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
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Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(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
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
Date of fiscal year end: November 30
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Date of reporting period: May 31, 2011
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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
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 Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
THE REPORT TO SHAREHOLDERS IS ATTACHED HEREWITH.
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
MAY 31, 2011
MACQUARIE/FIRST TRUST
GLOBAL INFRASTRUCTURE/
UTILITIES DIVIDEND &
INCOME FUND
MACQUARIE FOUR CORNERS CAPITAL MANAGEMENT FIRST TRUST
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TABLE OF CONTENTS
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MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 2011
Shareholder Letter .......................................................... 1
At A Glance ................................................................. 2
Portfolio Commentary ........................................................ 3
Portfolio of Investments .................................................... 8
Statement of Assets and Liabilities ......................................... 12
Statement of Operations ..................................................... 13
Statements of Changes in Net Assets ......................................... 14
Statement of Cash Flows ..................................................... 15
Financial Highlights ........................................................ 16
Notes to Financial Statements ............................................... 17
Additional Information ...................................................... 25
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
("MCIM") and/or Four Corners Capital Management, LLC ("Four Corners") (MCIM and
Four Corners collectively, the "Sub-Advisors"), 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
Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund
(the "Fund") 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 the Advisor and/or Sub-Advisors 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 by 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.
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SHAREHOLDER LETTER
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MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND &
INCOME FUND (MFD)
SEMI-ANNUAL LETTER FROM THE PRESIDENT
MAY 31, 2011
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. Successful investors understand that the success
they have achieved is typically because of their long-term investment
perspective through all kinds of markets. While the past two years have been
challenging, the markets have been recovering from their lows of 2008-2009,
bringing relief to economists and investors alike.
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 months this report
covers. I encourage you to read this document and discuss it with your financial
advisor.
First Trust has been through many types of markets. That's why we remain
committed to being a long-term investor and investment manager and to bringing
you quality investment solutions regardless of the inevitable volatility the
market experiences. We offer a variety of products that may fit many financial
plans to help those investors seeking long-term investment success. You may want
to talk to your advisor about the investments First Trust offers that might also
fit your financial goals.
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. I look forward to the remainder of 2011 and to the next edition of your
Fund's report.
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, 2011 (UNAUDITED)
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FUND STATISTICS
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Symbol on New York Stock Exchange MFD
Common Share Price $15.89
Common Share Net Asset Value ("NAV") $17.06
Premium (Discount) to NAV (6.86)%
Net Assets Applicable to Common Shares $152,836,279
Current Quarterly Distribution per Common Share (1) $0.3500
Current Annualized Distribution per Common Share $1.4000
Current Distribution Rate on Closing Common Share Price (2) 8.81%
Current Distribution Rate on NAV (2) 8.21%
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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
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Common Share Price NAV
5/28/2010 10.65 12.89
6/4/2010 10.49 12.63
6/11/2010 10.93 13.09
6/18/2010 11.19 13.66
6/25/2010 11.07 13.44
7/2/2010 10.72 13.07
7/9/2010 11.55 13.86
7/16/2010 11.49 13.95
7/23/2010 11.88 14.43
7/30/2010 12.06 14.54
8/6/2010 12.43 14.90
8/13/2010 11.98 14.42
8/20/2010 11.81 14.10
8/27/2010 11.93 14.32
9/3/2010 12.53 14.85
9/10/2010 12.59 14.85
9/17/2010 12.64 14.91
9/24/2010 13.09 15.30
10/1/2010 13.36 15.47
10/8/2010 13.62 15.89
10/15/2010 14.09 16.11
10/22/2010 14.23 16.20
10/29/2010 14.65 16.43
11/5/2010 15.24 16.69
11/12/2010 14.49 16.32
11/19/2010 14.33 16.07
11/26/2010 14.07 15.61
11/30/2010 13.82 15.29
12/3/2010 14.30 15.80
12/10/2010 14.20 15.69
12/17/2010 14.31 15.71
12/23/2010 14.42 16.01
12/31/2010 14.48 16.08
1/7/2011 14.39 15.91
1/14/2011 14.60 16.29
1/21/2011 14.89 16.52
1/28/2011 14.98 16.44
2/4/2011 15.13 16.73
2/11/2011 15.73 16.82
2/18/2011 15.41 16.62
2/25/2011 15.38 16.54
3/4/2011 15.54 16.61
3/11/2011 15.38 16.31
3/18/2011 14.89 16.05
3/25/2011 15.37 16.45
4/1/2011 15.93 16.92
4/8/2011 15.99 17.09
4/15/2011 15.77 16.98
4/21/2011 16.12 17.27
5/6/2011 16.18 17.28
5/13/2011 16.05 17.02
5/20/2011 15.94 16.77
5/27/2011 15.69 16.89
5/31/2011 15.89 17.06
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PERFORMANCE
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Average Annual Total Return
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6 Months Ended 1 Year Ended 5 Years Ended Inception (3/25/2004)
5/31/2011 5/31/2011 5/31/2011 to 5/31/2011
FUND PERFORMANCE(3)
NAV 16.62% 42.20% 5.19% 9.71%
Market Value 20.17% 60.31% 6.50% 7.93%
INDEX PERFORMANCE
S&P 500 Utilities Total Return Index 12.58% 23.24% 5.32% 8.98%
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% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
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Spark Infrastructure Group 5.4%
Atlantia SpA 4.9
PG&E Corp. 4.4
National Grid plc 3.7
Enterprise Products Partners, L.P. 3.7
GDF Suez 3.6
Magellan Midstream Partners, L.P. 3.3
E.On AG 3.1
Abertis Infraestructuras S.A. 3.1
Vinci S.A. 3.0
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Total 38.2%
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% OF TOTAL
INDUSTRY CLASSIFICATION(4) INVESTMENTS
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Electric Utilities 19.8%
Transportation Infrastructure 16.9
Oil, Gas & Consumable Fuels 13.0
Multi-Utilities 12.8
Construction & Engineering 3.0
Media 2.7
Water Utilities 2.4
Independent Power Producers & Energy Traders 2.3
Diversified Consumer Services 1.2
Gas Utilities 1.0
Road & Rail 1.0
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Total 76.1%
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% OF TOTAL
COUNTRY INVESTMENTS
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United States(5) 43.7%
Australia 12.9
France 8.8
United Kingdom 8.4
Italy 7.4
Canada 6.6
Germany 4.2
Spain 3.1
Luxembourg 2.7
Switzerland 1.1
Japan 1.1
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Total 100.0%
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(1) Most recent distribution paid or declared through 5/31/2011. 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 5/31/2011. 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 Stocks and Master Limited
Partnerships. It excludes the Senior Loan Component of the Fund's
portfolio, which industry classification is disclosed in the Portfolio of
Investments and makes up the remaining 23.9% of the Fund's portfolio.
(5) The percentage of United States securities includes 23.9% of Senior
Floating-Rate Loan Interests.
Page 2
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PORTFOLIO COMMENTARY
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MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND &
INCOME FUND (MFD)
SEMI-ANNUAL REPORT
MAY 31, 2011
SUB-ADVISOR
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 manage approximately $3.1 billion of assets as of May
31, 2011, in MFG's Infrastructure Securities portfolios, which include the Fund.
The Fund's Senior Loan Component 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 $1.1 billion of assets as of May 31, 2011, with
an emphasis on Senior Loans.
MFG is Macquarie Group's funds management business. MFG is Australia's largest
asset manager and a top 40 asset manager globally, with over A$300 billion in
assets under management (as at March 31, 2011). MFG is a full-service asset
manager, offering a diverse range of products including securities investment
management, infrastructure and real estate asset management and fund and
equity-based structured products.
PORTFOLIO MANAGEMENT TEAM
Mr. Andrew Maple-Brown is the sole Portfolio Manager of MFD's Core Component as
of June 1, 2010 and is 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.
Effective July 1, 2011, Adam H. Brown and Kevin P. Loome will replace Bob
Bernstein and Drew Sweeney as Co-Portfolio Managers of MFD's Senior Loan
Component.
MFD's current portfolio management team is as follows:
ANDREW MAPLE-BROWN
PORTFOLIO MANAGER, MFD CORE COMPONENT
PORTFOLIO MANAGER, MACQUARIE CAPITAL INVESTMENT MANAGEMENT LLC
Mr. Maple-Brown joined the MFG Infrastructure Securities investment team in
Sydney, Australia, in 2007 as a Portfolio Manager. He 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
in Macquarie's Debt Markets area, Mr. Maple-Brown has had fourteen 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.
