primary focus (in terms of income and/or assets) the
management, ownership and/or operation of infrastructure and utilities assets in
a select group of countries. There can be no assurance that the Fund will
achieve its investment objective. The Fund may not be appropriate for all
investors.
2.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of the Fund is determined daily
as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time,
on each day the NYSE is open for trading. Domestic debt securities and foreign
securities are priced using data reflecting the earlier closing of the principal
markets for those securities. The NAV per Common Share is calculated by dividing
the value of all assets of the Fund (including accrued interest and dividends),
less all liabilities (including accrued expenses, dividends declared but unpaid
and any borrowings of the Fund) by the total number of Common Shares
outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value in
accordance with valuation procedures adopted by the Fund's Board of Trustees. A
majority of the Fund's assets are valued using market information supplied by
third parties. In the event that market quotations are not readily available,
the pricing service does not provide a valuation for a particular asset, or the
valuations are deemed unreliable, the Fund's Board of Trustees has designated
First Trust Advisors L.P. ("First Trust") to use a fair value method to value
the Fund's securities and other investments. Additionally, if events occur after
the close of the principal markets for particular securities (e.g., domestic
debt and foreign securities), but before the Fund values its assets, that could
materially affect NAV, First Trust may use a fair value method to value the
Fund's securities and other investments. The use of fair value pricing by the
Fund is governed by valuation procedures adopted by the Fund's Board of
Trustees, and in accordance with the provisions of the 1940 Act.
Portfolio securities listed on any exchange other than the NASDAQ National
Market ("NASDAQ") or the London Stock Exchange Alternative Investment Market
("AIM") are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such day, or no official
closing price in the case of securities traded on the NASDAQ or the AIM, the
securities are valued at the mean of the most recent bid and asked prices on
such day. Securities traded on the NASDAQ or the AIM are valued at the official
closing price on the business day as of which such value is being determined.
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 or the AIM, are valued at the closing
bid prices. Short-term investments that mature in less than 60 days when
purchased are valued at amortized cost.
Page 20
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2010 (UNAUDITED)
Foreign securities traded outside the United States are generally valued as of
the time their trading is complete, which is usually different from the close of
the NYSE. Occasionally, events affecting the value of such securities may occur
between such times and the close of the NYSE that will not always be reflected
in the computation of the value of such securities. If events materially
affecting the value of such securities occur during such period, these
securities will be valued at their fair value according to procedures adopted by
the Fund's Board of Trustees. All securities and other assets of the Fund
initially expressed in foreign currencies will be converted to U.S. dollars
using exchange rates in effect at the time of valuation.
The Senior Floating-Rate Loan interests ("Senior Loans") in which the Fund
invests are not listed on any securities exchange or board of trade. Senior
Loans are typically bought and sold by institutional investors in individually
negotiated private transactions that function in many respects like an
over-the-counter secondary market, although typically no formal market-makers
exist. This market, while having grown substantially since its inception,
generally has fewer trades and less liquidity than the secondary market for
other types of securities. Some Senior Loans have few or no trades, or trade
infrequently, and information regarding a specific Senior Loan may not be widely
available or may be incomplete. Accordingly, determinations of the value of
Senior Loans may be based on infrequent and dated information. Because there is
less reliable, objective data available, elements of judgment may play a greater
role in valuation of Senior Loans than for other types of securities. Typically,
Senior Loans are valued using information provided by a third party pricing
service. If the pricing service cannot or does not provide a valuation for a
particular Senior Loan or such valuation is deemed unreliable, First Trust may
value such Senior Loan at a fair value according to procedures adopted by the
Fund's Board of Trustees, and in accordance with the provisions of the 1940 Act.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
- Level 1 - Level 1 inputs are quoted prices in active markets for
identical securities. An active market is a market in which
transactions for the security occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
- Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
- Quoted prices for similar securities in active markets.
- Quoted prices for identical or similar securities in markets that
are non-active. A non-active market is a market where there are
few transactions for the security, the prices are not current, or
price quotations vary substantially either over time or among
market makers, or in which little information is released
publicly.
- Inputs other than quoted prices that are observable for the
security (for example, interest rates and yield curves observable
at commonly quoted intervals, volatilities, prepayment speeds,
loss severities, credit risks, and default rates).
- Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
- Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs
reflect the reporting entity's own assumptions about the assumptions
that market participants would use in pricing the security.
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. A summary
of the inputs used to value the Fund's investments as of May 31, 2010 is
included with the Fund's Portfolio of Investments.
B. REPURCHASE AGREEMENTS:
The Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Fund's holding
period. The value of the collateral is at all times at least equal to the total
amount of the repurchase obligation, including interest. In the event of
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements to
evaluate potential risks. As of May 31, 2010, the Fund had no open repurchase
agreements.
Page 21
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2010 (UNAUDITED)
C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. Market premiums and discounts are amortized over the
expected life of each respective borrowing.
