UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-21549
Energy Income and Growth Fund
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, Il 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
Registrant's telephone number, including area code: 630-765-8000
Date of fiscal year end: November 30
Date of reporting period: February 28, 2010
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (Sections 239.24 and 274.5
of this chapter), to file reports with the Commission, not later than 60 days
after the close of the first and third fiscal quarters, pursuant to rule 30b1-5
under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may
use the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. Section 3507.
ITEM 1. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
ENERGY INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (a)
FEBRUARY 28, 2010 (UNAUDITED)
SHARES/UNITS DESCRIPTION VALUE
------------ ----------- -------------
MASTER LIMITED PARTNERSHIPS - 121.7%
OIL, GAS & CONSUMABLE FUELS - 120.8%
74,700 AmeriGas Partners, L.P. .............................. $ 2,976,795
110,770 Buckeye GP Holdings, L.P. (b) ........................ 3,614,425
65,210 Buckeye Partners, L.P. ............................... 3,833,696
465,471 Clearwater Natural Resources, L.P. (c) (d) (e) (f) ... 0
158,990 Duncan Energy Partners, L.P. (b) ..................... 4,052,655
155,050 El Paso Pipeline Partners, L.P. (b) .................. 4,014,245
150,947 Enbridge Energy Partners, L.P. (b) ................... 7,731,505
7,582 Encore Energy Partners, L.P. (b) ..................... 154,900
164,640 Energy Transfer Equity, L.P. (b) ..................... 5,321,165
194,744 Energy Transfer Partners, L.P. (b) ................... 9,012,752
233,823 Enterprise GP Holdings, L.P. (b) ..................... 9,596,096
532,568 Enterprise Products Partners, L.P. (b) ............... 17,446,928
40,709 EV Energy Partner, L.P. (b) .......................... 1,257,501
104,774 Global Partners, L.P. (b) ............................ 2,602,586
158,990 Holly Energy Partners, L.P. (b) ...................... 6,771,384
70,422 Inergy Holdings, L.P. ................................ 4,913,343
205,771 Kinder Morgan Energy Partners, L.P. (b) .............. 13,231,075
530,512 Magellan Midstream Partners, L.P. (b) ................ 24,000,363
157,378 Natural Resource Partners, L.P. (b) .................. 4,032,024
232,446 NuStar Energy, L.P. (b) .............................. 13,340,076
229,990 NuStar GP Holdings, LLC (b) .......................... 6,444,320
173,370 ONEOK Partners, L.P. (b) ............................. 10,514,891
94,300 Penn Virginia GP Holdings, L.P. ...................... 1,654,022
60,000 Penn Virginia Resource Partners, L.P. (b) ............ 1,385,400
289,983 Plains All American Pipeline, L.P. (b) ............... 16,067,958
57,505 Quicksilver Gas Services, L.P. (b) ................... 1,161,026
140,724 Sunoco Logistics Partners, L.P. (b) .................. 9,549,531
133,030 TC Pipelines, L.P. ................................... 4,908,807
136,700 Teekay LNG Partners, L.P. ............................ 3,730,543
115,994 TransMontaigne Partners, L.P. (b) .................... 3,201,434
20,000 Western Gas Partners, L.P. ........................... 427,600
55,900 Williams Partners, L.P. .............................. 2,171,156
60,860 Williams Pipeline Partners, L.P. (b) ................. 1,776,503
-------------
200,896,705
-------------
GAS UTILITIES - 0.9%
30,560 Spectra Energy Partners, L.P. ........................ 916,189
13,600 Suburban Propane Partners, L.P. ...................... 647,088
-------------
1,563,277
-------------
TOTAL MASTER LIMITED PARTNERSHIPS
(Cost $123,516,630) .................................. 202,459,982
-------------
See Notes to Quarterly Portfolio of Investments
Page 1
ENERGY INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 28, 2010 (UNAUDITED)
SHARES/UNITS DESCRIPTION VALUE
------------ ----------- -------------
COMMON STOCKS - 29.8%
OIL, GAS & CONSUMABLE FUELS - 22.7%
150,000 El Paso Corp. (g) .................................... $ 1,570,500
85,272 Enbridge Energy Management, LLC (b) (h) .............. 4,262,758
77,925 Enbridge, Inc. (g) ................................... 3,450,519