ROBERT I. BERNSTEIN, CFA
CO-PORTFOLIO MANAGER, MFD SENIOR LOAN COMPONENT (UNTIL JULY 1, 2011)
CHIEF INVESTMENT OFFICER, FOUR CORNERS CAPITAL MANAGEMENT, LLC
Mr. Bernstein is responsible for managing Four Corners' investment activities.
He has over 20 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 (UNTIL JULY 1, 2011)
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 16 years of investment experience
including 13 years in senior secured loans and high-yield bonds. Mr. Sweeney
joined Four Corners in 2005 from American Express Asset Management Group, Inc.
Page 3
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PORTFOLIO COMMENTARY - (Continued)
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MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 2011
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.
ADAM H. BROWN
CO-PORTFOLIO MANAGER, MFD SENIOR LOAN COMPONENT (EFFECTIVE JULY 1, 2011)
VICE PRESIDENT, PORTFOLIO MANAGER, FOUR CORNERS CAPITAL MANAGEMENT, LLC
Mr. Brown is a portfolio manager on Four Corners' taxable fixed-income team,
with specific responsibilities for the bank loan portfolio. Mr. Brown previously
worked with Wachovia Securities, where he worked in the leveraged finance group
arranging senior secured bank loans and high-yield bond financings for financial
sponsors and corporate issuers. Mr. Brown has been part of the Four Corners team
for nine years and over the past year has had a dual role with Four Corners'
affiliated investment adviser, Delaware Investments. Since 2007, Mr. Brown has
co-managed the Four Corners' collateralized loan obligations and bank loan
portfolios with Bob Bernstein and Drew Sweeney. Mr. Brown earned a bachelor's
degree from the University of Florida and an MBA from the A.B. Freeman School of
Business at Tulane University. Mr. Brown is also a Chartered Financial Analyst.
KEVIN P. LOOME
CO-PORTFOLIO MANAGER, MFD SENIOR LOAN COMPONENT (EFFECTIVE JULY 1, 2011)
SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, HEAD OF HIGH YIELD INVESTMENTS,
FOUR CORNERS CAPITAL MANAGEMENT, LLC
Mr. Loome is the head of the high-yield fixed-income team at Four Corners,
responsible for portfolio construction and strategic asset allocation of all
high-yield fixed income assets. Prior to joining Delaware Investments, Four
Corners' affiliated investment adviser, in August 2007 in his current position,
Mr. Loome spent 11 years at T. Rowe Price, starting as an analyst and leaving
the firm as a portfolio manager. Mr. Loome began his career with Morgan Stanley
as a corporate finance analyst in the New York and London offices. Mr. Loome
received his bachelor's degree in commerce from the University of Virginia and
earned an MBA from the Tuck School of Business at Dartmouth.
COMMENTARY
INVESTMENT OBJECTIVE
The investment objective of 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 may utilize leverage through the issuance of
leveraged instruments in an aggregate amount up to 30% of the Fund's total
assets, the proceeds of which are invested in senior secured floating-rate
loans. 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.
MARKET RECAP
The performance of the Fund for the six-month period ended May 31, 2011 was set
against the backdrop of continued recovery in global equity and credit markets
in the beginning of the period fueled by QEII (quantitative easing) in the U.S.,
followed by increased market volatility due to the political unrest in the
Middle East and North Africa and the European sovereign debt concerns, and then
a continuation of the recovery in equity markets through the remainder of the
period.
Page 4
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PORTFOLIO COMMENTARY - (Continued)
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MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 2011
PERFORMANCE ANALYSIS - CORE COMPONENT
As shown on the performance table, MFD's net asset value ("NAV") total return(1)
for the period was 16.62%, ahead of the 12.58% return of the S&P 500 Utilities
Total Return Index ("Index") which is a broad barometer of the performance of
utility stocks (not including all infrastructure industries) solely in the U.S.
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 frame of reference.
In our view, there were three factors driving the Core Component's positive
contribution to the Fund's positive NAV total return during the period:
o The strong performance of Transportation Infrastructure stocks;
o The strong performance of Utilities stocks, most notably within the
regulated sub-sectors; and
o The weakness of the U.S. Dollar against major currencies,
particularly the Euro, the Australian Dollar, the Canadian Dollar,
and the British Pound, had a positive effect as the Fund had
significant exposure to these currencies.
These factors are discussed in further detail below.
Transportation Infrastructure
The Transportation Infrastructure sectors continued to benefit from volume
growth over the period and made a solid contribution to total return.
Among Toll Road stocks, the largest contributions came from Abertis
Infraestructuras in Spain and Atlantia in Italy. Abertis benefitted from
expectations of further initiatives to realize value for shareholders, and on
the announcement of a toll increase for 2011 on its Spanish roads. Atlantia
delivered strong growth in 2010 and first quarter 2011 earnings driven by tariff
increases and successful cost reduction.
The Airports sub-sector was buoyed by the steady rebound in passenger traffic.
The strongest performers were Aeroports de Paris and Flughafen Zuerich.
Utilities
There was also a strong contribution from Utilities, most notably from the
regulated businesses, such as Electricity and Gas Distribution and Transmission
entities.
Electricity and Gas Distribution companies posted strong returns. Spark
Infrastructure in Australia was up after a successful regulatory appeal to
increase its regulated asset base, which will result in increased earnings. The
market also responded positively to the internalization of its management team
which more closely aligns it with shareholders. SP AusNet also performed well as
its 2011 results were ahead of market expectations.
National Grid and Red Electrica, both Electric Transmission companies, posted
strong performances. National Grid rallied after the UK regulator announced an
improved package of allowed returns for the regulatory cycle beginning in 2013.
An increase in the regulated component of tariffs in Spain provided further
confidence in the Spanish energy sector, which was viewed as a positive for Red
Electrica.
The Integrated Utilities were generally weak after the Fukushima nuclear
accidents. In Germany, E.On was weaker after it reported that first quarter
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was down
23% due to lower wholesale prices in electricity generation and the beginning of
the nuclear moratorium. PG&E in the U.S. also underperformed due to concerns of
its nuclear exposure in California, and potential penalties for a recent
pipeline explosion.
Weak U.S. Dollar
As the Fund was not hedged for currency, the significant fall in the U.S. Dollar
made a material contribution to return during the period. The Australian Dollar,
British Pound, Canadian Dollar, and the Euro appreciated by 11%, 6%, 6% and 10%,
respectively(2). Altogether, investments in these currencies comprised around
52% of the Core Component of the Fund (as of period-end).
Notable Detractors
In what was a very strong half year, there were only two small sector detractors
from performance over the period.
Gas Utilities detracted as Tokyo Gas was weaker despite reporting good earnings
results due to a time lag in being able to pass higher fuel prices through to
customers.
-----------------------------
1 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.
2 Source: Bloomberg
Page 5
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PORTFOLIO COMMENTARY - (Continued)
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MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 2011
Road and Rail detracted due to Asciano, which was weaker after its earnings were
negatively affected by the impact of floods on its rail business, and on
concerns of a potential industrial dispute. Management nevertheless provided
strong guidance for the year ahead.
PORTFOLIO COMPOSITION
As of May 31, 2011, the Fund's Core Component was well diversified across 34
positions in global infrastructure stocks, representing 11 countries and 11
sectors.
During the period, the main increases in the Fund's weightings were in Electric
Utilities, Media, Oil, Gas & Consumables and Construction & Engineering, while
the weightings in Multi-Utilities, Water Utilities and Gas Utilities were
reduced. Sector changes were driven by bottom-up stock selection.
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 has tended to rise and fall as short-term rates fluctuate, with an
approximate 60-to-90-day lag.
The S&P/LSTA Leveraged Loan Index ("Loan Index") posted a solid 4.3% return for
the six months ended May 31, 2011. However, most of the gain occurred from
December 2010 to February 2011. Against the backdrop of weak unemployment
numbers, an uncertain real estate market, slowing domestic gross domestic
product forecasts, European debt concerns, and an 8.2 magnitude earthquake in
Japan, the loan market posted much slower gains in the three months ended May
31, 2011. Nevertheless, returns for the period remain very solid and demand for
bank debt remains robust.