Distributions received from the Fund's investments in Master Limited
Partnerships ("MLP") generally are comprised of return of capital from the MLP
to the extent of the cost basis of such MLP investments. Cumulative
distributions received in excess of the Fund's cost basis in an MLP generally
are recorded as dividend income.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund maintains liquid assets with a
current value at least equal to the amount of its when-issued or
delayed-delivery purchase commitments. At May 31, 2010, the Fund had no
when-issued or delayed-delivery purchase commitments.
D. UNFUNDED LOAN COMMITMENTS:
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund is obligated to fund these loan commitments at the
borrowers' discretion. As of May 31, 2010, the Fund had no unfunded loan
commitments.
E. FOREIGN CURRENCY:
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statement of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statement of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received. The portion of foreign
currency gains and losses related to fluctuation in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in "Net
realized gain (loss) on foreign currency transactions" on the Statement of
Operations.
F. RESTRICTED SECURITIES:
The Fund invests in restricted securities, which are securities that cannot be
offered for public sale without first being registered under the Securities Act
of 1933, as amended. Prior to registration, restricted securities may only be
resold in transactions exempt from registration. The Fund held restricted
securities at May 31, 2010 as shown in the following table. The Fund does not
have the right to demand that such securities be registered. These securities
are valued using market quotations according to the valuation procedures as
stated in the Portfolio Valuation footnote (Note 2A) and are not expressed as a
discount to the carrying value of a comparable unrestricted security.
ACQUISITION % OF
SECURITY DATE SHARES PRICE CARRYING COST VALUE NET ASSETS
-------- ----------- --------- ----- ------------- ---------- ----------
Spark Infrastructure Group 12/14/05 8,274,839 $0.96 $9,496,467 $7,942,052 6.79%
========== ========== ====
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Fund are declared and paid quarterly
or as the Board of Trustees may determine from time to time. On December 11,
2006, the Fund's Board of Trustees adopted a level distribution plan for the
Fund. If, for any quarterly distribution, net investment company taxable income,
if any (which term includes net short-term capital gain), as determined as of
the close of the Fund's taxable year, is less than the amount of the
distribution, the difference will generally be a tax-free return of capital
distributed from the Fund's assets. Distributions of any net capital gains
earned by the Fund are distributed at least annually. Distributions will
automatically be reinvested into additional Common Shares pursuant to the Fund's
Dividend Reinvestment Plan unless cash distributions are elected by the
shareholder.
Page 22
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2010 (UNAUDITED)
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund. The character of distributions for tax reporting purposes will
depend on the Fund's investment experience during the remainder of its fiscal
year; however, based on information for the Fund's fiscal year through May 31,
2010, it is likely that the Fund's distributions will include a return of
capital component for the Fund's fiscal year ending on November 30, 2010.
The tax character of distributions paid during the fiscal year ended November
30, 2009 was as follows:
Distributions paid from:
Ordinary Income ............................. $ 957,151
Return of Capital ........................... 4,489,627
As of November 30, 2009, the components of distributable earnings on a tax basis
were as follows:
Undistributed Ordinary Income ............... $ --
Net Unrealized Appreciation (Depreciation) .. 2,824,728
Accumulated Capital and Other Losses ........ (39,659,733)
H. INCOME TAXES:
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal or state income taxes.
Certain capital losses realized after October 31 may be deferred and treated as
occurring on the first day of the following fiscal year. For the fiscal year
ended November 30, 2009, the Fund elected to defer net realized capital losses
of $3,403,327 and foreign currency losses of $64,319 incurred between November
1, 2009 and November 30, 2009.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry realized capital losses forward for eight years following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At November 30, 2009, the
Fund had a capital loss carryforward for federal income tax purposes of
$36,192,087 expiring on November 30, 2017.
The Fund is subject to tax accounting standards that establish a minimum
threshold for recognizing, and a system for measuring, the benefits of a tax
position taken or expected to be taken in a tax return. Taxable years ending
2006, 2007, 2008 and 2009 remain open to federal and state audit. As of May 31,
2010, management has evaluated the application of these standards to the Fund,
and has determined that no provision for income tax is required in the Fund's
financial statements for uncertain tax positions.
I. EXPENSES:
The Fund pays all expenses directly related to its operations.
J. ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements." ASU 2010-06 amends FASB Accounting Standards
Codification Topic 820, Fair Value Measurements and Disclosures, to require
additional disclosures regarding fair value measurements. Certain disclosures
required by ASU No. 2010-06 are effective for interim and annual reporting
periods beginning after December 15, 2009, and other required disclosures are
effective for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years. Management is currently evaluating the impact
ASU No. 2010-06 will have on the Fund's financial statement disclosures, if any.