3,000 Exxon Mobil Corp. .................................... 195,000
178,460 Kinder Morgan Management, LLC (b) (h) ................ 10,234,669
188,650 Spectra Energy Corp. (g) ............................. 4,112,570
127,891 TransCanada Corp. (g) ................................ 4,220,403
449,358 Williams Cos., Inc. (g) .............................. 9,679,171
-------------
37,725,590
-------------
GAS UTILITIES - 7.0%
55,266 ONEOK, Inc. (g) ...................................... 2,449,942
371,830 UGI Corp. (g) ........................................ 9,314,342
-------------
11,764,284
-------------
CAPITAL MARKETS - 0.1%
20,000 NGP Capital Resources Co. (b) ........................ 164,600
-------------
TOTAL COMMON STOCKS
(Cost $42,956,957) ................................... 49,654,474
-------------
CANADIAN INCOME TRUSTS - 3.7%
OIL, GAS & CONSUMABLE FUELS - 2.7%
19,700 Enbridge Income Fund ................................. 236,655
172,480 Keyera Facilities Income Fund ........................ 4,312,810
-------------
4,549,465
-------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 1.0%
128,000 Northland Power Income Fund .......................... 1,576,582
-------------
TOTAL CANADIAN INCOME TRUSTS
(Cost $3,986,160) .................................... 6,126,047
-------------
RIGHTS - 0.0%
OIL, GAS & CONSUMABLE FUELS - 0.0%
17 Clearwater Natural Resources, L.P. (c) (d) (e) (f) ... 0
-------------
TOTAL RIGHTS
(Cost $0) ............................................ 0
-------------
WARRANTS - 0.0%
OIL, GAS & CONSUMABLE FUELS - 0.0%
48,956 Abraxas Petroleum Corp., Expiration 05/25/12
(c) (d) (e) ...................................... 20,351
-------------
TOTAL WARRANTS
(Cost $0) ............................................ 20,351
-------------
TOTAL INVESTMENTS - 155.2%
(Cost $170,459,747) (i) .............................. 258,260,854
-------------
See Notes to Quarterly Portfolio of Investments
Page 2
ENERGY INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 28, 2010 (UNAUDITED)
NUMBER OF
CONTRACTS DESCRIPTION VALUE
------------ ----------- -------------
CALL OPTIONS WRITTEN - (0.3%)
El Paso Corp.
400 @ 11 due July 10 ..................................... $ (26,000)
400 @ 12 due July 10 ..................................... (14,000)
-------------
(40,000)
-------------
Enbridge, Inc.
220 @ 45 due Apr 10 ...................................... (17,600)
100 @ 45 due July 10 ..................................... (13,500)
400 @ 50 due July 10 ..................................... (11,000)
-------------
(42,100)
-------------
ONEOK Inc.
378 @ 40 due April 10 .................................... (166,320)
-------------
Spectra Energy Corp.
195 @ 22.5 due Mar 10 .................................... (1,950)
40 @ 20 due June 10 ..................................... (8,600)
910 @ 22.5 due June 10 ................................... (54,600)
-------------
(65,150)
-------------
TransCanada Corp.
800 @ 35 due May 10 ...................................... (30,000)
-------------
UGI Corp.
900 @ 25 due April 10 .................................... (40,500)
-------------
Williams Cos., Inc.
800 @ 22.5 due May 10 .................................... (72,000)
800 @ 23 due April 10 .................................... (28,000)
30 @ 22.5 due August 10 ................................. (4,500)
120 @ 25 due August 10 ................................... (9,000)
-------------
(113,500)
-------------
TOTAL CALL OPTIONS WRITTEN
(Premiums received $520,641) ......................... (497,570)
-------------
OUTSTANDING LOAN - (35.6)% ........................... (59,300,000)
NET OTHER ASSETS AND LIABILITIES - (19.3%) ........... (32,106,528)
-------------
NET ASSETS - 100.0% .................................. $ 166,356,756
=============
----------
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) All or a portion of the securities are available to serve as collateral on
the outstanding loan.
(c) Non-income producing security.
(d) This security is fair valued in accordance with procedures adopted by the
Fund's Board of Trustees.
(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 1D - Restricted Securities in the Notes
to Quarterly Portfolio of Investments).