Technical conditions are strong as loan market inflows are up $15.6 billion
through June 2, 2011.(3) In fact, there have been over $35.0 billion of inflows
since 2009.(4) Senior Loan new issuance has bounced back through the first 5
months of 2011 as institutional new issuance is over $170 billion, which
surpasses the full year 2010 new issuance by 7.1%.(5) However, we believe
mergers and acquisitions are still not the true driver of new issuance as 76% of
the primary market in the first quarter was driven by recapitalizations,
refinancing and repricing existing deals.(6)
Corporate earnings were up significantly in the first calendar quarter of
2011(7). This growth combined with liquidity in the high-yield markets has
contributed to the continued decline in the lagging 12-month loan default rate
by principal. The default rate by amount eased to a 40-month low of 0.91%, from
0.95% in April 2011. The rate by number of loans was unchanged, at a 39-month
low of 1.5%(6).
The Senior Loan Component of the Fund invests in infrastructure businesses and
therefore the loans tend to have significant asset collateral. Consequently, the
average price of the Senior Loan Component is 99, nearly 4 points higher than
the benchmark Loan Index. While the Senior Loan market continues to perform
relatively well and riskier issues have generally outperformed higher quality
issues, recent months have seen an increased concern regarding the global
economic recovery.
PERFORMANCE RELATIVE TO THE INDEX
The 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 secured loans.
The Fund outperformed the Index principally due to its overweight and stock
selection in Diversified Consumer Services, Transportation Infrastructure and
Construction & Engineering. The Fund's foreign currency exposure contributed
relative to this fully U.S. dollar-denominated Index, as the U.S. dollar was
weaker against major currencies (as noted above). The Fund's Senior Loan
Component also contributed to this outperformance.
DISTRIBUTIONS
During the six-month period covered by this report, the Fund announced two
regularly scheduled quarterly distributions totaling $0.70 per share. The Fund's
continued positive total return performance has provided the opportunity for an
increase in the quarterly distribution from $0.225 in November 2010 to $0.35 per
share. In accordance with the Fund's level distribution policy, distributions
-----------------------------
3 S&P LCD "2011 YTD INFLOW - Whisper numbers for loan funds say weekly
inflows continue to slow," June 9, 2011.
4 S&P LCD articles: "2011 YTD INFLOW - Whisper numbers for loan funds say
weekly inflows continue to slow," June 9, 2011. "Loan bids hit 38-month
high as market begins year on positive note, January 4, 2011. "Technicals
improve on year-end flurry of amortization, repays," January 14, 2010.
5 S&P LCD Senior Loan New Issuance Data.
6 S&P LCD LCD's Leveraged Lending Review - 1Q 2011, page 1.
7 S&P LCD "With one default in May, rate hovers at historically low level"
Page 6
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY - (Continued)
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 2011
are expected to be comprised of net investment income, realized short-term
capital gains and non-taxable return of capital distributions (which generally
are expected to represent unrealized capital appreciation) in order to sustain a
stable level of distributions to shareholders. The increase in distribution is
expected to partially consist of return of capital. Net long-term capital gain
distributions, if any, are expected to be made annually.
MARKET AND FUND OUTLOOK
The global economy continues to grow, albeit at a more moderate pace, led by
non-Japan Asia. The aftermath of the Japanese earthquake continues to have a
significant adverse economic impact in Japan and, to a lesser extent, the U.S.
(due to supply disruptions). High commodity prices, continuing sovereign debt
concerns in peripheral European economies and the need for tighter fiscal policy
in a number of countries may temper global economic growth.
The need for investment in infrastructure as a way to encourage and sustain
economic growth was highlighted during the period. A report released by the
Urban Land Institute and Ernst & Young(8) highlighted the under-investment in
infrastructure globally, estimating that the United States alone needs to invest
USD $2 trillion to repair roads, bridges, water lines and sewage systems. The
report also reported that Africa needs USD $480 billion to be spent on
infrastructure in order to achieve its full potential in terms of economic
development and stability.
President Obama's budget proposal includes USD$550 billion over the next six
years for construction and maintenance of roads, bridges and rail. Included in
the proposal is a National Infrastructure Bank to leverage private investment
for infrastructure projects, with a USD$30 billion initial allocation.
Greece added to its privatization program, consistent with our expectation of
increased privatization of infrastructure as governments seek to restore their
financial positions.
The Core Component of the Fund holds what we believe are high quality
income-generating stocks, diversified primarily across the Transportation,
Utilities and Pipelines sectors. The companies in the portfolio continue to
perform in line with our expectations, and we believe that the portfolio is well
positioned to benefit from several themes we have identified.
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.
DISCLOSURE
The Fund's portfolio holdings are subject to change without notice. Any mention
of specific securities is not a recommendation or solicitation for any person to
buy, sell or hold any particular security. There is no assurance that the Fund
currently holds these securities.
The S&P/LSTA Leveraged Loan Index is a daily total return index that uses
LSTA/LPC Mark-to-Market Pricing to calculate market value change. On a real-time
basis, the Index tracks the current outstanding balance and spread over LIBOR
for fully funded term loans. The facilities included in the Index represent a
broad cross section of leveraged loans syndicated in the United States,
including dollar-denominated loans to overseas issuers. (Information gathered
from Standard & Poor's LCD.)
This report may contain information obtained from third parties, including
ratings from credit ratings agencies such as Standard & Poor's. Reproduction and
distribution of third party content in any form is prohibited except with the
prior written permission of the related third party. Third party content
providers do not guarantee the accuracy, completeness, timeliness or
availability of any information, including ratings, and are not responsible for
any errors or omissions (negligent or otherwise), regardless of the cause, or
for the results obtained from the use of such content. THIRD PARTY CONTENT
PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO,
ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.
THIRD PARTY CONTENT PROVIDERS shall not be liable for any direct, indirect,
incidental, exemplary, compensatory, punitive, special or consequential damages,
costs, expenses, legal fees, or losses (including lost income or profits and
opportunity costs) in connection with any use of THEIR CONTENT, INCLUDING
ratings. Credit ratings are statements of opinions and are not statements of
fact or recommendations to purchase, hold or sell securities. They do not
address the suitability of securities or the suitability of securities for
investment purposes, and should not be relied on as investment advice.
-----------------------------
8 Infrastructure 2011: A Strategic Priority - Urban Land Institute and Ernst
& Young.