Page 23
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31,2010 (UNAUDITED)
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust is a limited partnership with one limited partner, Grace Partners of
DuPage L.P., and one general partner, The Charger Corporation. First Trust
serves as investment advisor to the Fund pursuant to an Investment Management
Agreement. First Trust is responsible for the ongoing monitoring of the Fund's
investment portfolio, managing the Fund's business affairs and providing certain
administrative services necessary for the management of the Fund. For these
services, First Trust is entitled to a quarterly fee calculated at an annual
rate of 0.40% of the Fund's Total Assets up to and including $250 million and
0.35% of the Fund's Total Assets over $250 million. Total Assets are generally
defined as average daily total assets (including the principal amount of any
borrowings) minus the Fund's accrued liabilities (excluding the principal amount
of any borrowings or indebtedness incurred).
Macquarie Capital Investment Management LLC ("MCIM") and Four Corners Capital
Management, LLC ("Four Corners") serve as the Fund's sub-advisors and manage the
Fund's portfolio subject to First Trust's supervision. MCIM manages the Core
Component which consists primarily of equity securities and equity-like
securities issued by infrastructure issuers and, for its portfolio management
services, MCIM is entitled to a quarterly fee calculated at an annual rate of
0.60% for that portion of the Fund's Total Assets allocated to MCIM. If the
Fund's Total Assets are greater than $250 million, MCIM receives an annual
portfolio management fee of 0.65% for that portion of the Fund's Total Assets
over $250 million. In addition, to the extent that MCIM invests a portion of the
Core Component in unlisted securities ("Core Unlisted Instruments"), MCIM is
entitled to receive a supplemental fee of 0.60% of that portion of the Fund's
Total Assets invested in Core Unlisted Instruments. Four Corners manages the
Senior Loan Component and, for its portfolio management services, Four Corners
is entitled to a quarterly fee calculated at an annual rate of 0.60% for that
portion of the Fund's Total Assets allocated to Four Corners.
PNC Global Investment Servicing (U.S.) Inc., an indirect, wholly-owned
subsidiary of The PNC Financial Services Group, Inc. ("PNC"), serves as the
Fund's Administrator, Fund Accountant and Transfer Agent in accordance with
certain fee arrangements. PFPC Trust Company, also an indirect, majority-owned
subsidiary of PNC, serves as the Fund's Custodian in accordance with certain fee
arrangements.
On July 1, 2010, The PNC Financial Services Group, Inc. sold the outstanding
stock of PNC Global Investment Servicing Inc. to The Bank of New York Mellon
Corporation. At the closing of the sale, PNC Global Investment Servicing (U.S.)
Inc. changed its name to BNY Mellon Investment Servicing (US) Inc. PFPC Trust
Company will not change its name until a later date to be announced.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustee") is paid an annual retainer of
$10,000 per trust for the first 14 trusts of the First Trust Fund Complex and an
annual retainer of $7,500 per trust for each subsequent trust in the First Trust
Fund Complex. The annual retainer is allocated equally among each of the trusts.
No additional meeting fees are paid in connection with board or committee
meetings.
Additionally, the Lead Independent Trustee is paid $10,000 annually, the
Chairman of the Audit Committee is paid $5,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and the Valuation Committee
is paid $2,500 annually to serve in such capacities, with such compensation paid
by the trusts in First Trust Fund Complex and allocated equally among those
trusts. Trustees are also reimbursed by the trusts in the First Trust Fund
Complex for travel and out-of-pocket expenses in connection with all meetings.
The Lead Independent Trustee and each Committee chairman will serve two-year
terms ending December 31, 2011, before rotating to serve as chairman of another
committee or as Lead Independent Trustee. The officers and "Interested" Trustee
receive no compensation from the trusts for serving in such capacities.
For the six months ended May 31, 2010, the Fund paid brokerage commissions to
Macquarie Capital (USA) Inc., an affiliate of MCIM and Four Corners, totaling
$6,779.
Page 24
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31,2010 (UNAUDITED)
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the six months ended May 31, 2010, were $80,129,433,
and $71,406,977, respectively.
5. BORROWINGS
The Fund has entered into a Committed Facility Agreement with BNP Paribas Prime
Brokerage Inc. (the "BNP Paribas Facility"), which provides for a committed
credit facility to be used as leverage for the Fund. The BNP Paribas Facility
provides for a secured, committed line of credit for the Fund, where Fund assets
are pledged against advances made to the Fund. Under the requirements of the
1940 Act, the Fund, immediately after any such borrowings, must have "asset
coverage" of at least 300% (33-1/3% of the Fund's total assets after
borrowings). The total amount of loans that may be outstanding at any one time
under the BNP Paribas Facility is $50,000,000. Absent certain events of default
or failure to maintain certain collateral requirements, BNP Paribas Prime
Brokerage Inc. may not terminate the BNP Paribas Facility except upon 180
calendar days prior notice. The BNP Paribas Facility required an up front
payment from the Fund equal to $200,000, which was amortized over a one year
period ended May 11, 2010. The interest rate under the BNP Paribas Facility is
equal to the 3-month LIBOR plus 145 basis points. In addition, under the BNP
Paribas Facility, the Fund pays a commitment fee of 0.85% on the undrawn amount
of the BNP Paribas Facility.