(f) This partnership has filed for protection in federal bankruptcy court.
(g) Call options were written on a portion of the Common Stock position and are
fully covered by the Common Stock position.
(h) Non-income producing security which pays regular in-kind distributions.
(i) Aggregate cost for financial reporting, which approximates the aggregate
cost for federal income tax purposes. As of February 28, 2010, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $96,518,933 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $8,717,826.
See Notes to Quarterly Portfolio of Investments
Page 3
ENERGY INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 28, 2010 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 28,
2010 is as follows (see Note 1A - Portfolio Valuation in the Notes to Quarterly
Portfolio of Investments):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/28/10 PRICES INPUTS INPUTS
------------ ------------ ----------- ------------
Master Limited Partnerships* ..... $202,459,982 $202,459,982 $ -- $--
Common Stocks* ................... 49,654,474 49,654,474 -- --
Canadian Income Trusts* .......... 6,126,047 6,126,047 -- --
Warrants* ........................ 20,351 -- 20,351 --
------------ ------------ ------- ---
Total Investments ................ $258,260,854 $258,240,503 $20,351 $--
============ ============ ======= ===
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/28/10 PRICES INPUTS INPUTS
--------- --------- ----------- ------------
Call Options Written ..... $(497,570) $(497,570) $-- $--
========= ========= === ===
* See the Portfolio of Investments for industry breakout.
See Notes to Quarterly Portfolio of Investments
Page 4
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
ENERGY INCOME AND GROWTH FUND
FEBRUARY 28, 2010 (UNAUDITED)
1. VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of Energy Income and Growth
Fund (the "Fund") is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. The NAV per Common Share is calculated by dividing
the value of all assets of the Fund (including accrued dividends and interest),
less all liabilities (including accrued expenses, dividends declared but unpaid
and deferred income taxes and any borrowings of the Fund) by the total number of
shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value according
to procedures adopted by the Fund's Board of Trustees. 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 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
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 Investment Company Act of 1940, as amended.
Portfolio securities listed on any exchange other than the NASDAQ National
Market ("NASDAQ") are valued at the last sale price on the business day as of
which such value is being determined. If there has been no sale on such day, the
securities are valued at the mean of the most recent bid and asked prices on
such day. Securities traded on the NASDAQ are valued at the NASDAQ Official
Closing Price as determined by NASDAQ. Portfolio securities traded on more than
one securities exchange are valued at the last sale price on the business day as
of which such value is being determined at the close of the exchange
representing the principal market for such securities. Portfolio securities
traded in the over-the-counter market, but excluding securities traded on the
NASDAQ, are valued at the closing bid prices. Short-term investments that mature
in less than 60 days when purchased are valued at amortized cost.
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 February 28, 2010 is
included with the Fund's Portfolio of Investments.
Page 5
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
ENERGY INCOME AND GROWTH FUND
FEBRUARY 28, 2010 (UNAUDITED)
B. OPTION CONTRACTS:
COVERED OPTIONS. The Fund is subject to equity price risk in the normal course
of pursuing its investment objective and may enter into options written to hedge
against changes in the value of equities. The Fund may write (sell) covered call
or put options ("options") on all or a portion of the common stock of energy
companies held in the Fund's portfolio as determined to be appropriate by Energy
Income Partners, LLC (the "Sub-Advisor"). The number of options the Fund can
write (sell) is limited by the amount of common stock of energy companies the
Fund holds in its portfolio. The Fund will not write (sell) "naked" or uncovered
options. By writing (selling) options, the Fund seeks to generate additional
income, in the form of premiums received for writing (selling) the options, and
provide a partial hedge against a market decline in the underlying equity
security. Options are marked-to-market daily and their value will be affected by
changes in the value and dividend rates of the underlying equity securities,
changes in interest rates, changes in the actual or perceived volatility of the
securities markets and the underlying equity securities and the remaining time
to the options' expiration. The value of options may also be adversely affected
if the market for the options becomes less liquid or smaller.