Page 7
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a)
MAY 31, 2011 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------ ------------------------------------------------------------------------------------------- -------------
COMMON STOCKS (b) - 86.8%
AUSTRALIA - 16.5%
1,117,453 Asciano Group.............................................................................. $ 1,885,192
1,268,724 Australian Infrastructure Fund............................................................. 2,472,289
1,277,850 MAp Group.................................................................................. 4,216,067
4,082,942 SP AusNet.................................................................................. 4,054,388
7,957,154 Spark Infrastructure Group (c)............................................................. 10,492,860
349,078 Transurban Group........................................................................... 2,035,093
-------------
25,155,889
-------------
CANADA - 8.5%
291,568 EnerCare, Inc.............................................................................. 2,287,162
252,209 Northland Power, Inc....................................................................... 4,425,404
126,749 Pembina Pipeline Corp...................................................................... 3,206,500
68,237 TransCanada Corp........................................................................... 3,055,998
-------------
12,975,064
-------------
FRANCE - 11.1%
44,641 Aeroports de Paris......................................................................... 4,297,840
190,000 GDF Suez................................................................................... 6,988,832
90,211 Vinci S.A.................................................................................. 5,820,588
-------------
17,107,260
-------------
GERMANY - 5.4%
214,269 E.On AG.................................................................................... 6,085,366
44,579 Hamburger Hafen Und Logistik AG............................................................ 2,133,746
-------------
8,219,112
-------------
ITALY - 9.4%
407,408 Atlantia SpA............................................................................... 9,632,903
691,283 Enel SpA................................................................................... 4,749,288
-------------
14,382,191
-------------
JAPAN - 1.3%
482,000 Tokyo Gas Co. Ltd.......................................................................... 2,046,031
-------------
LUXEMBOURG - 3.5%
198,359 SES Global................................................................................. 5,336,636
-------------
SPAIN - 3.9%
260,660 Abertis Infraestructuras S.A............................................................... 6,013,086
-------------
SWITZERLAND - 1.5%
4,908 Flughafen Zuerich AG....................................................................... 2,192,458
-------------
UNITED KINGDOM - 10.8%
390,382 Centrica plc............................................................................... 2,042,778
708,594 National Grid plc.......................................................................... 7,296,919
101,040 Scottish and Southern Energy plc........................................................... 2,290,395
194,161 Severn Trent plc........................................................................... 4,835,659
-------------
16,465,751
-------------
UNITED STATES - 14.9%
79,400 American Electric Power Co., Inc........................................................... 3,033,080
85,700 NextEra Energy, Inc........................................................................ 4,966,315
199,600 PG&E Corp.................................................................................. 8,658,648
44,088 SemGroup Corp., Class A (d)................................................................ 1,122,040
74,300 Southern Co................................................................................ 2,977,944
Page 8 See Notes to Financial Statements
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
MAY 31, 2011 (UNAUDITED)
SHARES/
UNITS DESCRIPTION VALUE
------------ ------------------------------------------------------------------------------------------- -------------
COMMON STOCKS (b) - (Continued)
UNITED STATES - (Continued)
74,300 Spectra Energy Corp........................................................................ $ 2,049,937
-------------
22,807,964
-------------
TOTAL COMMON STOCKS........................................................................ 132,701,442
(Cost $112,956,196) -------------
MASTER LIMITED PARTNERSHIPS (b) - 10.4%
UNITED STATES - 10.4%
50,441 Energy Transfer Equity, L.P................................................................ 2,125,584
175,077 Enterprise Products Partners, L.P.......................................................... 7,290,206
109,681 Magellan Midstream Partners, L.P........................................................... 6,477,760
-------------
TOTAL MASTER LIMITED PARTNERSHIPS.......................................................... 15,893,550
(Cost $13,622,006) -------------
PRINCIPAL RATINGS (e) STATED
VALUE DESCRIPTION MOODY'S S&P RATE (f) MATURITY (g) VALUE
------------ ----------------------------------------------- --------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS - 30.6%
CABLE & SATELLITE - 6.5%
$ 1,000,000 Bresnan Broadband Holdings, LLC, Term Loan B... B1 BB+ 4.50% 12/14/17 $ 1,003,864
41,030 Charter Communications Operating, LLC,
Incremental Term Loan B-2................... Ba1 BB+ 7.25% 03/06/14 41,338
2,484,912 Charter Communications Operating, LLC,
Term Loan C................................. Ba1 BB+ 3.56% 09/06/16 2,486,062
2,468,264 CSC Holdings, Inc., Term Loan B2, Extended
Maturity.................................... Baa3 BBB- 2.06% 03/29/16 2,468,546
495,000 CSC Holdings, Inc., Term Loan B3, Extended
Maturity.................................... Baa3 BBB- 2.06% 03/29/16 494,750
1,000,000 Knology, Inc., Term Loan B..................... B1 B+ 4.00% 08/18/17 998,750
164,118 UPC Broadband Holdings B.V., Term Loan T....... Ba3 B+ 3.71% 12/31/16 164,272
2,324,144 UPC Broadband Holdings B.V., Term Loan X....... Ba3 B+ 3.71% 12/31/17 2,322,208
-------------
9,979,790
-------------
ELECTRIC UTILITIES - 7.1%
1,250,000 AES Corp., Term Loan B......................... Ba1 BB+ 5.50% 06/01/18 1,248,829
2,151,003 Astoria Generating Co., Acquisitions, LLC,
Term Loan B................................. B1 BB- 2.06% 02/23/13 2,137,021
2,500,000 Calpine Corp., Term Loan....................... B1 B+ 4.50% 04/01/18 2,505,000
488,758 Covanta Energy Corp., Synthetic Letter of
Credit ..................................... Ba1 BB 1.80% 02/09/14 483,260
953,078 Covanta Energy Corp., Term Loan B.............. Ba1 BB 1.75%-1.81% 02/09/14 942,356
1,000,000 Equipower Resources Holdings, LLC, Term
Loan B...................................... Ba3 BB- 5.75% 01/26/18 1,003,750
2,024,500 NRG Energy, Inc., Extended Synthetic Letter
of Credit................................... Baa3 BB+ 3.56% 08/31/15 2,024,184
413,322 NRG Energy, Inc., Extended Term Loan B......... Baa3 BB+ 3.46%-3.56% 08/31/15 413,386
775 NRG Energy, Inc., Synthetic Letter of Credit... Baa3 BB+ 2.06% 02/01/13 773
85,736 NRG Energy, Inc., Term Loan.................... Baa3 BB+ 2.06% 02/01/13 85,521
-------------
10,844,080
-------------
See Notes to Financial Statements Page 9
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
MAY 31, 2011 (UNAUDITED)
PRINCIPAL RATINGS (e) STATED
VALUE DESCRIPTION MOODY'S S&P RATE (f) MATURITY (g) VALUE
------------ ----------------------------------------------- --------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS - (Continued)
ENVIRONMENTAL & FACILITIES SERVICES - 1.3%
$ 1,985,000 EnergySolutions, LLC, Term Loan................ Ba2 BB+ 6.25% 08/15/16 $ 1,993,272
-------------
HEALTH CARE FACILITIES - 10.5%
64,643 CHS/Community Health Systems, Inc.,
Delayed Draw Term Loan...................... Ba3 BB 2.44%-2.50% 07/25/14 62,437
2,123,798 CHS/Community Health Systems, Inc.,
Extended Term Loan.......................... Ba3 BB 3.69%-3.75% 01/25/17 2,069,707
1,256,443 CHS/Community Health Systems, Inc.,
Term Loan................................... Ba3 BB 2.44%-2.50% 07/25/14 1,213,567
3,597,027 HCA, Inc., Term Loan B-2....................... Ba2 BB 3.56% 03/31/17 3,574,545
469,758 HCA, Inc., Term Loan B-3....................... Ba2 BB 3.56% 05/12/18 467,015
1,283,499 Health Management Associates Inc., Term
Loan B...................................... B1 BB- 2.06% 02/28/14 1,251,251
3,000,000 IASIS Healthcare Corporation, Term Loan B...... Ba2 B- 5.00% 05/03/18 3,002,250
748,101 Select Medical Corp., Non Extended Add-On
Term Loan B................................. Ba2 BB- 2.17%-4.25% 02/24/12 743,114
1,602,218 Select Medical Corp., Term Loan B1............. Ba2 BB- 3.92%-6.00% 08/22/14 1,602,886
1,980,075 Vanguard Health Systems, Inc., Term Loan B..... Ba2 BB- 5.00% 01/29/16 1,978,838
-------------
15,965,610
-------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 4.1%
772,748 Bicent Power, LLC, Term Loan, First Lien....... B1 CCC+ 2.31% 07/10/14 609,505
3,314,891 Dynegy Holdings, Inc., Synthetic Letter of
Credit...................................... B2 CCC 4.03% 04/02/13 3,282,202
183,966 Dynegy Holdings, Inc., Term Loan B............. B2 CCC 4.03% 04/02/13 182,151
933,333 Longview Power, LLC, Delayed Draw Term
Loan........................................ B3 B 2.56% 02/28/14 890,167
266,667 Longview Power, LLC, Synthetic Letter of
Credit...................................... B3 B 2.56% 02/28/14 254,333
800,000 Longview Power, LLC, Term Loan B............... B3 B 2.56% 02/28/14 763,000
102,041 NSG Holdings, LLC, Synthetic Letter of Credit.. Ba2 BB 1.81% 06/15/14 99,490
275,870 NSG Holdings, LLC, Term Loan................... Ba2 BB 1.81% 06/15/14 268,974
-------------
6,349,822
-------------
OIL & GAS EXPLORATION & PRODUCTION - 0.4%
204,772 SemCrude, L.P., Prefunded Synthetic Letter
of Credit................................... NR NR 8.50% 11/30/12 204,772
356,895 SemCrude, L.P., Term Loan, Second Lien......... NR NR 9.00% (h) 11/30/16 358,010
-------------
562,782
-------------
WIRELESS TELECOMMUNICATION SERVICES - 0.7%
1,046,933 Windstream Corp., Term Loan B-2................ Baa3 BB+ 2.95%-3.03% 12/17/15 1,048,242
-------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................. 46,743,598
(Cost $46,943,001) -------------
TOTAL INVESTMENTS - 127.8%................................................................. 195,338,590
(Cost $173,521,203) (i)
OUTSTANDING LOAN - (31.1%)................................................................. (47,500,000)
NET OTHER ASSETS AND LIABILITIES - 3.3%.................................................... 4,997,689
-------------
NET ASSETS - 100.0%........................................................................ $152,836,279
=============
Page 10 See Notes to Financial Statements
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
MAY 31, 2011 (UNAUDITED)
-----------------------------
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) All or a portion of these securities, excluding Tokyo Gas Co. Ltd., are
available to serve as collateral for the outstanding loan. As of May 31,
2011, the aggregate market value of the securities available to serve as
collateral on the outstanding loan was $145,697,620.