For the six months ended May 31, 2010, the daily average amount outstanding
under the BNP Paribas Facility was $38,501,099. The high and low annual interest
rates during the six months ended May 31, 2010 were 1.80% and 1.35%,
respectively, and the weighted average interest rate was 1.68%. The interest
rate at May 31, 2010 was 1.54%.
6. INDEMNIFICATION
The Fund has a variety of indemnification obligations under contracts with its
service providers. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
7. RISK CONSIDERATIONS
Risks are inherent in all investing. The following summarizes some of the risks
that should be considered for the Fund. For additional information about the
risks associated with investing in the Fund, please see the Fund's prospectus
and statement of additional information, as well as other Fund regulatory
filings.
INVESTMENT AND MARKET RISK: An investment in the Fund's Common Shares is subject
to investment risk, including the possible loss of the entire principal
invested. An investment in Common Shares represents an indirect investment in
the securities owned by the Fund. The value of these securities, like other
market investments, may move up or down, sometimes rapidly and unpredictably.
Common Shares at any point in time may be worth less than the original
investment, even after taking into account the reinvestment of Fund dividends
and distributions. Security prices can fluctuate for several reasons including
the general condition of the securities markets, or when political or economic
events affecting the issuers occur. When the Advisor or sub-advisors determines
that it is temporarily unable to follow the Fund's investment strategy or that
it is impractical to do so (such as when a market disruption event has occurred
and trading in the securities is extremely limited or absent), the Fund may take
temporary defensive positions.
INDUSTRY CONCENTRATION RISK: The Fund intends to invest up to 100% of its Total
Assets in the securities and instruments of infrastructure issuers. Given this
industry concentration, the Fund will be more susceptible to adverse economic or
regulatory occurrences affecting that industry than an investment company that
is not concentrated in a single industry. Infrastructure issuers, including
utilities and companies involved in infrastructure projects, may be subject to a
variety of factors that may adversely affect their business or operations,
including high interest costs in connection with capital construction programs,
high leverage, costs associated with environmental and other regulations, the
effects of economic slowdown, surplus capacity, increased competition from other
providers of services, uncertainties concerning the availability of fuel at
reasonable prices, the effects of energy conservation policies and other
factors.
Page 25
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31,2010 (UNAUDITED)
LEVERAGE RISK: The use of leverage results in additional risks and can magnify
the effect of any losses. If the income and gains from the securities and
investments purchased with such proceeds do not cover the cost of leverage, the
Common Shares' return will be less than if leverage had not been used. The funds
borrowed pursuant to a leverage borrowing program constitute a substantial lien
and burden by reason of their prior claim against the income of the Fund and
against the net assets of the Fund in liquidation. The rights of lenders to
receive payments of interest on and repayments of principal on any borrowings
made by the Fund under a leverage borrowing program are senior to the rights of
holders of Common Shares upon liquidation. If the Fund is not in compliance with
certain credit facility provisions, the Fund may not be permitted to declare
dividends or other distributions, including dividends and distributions with
respect to Common Shares or purchase Common Shares. The use of leverage by the
Fund increases the likelihood of greater volatility of NAV and market price of
the Common Shares. Leverage also increases the risk that fluctuations in
interest rates on borrowings and short-term debt that the Fund may pay will
reduce the return to the Common Shareholders or will result in fluctuations in
the dividends paid on the Common Shares.
MLP RISK: An investment in MLP units involves risks which differ from an
investment in common stock of a corporation. Holders of MLP units have limited
control and voting rights on matters affecting the partnership. In addition,
there are certain tax risks associated with an investment in MLP units and
conflicts of interest exist between common unit holders and the general partner,
including those arising from incentive distribution payments.
NON-U.S. RISK: Investments in the securities and instruments of non-U.S. issuers
involve certain considerations and risks not ordinarily associated with
investments in securities and instruments of U.S. issuers. Non-U.S. companies
are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to U.S. companies.
Non-U.S. securities exchanges, brokers and listed companies may be subject to
less government supervision and regulation than exists in the United States.
Dividend and interest income may be subject to withholding and other non-U.S.
taxes, which may adversely affect the net return on such investments. A related
risk is that there may be difficulty in obtaining or enforcing a court judgment
abroad.
CURRENCY RISK: Currency risk is the risk that the value of a non-U.S.
investment, measured in U.S. dollars, will decrease because of unfavorable
changes in currency exchange rates. An increase in the strength of the U.S.
dollar relative to other currencies may cause the value of the Fund to decline.