Options the Fund writes (sells) will either be exercised, expire or be cancelled
pursuant to a closing transaction. If the price of the underlying equity
security exceeds the option's exercise price, it is likely that the option
holder will exercise the option. If an option written (sold) by the Fund is
exercised, the Fund would be obligated to deliver the underlying equity security
to the option holder upon payment of the strike price. In this case, the option
premium received by the Fund will be added to the amount realized on the sale of
the underlying security for purposes of determining gain or loss. If the price
of the underlying equity security is less than the option's strike price, the
option will likely expire without being exercised. The option premium received
by the Fund will, in this case, be treated as short-term capital gain on the
expiration date of the option. The Fund may also elect to close out its position
in an option prior to its expiration by purchasing an option of the same series
as the option written (sold) by the Fund.
The options that the Fund writes (sells) give the option holder the right, but
not the obligation, to purchase a security from the Fund at the strike price on
or prior to the option's expiration date. The ability to successfully implement
the writing (selling) of covered call options depends on the ability of the
Sub-Advisor to predict pertinent market movements, which cannot be assured.
Thus, the use of options may require the Fund to sell portfolio securities at
inopportune times or for prices other than current market value, which may limit
the amount of appreciation the Fund can realize on an investment, or may cause
the Fund to hold a security that it might otherwise sell. As the writer (seller)
of a covered option, the Fund foregoes, during the option's life, the
opportunity to profit from increases in the market value of the security
covering the option above the sum of the premium and the strike price of the
option, but has retained the risk of loss should the price of the underlying
security decline. The writer (seller) of an option has no control over the time
when it may be required to fulfill its obligation as a writer (seller) of the
option. Once an option writer (seller) has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying security to the
option holder at the exercise price.
Over-the-counter ("OTC") options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum equity
price risk for purchased options is limited to the premium initially paid. In
addition, certain risks may arise upon entering into option contracts including
the risk that an illiquid secondary market will limit the Fund's ability to
close out an option contract prior to the expiration date and that a change in
the value of the option contract may not correlate exactly with changes in the
value of the securities hedged.
C. SECURITIES TRANSACTIONS:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Distributions received from the Fund's investments in MLPs generally are
comprised of return of capital from the MLP to the extent of the cost basis of
such MLP investments.
Page 6
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
ENERGY INCOME AND GROWTH FUND
FEBRUARY 28, 2010 (UNAUDITED)
D. RESTRICTED SECURITIES:
The Fund may invest up to 35% of its Managed Assets, which is the gross asset
value of the Fund minus accrued liabilities (excluding the principal amount of
any borrowings), in restricted securities. Restricted securities are securities
that cannot be offered for public sale without first being registered under the
Securities Act of 1933, as amended. Prior to registration, restricted securities
may only be resold in transactions exempt from registration. The Fund holds the
restricted securities at February 28, 2010 shown in the following table. The
Fund does not have the right to demand that such securities be registered. These
securities are valued according to the valuation procedures as stated in the
Portfolio Valuation Footnote (Note 1A) and are not expressed as a discount to
the value of a comparable unrestricted security.
ACQUISITION SHARES/ CARRYING % OF
SECURITY DATE UNITS PRICE COST VALUE NET ASSETS
-------- ----------- ------- ----- ---------- ------- ----------
Abraxas Petroleum Corp. -
Warrants 05/25/07 48,956 $0.42 $ -- $20,351 0.01%
Clearwater Natural
Resources, L.P. 08/01/05 465,471 -- 8,601,560 -- --
Clearwater Natural
Resources, L.P. -
Rights 08/01/05 17 -- -- -- --
---------- ------- ----
$8,601,560 $20,351 0.01%
========== ======= ====
2. OPTION ACTIVITY
Written option activity for the three months ended February 28, 2010 was as
follows:
NUMBER
OF
WRITTEN OPTIONS CONTRACTS PREMIUMS
--------------- --------- ---------
Options outstanding at November 30, 2009....... 7,315 $ 722,982
Options Written................................ 6,226 414,689
Options Expired................................ (2,346) (139,871)
Options Exercised.............................. (4,702) (477,159)
------ ---------
Options outstanding at February 28, 2010....... 6,493 $ 520,641
====== =========
Page 7
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal quarter that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Energy Income and Growth Fund
By (Signature and Title)* /s/ James A. Bowen
--------------------------------
James A. Bowen, Chairman of the
Board, President and Chief
Executive Officer
(principal executive officer)
Date April 21, 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 April 21, 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 April 21, 2010
* Print the name and title of each signing officer under his or her
signature.