(c) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the Australian Exchange and
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(d) Non-income producing security.
(e) Ratings below Baa3 by Moody's Investors Service, Inc. or BBB- by Standard
& Poor's Ratings Group are considered to be below investment grade.
(f) Senior Loans in which the Fund invests 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. Certain Senior
Loans are subject to a LIBOR floor that establishes a minimum base LIBOR
rate.
(g) 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.
(h) 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%. Commencing on
January 1, 2012, interest shall be payable as Cash Interest.
(i) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of May 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $24,117,160 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $2,299,773.
NR Not Rated
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of May 31, 2011
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
5/31/2011 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Common Stocks*..................................... $ 132,701,442 $ 132,701,442 $ -- $ --
Master Limited Partnerships*....................... 15,893,550 15,893,550 -- --
Senior Floating-Rate Loan Interests*............... 46,743,598 -- 46,743,598 --
------------- ------------- ------------- -------------
TOTAL INVESTMENTS.................................. $ 195,338,590 $ 148,594,992 $ 46,743,598 $ --
============= ============= ============= =============
* See the Portfolio of Investments for industry or country breakout.
The following table presents the activity of the Fund's investments measured at
fair value on a recurring basis using significant unobservable inputs (Level 3)
for the period presented.
CHANGE IN NET
INVESTMENTS AT FAIR VALUE USING UNREALIZED
SIGNIFICANT UNOBSERVABLE INPUTS BALANCE AS OF APPRECIATION NET PURCHASES BALANCE AS OF
(LEVEL 3) NOVEMBER 30, 2010 (DEPRECIATION) (SALES) MAY 31, 2011
---------------------------------------------------------------------------------------------------------------------
Senior Floating-Rate Loan Interests $ 1,895,000 $ 105,000 $ (2,000,000) $ --
==========================================================================
See Notes to Financial Statements Page 11
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2011 (UNAUDITED)
ASSETS:
Investments, at value
(Cost $173,521,203)......................................................................... $195,338,590
Cash........................................................................................... 4,506,099
Prepaid expenses............................................................................... 19,906
Receivables:
Dividends................................................................................... 1,584,708
Investment securities sold.................................................................. 1,221,891
Interest.................................................................................... 247,939
------------
Total Assets............................................................................. 202,919,133
------------
LIABILITIES:
Outstanding loan............................................................................... 47,500,000
Payables:
Investment securities purchased............................................................. 1,746,875
Investment advisory fees (includes sub-advisory fees of $231,673)........................... 501,972
Common Shares repurchased................................................................... 213,762
Custodian fees.............................................................................. 34,380
Audit and tax fees.......................................................................... 31,062
Administrative fees......................................................................... 16,129
Printing fees............................................................................... 10,341
Interest and fees on loan................................................................... 8,568
Trustees' fees and expenses................................................................. 6,770
Transfer agent fees......................................................................... 4,869
Legal fees.................................................................................. 1,522
Other liabilities.............................................................................. 6,604
------------
Total Liabilities........................................................................ 50,082,854
------------
NET ASSETS..................................................................................... $152,836,279
============
NET ASSETS CONSIST OF:
Paid-in capital................................................................................ $169,858,994
Par value...................................................................................... 89,582
Accumulated net investment income (loss)....................................................... 131,346
Accumulated net realized gain (loss) on investments and foreign currency transactions.......... (39,182,191)
Net unrealized appreciation (depreciation) on investments and foreign currency translation..... 21,938,548
------------
NET ASSETS..................................................................................... $152,836,279
============
NET ASSET VALUE per Common Share (par value $0.01 per Common Share)............................ $ 17.06
============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized).... 8,958,234
============
Page 12 See Notes to Financial Statements
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 2011 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $599,866)......................................... $ 8,079,308
Interest....................................................................................... 873,045
Other.......................................................................................... 113,175
------------
Total investment income..................................................................... 9,065,528
------------
EXPENSES:
Investment advisory fees (includes sub-advisory fees of $453,925).............................. 979,136
Interest and fees on outstanding loan.......................................................... 320,128
Administrative fees............................................................................ 92,587
Legal fees..................................................................................... 66,102
Custodian fees................................................................................. 63,129
Printing fees.................................................................................. 30,184
Audit and tax fees............................................................................. 26,558
Trustees' fees and expenses.................................................................... 19,843
Transfer agent fees............................................................................ 17,418
Other.......................................................................................... 37,210
------------
Total expenses.............................................................................. 1,652,295
------------
NET INVESTMENT INCOME (LOSS)................................................................... 7,413,233
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................................................. 3,194,981
Foreign currency transactions............................................................... (145,432)
------------
Net realized gain (loss)....................................................................... 3,049,549
------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................................................. 11,680,885
Foreign currency translation................................................................ 79,774
------------
Net change in unrealized appreciation (depreciation)........................................... 11,760,659
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................................................ 14,810,208
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 22,223,441
============
See Notes to Financial Statements Page 13
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR
5/31/2011 ENDED
(UNAUDITED) 11/30/2010
------------ ------------
OPERATIONS:
Net investment income (loss)....................................................... $ 7,413,233 $ 4,923,492
Net realized gain (loss)........................................................... 3,049,549 4,532,382
Net change in unrealized appreciation (depreciation)............................... 11,760,659 5,123,305
------------ ------------
Net increase (decrease) in net assets resulting from operations.................... 22,223,441 14,579,179
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................................. (6,317,499) (6,127,625)
Net realized gain.................................................................. -- --
Return of capital.................................................................. -- --
------------ ------------
Total distributions to shareholders................................................ (6,317,499) (6,127,625)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from Common Shares reinvested............................................. -- --
Repurchase of Common Shares (a).................................................... (1,855,719) --
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions.......... (1,855,719) --
------------ ------------
Total increase (decrease) in net assets............................................ 14,050,223 8,451,554
NET ASSETS:
Beginning of period................................................................ 138,786,056 130,334,502
------------ ------------
End of period...................................................................... $152,836,279 $138,786,056
============ ============
Accumulated net investment income (loss) at end of period.......................... $ 131,346 $ (964,388)
============ ============
CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period............................................... 9,077,963 9,077,963
Common Shares redeemed (a)......................................................... (119,729) --
Common Shares issued as reinvestment under the Dividend Reinvestment Plan.......... -- --
------------ ------------
Common Shares at end of period..................................................... 8,958,234 9,077,963
============ ============
-----------------------------
(a) On February 24, 2011, the Fund commenced a share repurchase program for
purposes of enhancing shareholder value and reducing the discount at which
the Fund's shares trade from their net asset value. For the period ended
May 31, 2011, the Fund repurchased 119,729 of its shares at an average
discount of 6.43% from net asset value per share. The Fund expects to
continue to repurchase its outstanding shares at such time and in such
amounts as it believes such activity will further the accomplishment of
the foregoing objectives, subject to the earlier of (i) the repurchase of
up to 544,678 of the Fund's outstanding common shares, or (ii) August 23,
2011. See Note 8 regarding continuation of repurchase program.
Page 14 See Notes to Financial Statements
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 2011 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations.................. $ 22,223,441
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Purchases of investments................................................... (119,045,655)
Sales, maturities and paydowns of investments.............................. 112,612,013
Return of capital received from investment in MLPs......................... 381,769
Net amortization/accretion of premiums/discounts on investments............ (117,211)
Net realized gain/loss on investments...................................... (3,194,981)
Net change in unrealized appreciation/depreciation on investments.......... (11,680,885)
CHANGES IN ASSETS AND LIABILITIES:
Increase in interest receivable............................................ (90,400)
Increase in dividends receivable (a)....................................... (428,954)
Increase in prepaid expenses............................................... (6,161)
Increase in interest and fees on loan payable.............................. 5,115
Increase in investment advisory fees payable............................... 35,288
Decrease in audit and tax fees payable..................................... (22,123)
Decrease in legal fees payable............................................. (2,123)
Decrease in printing fees payable.......................................... (17,066)
Increase in administrative fees payable.................................... 1,216
Increase in custodian fees payable......................................... 17,096
Increase in transfer agent fees payable.................................... 2,031
Increase in Trustees' fees and expenses payable............................ 138
Increase in other liabilities payable...................................... 2,940
------------
CASH PROVIDED BY OPERATING ACTIVITIES............................................ $ 675,488
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Common Shares................................................ (1,641,957)
Distributions to Common Shareholders from net investment income............ (8,360,041)
Issuances of loan.......................................................... 3,000,000
------------
CASH USED IN FINANCING ACTIVITIES................................................ (7,001,998)
------------
Decrease in cash................................................................. (6,326,510)
Cash at beginning of period...................................................... 10,832,609
------------
CASH AT END OF PERIOD............................................................ $ 4,506,099
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees................................ $ 315,013
============
-----------------------------
(a) Includes net change in unrealized appreciation (depreciation) on foreign
currency of $79,774.