Certain non-U.S. currencies may be particularly volatile, and non-U.S.
governments may intervene in the currency markets, causing a decline in value or
liquidity in the Fund's non-U.S. holdings whose value is tied to the affected
non-U.S. currency.
During the period covered by this report, the Fund did not reduce or hedge its
exposure to non-U.S. currencies other than in connection with the Fund's
exposure to dividends received or receivable in non-U.S. currencies and to hedge
forward commitments. However, pursuant to a change in investment strategy to
take effect on or about October 1, 2010, as more fully described in Note 8
below, the Fund will be authorized to hedge its exposure to non-U.S. currencies
by entering into forward currency contracts or currency futures contracts
("DERIVATIVE INSTRUMENTS") to selectively hedge certain currencies for defensive
purposes. Derivative Instruments subject the Fund to additional transaction
costs and may be volatile and illiquid. There may also be imperfect correlation
between the value of the Derivative Instrument and the underlying currency
resulting in decreased effectiveness of the hedge. With over-the-counter
derivatives, there is also the risk that the other party to the transaction will
fail to perform.
SENIOR LOAN RISK: In the event a borrower fails to pay scheduled interest or
principal payments on a Senior Loan held by the Fund, the Fund will experience a
reduction in its income and a decline in the market value of the Senior Loan,
which will likely reduce dividends and lead to a decline in the net asset value
of the Fund's Common Shares. If the Fund acquires a Senior Loan from another
Lender, for example, by acquiring a participation, the Fund may also be subject
to credit risks with respect to that lender. Although Senior Loans may be
secured by specific collateral, the value of the collateral may not equal the
Fund's investment when the Senior Loan is acquired or may decline below the
principal amount of the Senior Loan subsequent to the Fund's investment. Also,
to the extent that collateral consists of stock of the borrower or its
subsidiaries or affiliates, the Fund bears the risk that the stock may decline
in value, be relatively illiquid, and/ or may lose all or substantially all of
its value, causing the Senior Loan to be undercollateralized. Therefore, the
liquidation of the collateral underlying a Senior Loan may not satisfy the
issuer's obligation to the Fund in the event of non-payment of scheduled
interest or principal, and the collateral may not be readily liquidated.
Page 26
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31,2010 (UNAUDITED)
HIGH-YIELD SECURITIES RISK: The Senior Loans in which the Fund invests are
generally considered to be "high-yield" securities. High-yield securities or
"junk" bonds, the generic name for securities rated below "BBB-" by one or more
ratings agencies, should be considered speculative as their low ratings indicate
a quality of less than investment grade, and therefore carry an increased risk
of default as compared to investment grade issues. Because high-yield securities
are generally subordinated obligations and are perceived by investors to be
riskier than higher rated securities, their prices tend to fluctuate more than
higher rated securities and are affected by short-term credit developments to a
greater degree.
High-yield securities are subject to greater market fluctuations and risk of
loss than securities with higher investment ratings. A reduction in an issuer's
creditworthiness may result in the bankruptcy of an issuer or the default by an
issuer on the interest and principal payments. The market for high-yield
securities is smaller and less liquid than that for investment grade securities.
NON-DIVERSIFICATION RISK: Because the Fund is non-diversified, it is only
limited as to the percentage of its assets which may be invested in the
securities of any one issuer by the diversification requirements imposed by the
Internal Revenue Code of 1986, as amended. Because the Fund may invest a
relatively high percentage of its assets in a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence and to the financial conditions of the issuers in which it invests.
INTEREST RATE RISK: The Fund is also subject to interest rate risk. Interest
rate risk is the risk that fixed-income securities will decline in value because
of changes in market interest rates. Investments in debt securities with
long-term maturities may experience significant price declines if long-term
interest rates increase.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued, and has determined that besides
the subsequent events that have already been disclosed there was the following
subsequent event:
CHANGE IN CERTAIN INVESTMENT STRATEGIES
On June 16, 2010, the Fund's Board of Trustees approved changes to certain of
the Fund's investment strategies. The Fund's investment strategies are
non-fundamental policies of the Fund and require 60 days' prior written notice
to shareholders before they can be changed by the Board without receiving
shareholder approval. As such, effective on or about October 1, 2010, the
following Fund investment strategy changes will become effective:
- Across both the Fund's Core Component and the Fund's Senior Loan
Component, no more than 50% (previously, no more than 40%) of the
Fund's total assets may be invested in securities and instruments of
U.S. infrastructure issuers at any one time. Within the Fund's Core
Component, no more than 30% (previously, no more than 20%) of the
infrastructure securities may consist of securities of U.S.
infrastructure issuers at any time.
- The Fund is authorized to enter into forward currency contracts or
currency futures contracts to selectively hedge certain currencies for
defensive purposes (previously, the Fund did not intend to reduce or
hedge its exposure to non-U.S. currencies other than in connection
with the Fund's exposure to dividends received or receivable in
non-U.S. currencies and to hedge forward commitments).