See Notes to Financial Statements Page 15
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 YEAR SIX MONTHS YEAR
5/31/2011 ENDED ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 11/30/2010 11/30/2009 11/30/2008 11/30/2007 11/30/2006 (a) 5/31/2006
-------------- ---------- ---------- ---------- ---------- -------------- ----------
Net asset value, beginning of period $ 15.29 $ 14.36 $ 11.43 $ 25.03 $ 25.99 $ 24.04 $ 23.43
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............ 0.82 0.55 0.46 1.33 1.33 0.90 1.61
Net realized and unrealized gain (loss) 1.64 1.06 3.07 (13.23) 4.25 3.39 1.28
-------- -------- -------- -------- -------- -------- --------
Total from investment operations........ 2.46 1.61 3.53 (11.90) 5.58 4.29 2.89
-------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income................... (0.70) (0.68) (0.11) (0.93) (2.11) (0.66) (1.65)
Net realized gain....................... -- -- -- (0.73) (4.43) (1.68) (0.63)
Return of capital....................... -- -- (0.49) (0.04) -- -- --
-------- -------- -------- -------- -------- -------- --------
Total from distributions................ (0.70) (0.68) (0.60) (1.70) (6.54) (2.34) (2.28)
-------- -------- -------- -------- -------- -------- --------
Capital share repurchases............... 0.01 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 17.06 $ 15.29 $ 14.36 $ 11.43 $ 25.03 $ 25.99 $ 24.04
======== ======== ======== ======== ======== ======== ========
Market value, end of period............. $ 15.89 $ 13.82 $ 11.73 $ 8.60 $ 23.78 $ 23.93 $ 21.04
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN BASED ON NET ASSET
VALUE (b) (c)........................ 16.62% 12.31% 33.75% (48.98)% 21.87% 18.22% 13.50%
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN BASED ON MARKET
VALUE (b)............................ 20.17% 24.27% 45.08% (59.56)% 25.75% 24.37% 11.52%
======== ======== ======== ======== ======== ======== ========
-----------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).... $152,836 $138,786 $130,335 $103,780 $225,548 $233,379 $215,861
Ratio of total expenses to average net
assets............................... 2.22% (d) 2.36% 2.86% 3.72% 3.63% 3.97% (d) 3.59%
Ratio of total expenses to average net
assets, excluding interest expense
and fees............................. 1.79% (d) 1.77% 1.92% 1.80% 1.73% 1.73% (d) 1.79%
Ratio of net investment income (loss)
to average net assets................ 9.94% (d) 3.68% 3.76% 6.44% 4.65% 6.94% (d) 6.73%
Portfolio turnover rate................. 58% 87% 80% 23% 53% 14% 60%
INDEBTEDNESS:
Total loan outstanding (in 000's)....... $ 47,500 $ 44,500 $ 35,900 $ 38,900 $ 84,000 $ 83,500 $ 83,000
Asset coverage per $1,000 of
indebtedness (e)..................... $ 4,218 $ 4,119 $ 4,630 $ 3,668 $ 3,685 $ 3,795 $ 3,601
-----------------------
(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.
Page 16 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (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. If the NYSE closes early on a
valuation day, the NAV is determined as of that time. 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 in accordance with valuation procedures
adopted by the Fund's Board of Trustees, and in accordance with provisions of
the 1940 Act. The following securities, for which accurate and reliable market
quotations are readily available, will be valued as follows:
Common stocks and other securities listed on any national or foreign
exchange (excluding the NASDAQ National Market ("NASDAQ") and the London
Stock Exchange Alternative Investment Market ("AIM")) are valued at the
last sale price on the exchange on which they are principally traded. If
there are no transactions on the valuation day, the securities are valued
at the mean between the most recent bid and asked prices.
Securities listed on the NASDAQ or the AIM are valued at the official
closing price. If there is no official closing price on the valuation day,
the securities are valued at the mean between the most recent bid and
asked prices.
Securities traded in the over-the-counter market are valued at their
closing bid prices.
All market quotations used in valuing the Fund's securities will be obtained
from a third party pricing service. If no quotation is received from a pricing
service, attempts will be made to obtain one or more broker quotes for the
security. In the event the pricing service does not provide a valuation, broker
quotations are not readily available, or the valuations received 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.
Additionally, if events occur after the close of the principal markets for
certain securities (e.g., domestic debt and foreign securities) that could
materially affect the Fund's NAV, First Trust will use a fair value method to
value the Fund's securities. The use of fair value pricing is governed by
valuation procedures adopted by the Fund's Board of Trustees, and in accordance
with the provisions of the 1940 Act. As a general principle, the fair value of a
security is the amount which the Fund might reasonably expect to receive for the
security upon its current sale. However, in light of the judgment involved in
fair valuations, there can be no assurance that a fair value assigned to a
particular security will be the amount which the Fund might be able to receive
upon its current sale. Fair valuation of common stocks and other equity
securities will be based on the consideration of all available information,
including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
Page 17
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (Continued)
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (UNAUDITED)
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect the
value of the security.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign markets;
2) ADR trading of similar securities;
3) closed-end fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
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 (see above). For certain foreign equity securities
a third party pricing service may be utilized to determine fair value. 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")(1) 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. The third party pricing service primarily uses broker quotes to value
the Senior Loans. 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. Fair valuation of a Senior Loan is based on the consideration of all
available information, including, but not limited to the following:
1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in which these
securities are purchased and sold;
3) the type, size and cost of the security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on the Sub-Advisor's
or external analysis;
6) the information as to any transactions in or offers for the security;
7) the price and extent of public trading in similar securities (or equity
securities) of the issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing the
security;
10) the business prospects of the issuer, including any ability to obtain
money or resources from a parent or affiliate and an assessment of the
issuer's management;
11) the prospects for the issuer's industry, and multiples (of earnings and/or
cash flows) being paid for similar businesses in that industry; and
12) other relevant factors.
Short-term investments that mature in less than 60 days when purchased are
valued at amortized cost.
1 The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 18
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (Continued)
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (UNAUDITED)
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:
o 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.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar securities in active markets.
o 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.
o 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).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may 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, 2011, 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 value of the underlying
securities during the period in which 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, 2011, the Fund had no open repurchase agreements.
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
daily 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 capital gain. For the six months ended May 31, 2011,
distributions of $381,769 received from MLPs have been reclassed as return of
capital. The cost basis of applicable MLPs has been reduced accordingly.
Securities purchased or sold on a when-issued, delayed-delivery or forward
purchase commitment basis may have extended settlement periods. The value of the
security so purchased is subject to market fluctuations during this period. Due
to the nature of the Senior Loan market, the actual settlement date may not be
certain at the time of purchase or sale for some of the Senior Loans. Interest
income on such Senior Loans 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, delayed-delivery or forward 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
borrower's discretion. The Fund did not have unfunded delayed draw loan
commitments as of May 31, 2011.
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
Page 19
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (Continued)
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (UNAUDITED)
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. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Level dividend distributions are declared and paid quarterly or as the Board of
Trustees may determine from time to time. 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.