Page 27
ADDITIONAL INFORMATION
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31,2010 (UNAUDITED)
DIVIDEND REINVESTMENT PLAN
If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by BNY
Mellon Investment Servicing (US) Inc. (formerly PNC Global Investment Servicing
(U.S.) Inc.) (the "Plan Agent"), in additional Common Shares under the Plan. If
you elect to receive cash distributions, you will receive all distributions in
cash paid by check mailed directly to you by the Plan Agent, as the dividend
paying agent.
If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:
(1) If Common Shares are trading at or above net asset value ("NAV") at
the time of valuation, the Fund will issue new shares at a price equal
to the greater of (i) NAV per Common Share on that date or (ii) 95% of
the market price on that date.
(2) If Common Shares are trading below NAV at the time of valuation, the
Plan Agent will receive the dividend or distribution in cash and will
purchase Common Shares in the open market, on the NYSE or elsewhere,
for the participants' accounts. It is possible that the market price
for the Common Shares may increase before the Plan Agent has completed
its purchases. Therefore, the average purchase price per share paid by
the Plan Agent may exceed the market price at the time of valuation,
resulting in the purchase of fewer shares than if the dividend or
distribution had been paid in Common Shares issued by the Fund. The
Plan Agent will use all dividends and distributions received in cash
to purchase Common Shares in the open market within 30 days of the
valuation date except where temporary curtailment or suspension of
purchases is necessary to comply with federal securities laws.
Interest will not be paid on any uninvested cash payments.
You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (800) 331-1710 in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.
The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized, although cash is not received by you.
Consult your financial advisor for more information.
If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.
The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing BNY Mellon Investment
Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809.
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's website located at http://www.sec.gov.
Page 28
ADDITIONAL INFORMATION - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31,2010 (UNAUDITED)
PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Form N-Qs are available (1) by calling (800)
988-5891; (2) on the Fund's website located at http://www.ftportfolios.com; (3)
on the SEC's website at http://www.sec.gov; and (4) for review and copying at
the SEC's Public Reference Room ("PRR") in Washington, DC. Information regarding
the operation of the PRR may be obtained by calling (800) SEC-0330.
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Joint Annual Meeting of Shareholders of the Common Shares of Macquarie/First
Trust Global Infrastructure/Utilities Dividend & Income Fund, Energy Income and
Growth Fund, First Trust Enhanced Equity Income Fund, First Trust/Aberdeen
Global Opportunity Income Fund, First Trust/FIDAC Mortgage Income Fund, First
Trust Strategic High Income Fund, First Trust Strategic High Income Fund II,
First Trust/Aberdeen Emerging Opportunity Fund, First Trust Strategic High
Income Fund III, First Trust Specialty Finance and Financial Opportunities Fund
and First Trust Active Dividend Income Fund was held on April 14, 2010. At the
Annual Meeting, Trustees James A. Bowen and Niel B. Nielson were elected by the
Common Shareholders of the Macquarie/First Trust Global Infrastructure/Utilities
Dividend & Income Fund as Class III Trustees for three-year terms expiring at
the Fund's annual meeting of shareholders in 2013. The number of votes cast in
favor of Mr. Bowen was 8,135,407, the number of votes against was 241,761 and
the number of abstentions was 700,795. The number of votes cast in favor of Mr.
Nielson was 8,131,455, the number of votes against was 245,713 and the number of
abstentions was 700,795. Richard E. Erickson, Thomas R. Kadlec and Robert F.
Keith are the other current and continuing Trustees.
INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY AGREEMENTS
The Board of Trustees of Macquarie/First Trust Global Infrastructure/Utilities
Dividend & Income Fund (the "Fund"), including the Independent Trustees,
unanimously approved the continuation of the Investment Management Agreement
(the "Advisory Agreement") between the Fund and First Trust Advisors L.P. (the
"Advisor"), the Investment Sub-Advisory Agreement (the "Macquarie Sub-Advisory
Agreement") among the Fund, the Advisor and Macquarie Capital Investment
Management LLC ("Macquarie") and the Investment Sub-Advisory Agreement (the
"Four Corners Sub-Advisory Agreement" and together with the Macquarie
Sub-Advisory Agreement, the "Sub-Advisory Agreements") among the Fund, the
Advisor and Four Corners Capital Management, LLC ("Four Corners"), at a meeting
held on March 21-22, 2010. Macquarie and Four Corners are each referred to
herein as a "Sub-Advisor" and collectively as the "Sub-Advisors." The
Sub-Advisory Agreements are referred to herein together with the Advisory
Agreement as the "Agreements." The Board determined that the terms of the
Agreements are fair and reasonable and that the Agreements continue to be in the
best interests of the Fund.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (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 advisors 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 separate report from the Advisor and each of the
Sub-Advisors in advance of the Board meeting responding to a request for
information from counsel to the Independent Trustees. The reports, among other
things, outlined the services provided by the Advisor and the Sub-Advisors
(including the relevant personnel responsible for these services and their
experience); the advisory and sub-advisory fees for the Fund as compared to fees
charged to other clients of the Advisor and the Sub-Advisors and as compared to
fees charged by investment advisors and sub-advisors to comparable funds;
expenses of the Fund as compared to expense ratios of comparable funds; the
nature of expenses incurred in providing services to the Fund and the potential
for economies of scale, if any; financial data on the Advisor and the
Sub-Advisors; any fall-out benefits to the Advisor and the Sub-Advisors; and
information on the Advisor's and the Sub-Advisors' compliance programs. The
Independent Trustees also met separately with their independent legal counsel to
discuss the information provided by the Advisor and the Sub-Advisors. The Board
applied its business judgment to determine whether the arrangements between the
Fund and the Advisor and among the Fund, the Advisor and each Sub-Advisor are
reasonable business arrangements from the Fund's perspective as well as from the
perspective of shareholders.