Distributions from income and realized capital gains are determined in
accordance with income tax regulations, which may differ from accounting
principles generally accepted in the United States of America. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on portfolio
securities held by the Fund and have no impact on net assets or net asset value
per share. Temporary differences, which arise from recognizing certain items of
income, expense and gain/loss in different periods for financial statement and
tax purposes, will reverse at some point in the future.
The tax character of distributions paid during the fiscal year ended November
30, 2010 was as follows:
Distributions paid from:
Ordinary income....................................... $ 6,127,625
Long-term capital gain................................ --
Return of capital..................................... --
As of November 30, 2010, the distributable earnings and net assets on a tax
basis were as follows:
Undistributed ordinary income............................ $ 177,637
Undistributed capital gains.............................. --
------------
Total undistributed earnings............................. 177,637
Accumulated capital and other losses..................... (38,121,447)
Net unrealized appreciation (depreciation)............... 6,969,583
------------
Total accumulated earnings (losses)...................... (30,974,227)
Other.................................................... (2,044,012)
Paid-in capital.......................................... 171,804,295
------------
Net assets............................................... $138,786,056
============
G. INCOME AND OTHER 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 (the "Code"), 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.
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, 2010, the
Fund had a capital loss carryforward for federal income tax purposes of
$37,928,962, expiring as follows:
EXPIRATION DATE AMOUNT
November 30, 2017 $ 37,928,962
During the taxable year ended November 30, 2010, the Fund utilized capital loss
carryforwards in the amount of $1,275,001.
Page 20
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (Continued)
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (UNAUDITED)
The Fund is subject to 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 2007, 2008,
2009 and 2010 remain open to federal and state audit. As of May 31, 2011,
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.
On December 22, 2010, President Obama signed into law the Regulated Investment
Company Modernization Act of 2010 effective for tax years beginning after
December 22, 2010. Management is currently evaluating the impact the Act will
have on future financial statements, if any.
H. EXPENSES:
The Fund will pay all expenses directly related to its operations.
I. 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 No. 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 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.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. 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 investment management 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 asset value
of the Fund minus the sum of the Fund's liabilities other than the principal
amount of borrowings. First Trust also provides fund reporting services to the
Fund for a flat annual fee in the amount of $9,250.
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.
James A. Bowen, the President of First Trust, on October 12, 2010, acquired 100%
of the voting stock of The Charger Corporation, the general partner of First
Trust (the "Transaction"). The consummation of the Transaction was deemed to be
an "assignment" (as defined in the 1940 Act) of the Fund's investment management
agreement and investment sub-advisory agreement and resulted in the automatic
termination of the agreements.
The Board of Trustees of the Fund approved an interim investment management
agreement with First Trust and interim investment sub-advisory agreements, which
were entered into effective upon the closing of the Transaction and would be in
effect for a maximum period of 150 days absent shareholder approval of new such
agreements. A new investment management agreement with First Trust and new
investment sub-advisory agreements were approved by the Board of Trustees of the
Fund and were submitted to shareholders of the Fund as of the record date
(September 30, 2010) for approval to take effect upon such shareholder approval.
A special shareholder meeting of the Fund to vote on a proposal to approve the
new investment management agreement and the new investment sub-advisory
agreements was held on December 20, 2010, at which time the new investment
management agreement and new investment sub-advisory agreements were approved by
the Fund's shareholders. Until December 20, 2010, advisory fees payable to First
Trust, MCIM and Four Corners were held in escrow. See Submission of Matters to a
Vote of Shareholders, in the Additional Information section of this report, for
the results.
BNY Mellon Investment Servicing (US) Inc. serves as the Fund's Administrator,
Fund Accountant and Transfer Agent in accordance with certain fee arrangements.
PFPC Trust Company, which was renamed BNY Mellon Investment Servicing Trust
Company effective July 1, 2011, serves as the Fund's Custodian in accordance
with certain fee arrangements.
Page 21
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NOTES TO FINANCIAL STATEMENTS - (Continued)
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MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (UNAUDITED)
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 the First Trust Fund Complex and divided 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 before
rotating to serve as Chairman of another Committee or as Lead Independent
Trustee. The officers and "Interested" Trustee receive no compensation from the
Fund for serving in such capacities.
For the six months ended May 31, 2011, the Fund paid brokerage commissions to
Macquarie Capital (USA) Inc., an affiliate of MCIM and Four Corners, totaling
$3,451.
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, 2011 were $110,799,220
and $112,515,832, 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. ("BNP) may not terminate the BNP Paribas Facility except upon 180
calendar days' prior notice. The interest rate under the BNP Paribas Facility is
equal to 3-month LIBOR plus 100 basis points. Effective June 13, 2011, BNP is
replacing the current borrowing rate under the BNP Paribas Facility with 3-month
LIBOR plus 80 basis points. In addition, 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, 2011, the daily average amount outstanding
under the BNP Paribas Facility was $46,840,659. The high and low annual interest
rates during the six months ended May 31, 2011 were 1.31% and 1.25%,
respectively, and the weighted average interest rate was 1.29%. The interest
rate at May 31, 2011 was 1.25%.
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, but not all,
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-Advisor 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.
Page 22
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NOTES TO FINANCIAL STATEMENTS - (Continued)
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (UNAUDITED)
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.
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.
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 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 under collateralized. 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.
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.
Page 23
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NOTES TO FINANCIAL STATEMENTS - (Continued)
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (UNAUDITED)
NON-DIVERSIFICATION RISK: The Fund is non-diversified under the 1940 Act, but is
still limited as to the percentage of its assets which may be invested in the
securities of any issuer by the diversification requirements imposed by the
Code. 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's portfolio 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.
QUALIFIED DIVIDEND INCOME TAX RISK: There can be no assurance as to what portion
of the distributions paid to the Fund's Common Shareholders will consist of
tax-advantaged qualified dividend income. For taxable years beginning before
January 1, 2013, certain distributions designated by the Fund as derived from
qualified dividend income will be taxed in the hands of non-corporate Common
Shareholders at the rates applicable to long-term capital gains, provided
certain holding period and other requirements are satisfied by both the Fund and
the Common Shareholders. Additional requirements apply in determining whether
distributions by foreign issuers should be regarded as qualified dividend
income. Certain investment strategies of the Fund will limit the Fund's ability
to meet these requirements and consequently will limit the amount of qualified
dividend income received and distributed by the Fund. A change in the favorable
provisions of the federal tax laws with respect to qualified dividends may
result in a widespread reduction in announced dividends and may adversely impact
the valuation of the shares of dividend-paying companies.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events to the Fund through
the date the financial statements were issued, and has determined that there
were subsequent events as follows:
As noted in the Portfolio Commentary, effective July 1, 2011, Adam H. Brown and
Kevin P. Loome will replace Bob Bernstein and Drew Sweeney as Co-Portfolio
Managers of MFD's Senior Loan Component.
On July 19, 2011, the Fund's Board of Trustees authorized the continuation of
the Fund's share repurchase program. Through the share repurchase program, the
Fund was originally authorized to repurchase up to 6% of its outstanding common
shares (544,678 shares). As of July 18, 2011, the Fund had repurchased 269,029
shares. The share repurchase program will continue until the earlier of (i) the
repurchase of the 275,649 shares, or (ii) February 23, 2012. The Board of
Trustees of the Fund authorized the continuation of the share repurchase program
with the expectation it would increase shareholder value through the accretive
nature of the purchases to the Fund's net asset value. There is no assurance
that the Fund will purchase shares at any particular discount levels or in any
specified amounts. There is also no assurance that the market price of the
Fund's shares will increase as a result of any share repurchases.
Page 24
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (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. (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 (866) 340-1104, 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 at http://www.sec.gov.
Page 25
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ADDITIONAL INFORMATION - (Continued)
--------------------------------------------------------------------------------
MACQUARIE/FIRST TRUST GLOBAL INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
MAY 31, 2011 (UNAUDITED)
PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
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
A special meeting of shareholders of the Fund was held on December 20, 2010. At
the meeting, shareholders approved a new investment management agreement between
the Fund and First Trust and new investment sub-advisory agreements between the
Fund, First Trust and each Sub-Advisor. 4,568,702 (50.33%) of the outstanding
voting securities were voted at the meeting. The number of votes cast in favor
of the new investment management agreement was 3,641,816, the number of votes
against was 732,732, and the number of abstentions was 194,154. The number of
votes cast in favor of the new investment sub-advisory agreement with MCIM was
3,632,382, the number of votes against was 737,210, and the number of
abstentions was 199,109. The number of votes cast in favor of the new investment
sub-advisory agreement with Four Corners was 3,623,276, the number of votes
against was 739,648, and the number of abstentions was 205,777. The terms of the
new investment management agreement and new investment sub-advisory agreements
are substantially similar to the terms of the previous agreements.