Page 29
ADDITIONAL INFORMATION - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31,2010 (UNAUDITED)
In reviewing the Agreements, the Board considered the nature, quality and extent
of services provided by the Advisor and the Sub-Advisors under the Agreements.
The Board considered the Advisor's statements regarding the incremental benefits
associated with the Fund's advisor/sub-advisor management structure. With
respect to the Advisory Agreement, the Board considered that the Advisor is
responsible for the overall management and administration of the Fund, including
the oversight of the Sub-Advisors. The Board noted the compliance program that
had been developed by the Advisor and considered that the compliance program
includes policies and procedures for monitoring the Sub-Advisors' compliance
with the 1940 Act and the Fund's investment objective and policies. The Board
also noted the enhancements made by the Advisor to the compliance program in
2009. With respect to the Sub-Advisory Agreements, the Board received a
presentation from representatives of both Macquarie and Four Corners discussing
the services that each Sub-Advisor provides to the Fund and how the Sub-Advisor
manages the Fund's investments. The Board considered portfolio manager changes,
including Macquarie's succession plan for the leadership of its Infrastructure
Securities business (a Fund portfolio manager, the current head of Macquarie's
Infrastructure Securities business, will be retiring in June 2010), and met with
his successor. In light of the information presented and the considerations
made, the Board concluded that the nature, quality and extent of services
provided to the Fund by the Advisor and the Sub-Advisors under the Agreements
have been and are expected to remain satisfactory and that each Sub-Advisor,
under the oversight of the Advisor, has managed the Fund consistent with its
investment objective and policies.
The Board considered the advisory and sub-advisory fees paid under the
Agreements. The Board considered the advisory fees charged by the Advisor to
similar funds and other non-fund clients, and noted that the Advisor does not
provide advisory services to clients with investment objectives and policies
similar to the Fund's other than to two closed-end senior loan funds. The Board
also considered information provided by the Sub-Advisors as to the fees they
charge to other clients. In addition, the Board received data prepared by Lipper
Inc. ("Lipper"), an independent source, showing the management fees and expense
ratios of the Fund as compared to the management fees and expense ratios of a
combined peer group selected by Lipper and the Advisor. The Board discussed with
representatives of the Advisor the limitations in creating a relevant peer group
for the Fund, including that (i) the peer funds may use different types of
leverage which have different costs associated with them; (ii) most peer funds
do not employ an advisor/sub-advisor management structure; (iii) the peer funds
may not have the same fiscal year as the Fund, which may cause the expense data
used by Lipper to be measured over different time periods; and (iv) many of the
peer funds are larger than the Fund. The Board reviewed the Lipper materials,
but based on its discussions with the Advisor, the Board determined that the
Lipper data was of limited value for purposes of its consideration of the
renewal of the Agreements.
The Board also considered performance information for the Fund, noting that the
performance information included the Fund's quarterly performance report, which
is part of the process that the Board has established for monitoring the Fund's
performance on an ongoing basis, and had been enhanced to assess portfolio risk
as well. The Board determined that this process continues to be effective for
reviewing the Fund's performance. In addition to the Board's ongoing review of
performance, the Board also received data prepared by Lipper comparing the
Fund's performance to the combined peer group selected by Lipper and the
Advisor, as well as to a larger group and to a benchmark. The Board reviewed the
Lipper materials, but for similar reasons to those described above, the Board
determined that the performance data provided by Lipper was of limited value.
The Board considered changes made to the Fund's leverage arrangements in 2009 as
a result of market events and considered an analysis prepared by the Advisor on
the continued benefits provided by the Fund's leverage. In addition, the Board
considered the market price and net asset value performance of the Fund since
inception, and compared the Fund's premium/discount to the average and median
premium/discount of the combined peer group, noting that the Fund's
premium/discount was generally indicative of the asset class and market events.
Based on the information provided and the Board's ongoing review of the Fund's
performance, the Board concluded that the Fund's performance, particularly over
the long term, was reasonable.
On the basis of all the information provided on the fees, expenses and
performance of the Fund, the Board concluded that the advisory and sub-advisory
fees were reasonable and appropriate in light of the nature, quality and extent
of services provided by the Advisor and Sub-Advisors under the Agreements.
The Board noted that the Advisor has continued to invest in personnel and
infrastructure and considered whether fee levels reflect any economies of scale
for the benefit of shareholders. The Board concluded that the advisory fee
reflects an appropriate level of sharing of any economies of scale at current
asset levels. The Board also considered the costs of the services provided and
profits realized by the Advisor from serving as investment manager to the Fund
for the twelve months ended December 31, 2009, as set forth in the materials
provided to the Board. The Board noted the inherent limitations in the
profitability analysis, and concluded that the Advisor's profitability appeared
to be not excessive in light of the services provided to the Fund. In addition,
the Board considered and discussed
Page 30
ADDITIONAL INFORMATION - (CONTINUED)
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31,2010 (UNAUDITED)
any ancillary benefits derived by the Advisor from its relationship with the
Fund and noted that the typical fall-out benefits to the Advisor such as soft
dollars are not present. The Board concluded that any other fall-out benefits
received by the Advisor or its affiliates would appear to be limited.
The Board considered that Macquarie's investment services expenses are generally
fixed. The Board noted that Macquarie implemented a new portfolio management
system in 2008 and a new performance measurement system and order management
system in 2009 that Macquarie believes will help it better manage the Fund. The
Board considered that the sub-advisory fee rate was negotiated at arm's length
between the Advisor and Macquarie, an unaffiliated third party. The Board also
considered data provided by Macquarie as to its profitability with respect to
the Fund. The Board noted the inherent limitations in this profitability
analysis and concluded that the profitability analysis for the Advisor was more
relevant, although the profitability of the Macquarie Sub-Advisory Agreement
appeared to be not excessive in light of the services provided to the Fund. The
Board considered the fall-out benefits realized by Macquarie from its
relationship with the Fund, including soft-dollar arrangements, and considered a
summary of such arrangements.
The Board considered that Four Corners' investment services expenses are
primarily fixed, and that Four Corners had previously invested in personnel and
systems and anticipated continued maintenance of efficient personnel and systems
in support of the Fund. The Board considered that the sub-advisory fee rate was
negotiated at arm's length between the Advisor and Four Corners, an unaffiliated
third party. The Board also considered data provided by Four Corners as to the
profitability of the Four Corners Sub-Advisory Agreement to Four Corners, noting
that the method used to allocate expenses was not a typical practice of Four
Corners. The Board noted the inherent limitations in this profitability analysis
and concluded that the profitability analysis for the Advisor was more relevant,
although the profitability of the Four Corners Sub-Advisory Agreement appeared
to be not excessive in light of the services provided to the Fund. The Board
noted that Four Corners does not maintain any soft-dollar arrangements and that
Four Corners indicated that it does not receive any material fall-out benefits
from its relationship to the Fund.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, determined that the terms of the
Agreements continue to be fair and reasonable and that the continuation of the
Agreements is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.
Page 31
This Page Left Blank Intentionally.
(FIRST TRUST LOGO)
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISORS
Macquarie Capital Investment Management LLC
125 West 55th Street
New York, NY 10019
Four Corners Capital Management, LLC
555 South Flower Street, Suite 3300
Los Angeles, CA 90071
ADMINISTRATOR,
FUND ACCOUNTANT & TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
CUSTODIAN
PFPC Trust Company
8800 Tinicom Boulevard
Philadelphia, PA 19153
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
(b) Mr. Jon Fitch announced his retirement from Macquarie Group and resigned as
Co-Portfolio Manager of MFD's Core Component, effective May 31, 2010. Mr.
Andrew Maple-Brown, previously a Co-Portfolio Manager with Mr. Fitch,
became sole Portfolio Manager of MFD's Core Component as of June 1, 2010.
Robert I. Bernstein and Drew R. Sweeney remain the Co-Portfolio Managers of
MFD's Senior Loan Component.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. 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 second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 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) Macquarie/First Trust Global Infrastructure/Utilities Dividend &
Income Fund
By (Signature and Title)* /s/ James A. Bowen
----------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date July 20, 2010
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 July 20, 2010
By (Signature and Title)* /s/ Mark R. Bradley
----------------------------------------------
Mark R. Bradley, Treasurer, Controller, Chief
Financial Officer and Chief Accounting Officer
(principal financial officer)
Date July 20, 2010
* Print the name and title of each signing officer under his or her
signature.