The Annual Meeting of Shareholders of the Common Shares of Macquarie/First Trust
Global Infrastructure/Utilities Dividend & Income Fund was held on April 18,
2011. At the Annual Meeting, Trustee Robert F. Keith was elected by the Common
Shareholders of the Macquarie/First Trust Global Infrastructure/Utilities
Dividend & Income Fund as a Class III Trustee for a three-year term expiring at
the Fund's annual meeting of shareholders in 2014. The number of votes cast in
favor of Mr. Keith was 7,291,372, the number of votes against was 1,147,734 and
the number of abstentions was 638,857. Richard E. Erickson, Thomas R. Kadlec,
James A. Bowen and Niel B. Nielson are the other current and continuing
Trustees.
Page 26
This Page Left Blank Intentionally.
This Page Left Blank Intentionally.
FIRST TRUST
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
BNY Mellon Investment Servicing Trust Company
Formerly, PFPC Trust Company
8800 Tinicum 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
[Blank Back Cover]
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)(1) IDENTIFICATION OF PORTFOLIO MANAGERS OR MANAGEMENT TEAM MEMBERS AND
DESCRIPTION OF ROLE OF PORTFOLIO MANAGERS OR MANAGEMENT TEAM MEMBERS
Information provided as of July 29, 2011.
Effective July 1, 2011, Adam H. Brown and Kevin P. Loome of Four Corners Capital
Management, LLC ("Four Corners") replaced Bob Bernstein and Drew Sweeney as
Co-Portfolio Managers of the Registrant's Senior Loan Component.
Adam H. Brown
Co-Portfolio Manager, Senior Loan Component
Vice President, Portfolio Manager, Four Corners Capital Management, LLC
Mr. Brown is a portfolio manager on Four Corners' taxable fixed-income team,
with specific responsibilities for the bank loan portfolio. Mr. Brown previously
worked with Wachovia Securities, where he worked in the leveraged finance group
arranging senior secured bank loans and high-yield bond financings for financial
sponsors and corporate issuers. Mr. Brown has been part of the Four Corners team
for nine years and over the past year has had a dual role with Four Corners'
affiliated investment adviser, Delaware Investments. Since 2007, Mr. Brown has
co-managed the Four Corners' collateralized loan obligations and bank loan
portfolios with Bob Bernstein and Drew Sweeney. Mr. Brown earned a bachelor's
degree from the University of Florida and an MBA from the A.B. Freeman School of
Business at Tulane University. Mr. Brown is also a Chartered Financial Analyst.
Kevin P. Loome
Co-Portfolio Manager, Senior Loan Component
Senior Vice President, Senior Portfolio Manager, Head of High Yield Investments,
Four Corners Capital Management, LLC
Mr. Loome is the head of the high-yield fixed-income team at Four Corners,
responsible for portfolio construction and strategic asset allocation of all
high-yield fixed income assets. Prior to joining Delaware Investments, Four
Corners' affiliated investment adviser, in August 2007 in his current position,
Mr. Loome spent 11 years at T. Rowe Price, starting as an analyst and leaving
the firm as a portfolio manager. Mr. Loome began his career with Morgan Stanley
as a corporate finance analyst in the New York and London offices. Mr. Loome
received his bachelor's degree in commerce from the University of Virginia and
earned an MBA from the Tuck School of Business at Dartmouth.
(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS OR MANAGEMENT TEAM MEMBER
AND POTENTIAL CONFLICTS OF INTEREST
Information provided as of July 1, 2011.
# of Accounts Total Assets
Total Managed for which for which
Advisory Fee is Advisory Fee
Name of Portfolio Manager or # of Accounts Total Assets Based on is Based on
Team Member Type of Accounts* Managed (Millions) Performance Performance
-----------------
1. Adam H. Brown Registered Investment Companies: 8 $621.5 0 $ 0
--------------------------------
Other Pooled Investment Vehicles: 3 $652.0 3 $652.0
---------------------------------
Other Accounts: 6 $304.2 0 $ 0
---------------
2. Kevin P. Loome Registered Investment Companies: 25 $5,167.4 0 $ 0
--------------------------------
Other Pooled Investment Vehicles: 0 $ 0 0 $ 0
---------------------------------
Other Accounts: 0 $ 0 0 $ 0
---------------
POTENTIAL CONFLICTS OF INTERESTS
In general, Four Corners seeks to allocate the purchase and sale of corporate
loans to clients in a fair and equitable manner to quickly and prudently create
a well-constructed, fully invested portfolio of corporate loans. Since Four
Corners' clients have varying investment restrictions, and because of the
constraining mechanics of the corporate loan market, allocation of trades
through methods such as pro-rata allocation are not feasible. Therefore, the
allocation of corporate loan purchases and sales to various accounts is
generally based on factors such as the client's investment restrictions and
objectives, including expected liquidity and/or third party credit ratings, the
client's acceptance or rejection of prospective investments, if applicable, and
the relative percentage of invested assets of a client's portfolio, among
others. Assets may be disproportionately allocated to accounts during their
initial investment (ramp up) period, notwithstanding that other accounts may
also have assets available for investment. Such disproportionate allocation to
accounts during the ramp-up process may have a detrimental effect on other
accounts. Subject to the foregoing, whenever Four Corners' clients have
available funds for investment, investments suitable and appropriate for each
will be allocated in a manner Four Corners believes to be equitable to each,
although such allocation may result in a delay in one or more client accounts
being fully invested that would not occur if an allocation to other client
accounts were not made. Moreover, it is possible that due to differing
investment objectives or for other reasons, Four Corners and its affiliates may
purchase securities or loans of an issuer for one client and at approximately
the same time recommend selling or sell the same or similar types of securities
or loans for another client. For these and other reasons, not all portfolios
will participate in the gains or losses experienced by other portfolios with
similar investment objectives.
(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGERS OR MANAGEMENT TEAM MEMBERS
PORTFOLIO MANAGER COMPENSATION
Information provided as of July 29, 2011.
Portfolio Manager and Management Team compensation is typically comprised of a
base salary and a bonus. There are no pre-determined formulas to determine base
salaries or bonus amounts. Bonuses for all employees, including the Portfolio
Managers, are discretionary.
The Portfolio Managers' salaries are set at certain levels and may be raised at
the discretion of Macquarie. If the Portfolios Managers' or the Management
Team's bonus is over a certain amount, a portion of that bonus will be deferred,
and paid out in the future in three equal installments. Bonuses are entirely
discretionary, and are likely to be related to, among other things, business
unit profitability and personal performance. Compensation is determined without
regard to the performance of any one particular fund. The Portfolio Managers and
the Management Team have no direct incentive to take undue risks when individual
fund performance is lagging.
(4) DISCLOSURE OF SECURITIES OWNERSHIP
Information provided as of July 29, 2011
Dollar Range of Fund
Name Shares Beneficially Owned
-------------- --------------------------
Adam H. Brown $ 0
Kevin P. Loome $ 0
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
---------------------------------------------------------------------------------------------------------
REGISTRANT PURCHASES OF EQUITY SECURITIES
---------------------------------------------------------------------------------------------------------
(a) TOTAL (c) TOTAL NUMBER OF (d) MAXIMUM NUMBER (OR
NUMBER OF (b) AVERAGE SHARES (OR UNITS) APPROXIMATE DOLLAR VALUE) OF
SHARES (OR PRICE PAID PER PURCHASED AS PART OF SHARES (OR UNITS) THAT MAY YET
UNITS) SHARE (OR PUBLICLY ANNOUNCED BE PURCHASED UNDER THE
PERIOD PURCHASED UNIT) PLANS OR PROGRAMS PLANS OR PROGRAMS
------------- ------------ -------------- -------------------- ------------------------------
Month #1
(02/24/2011 -
02/28/2011) 0 0 0 544,678
Month #2
(03/01/2011 - 63,662 $15.1457 63,662 481,106
03/31/2011)
Month #3
(04/01/2014 - 33,045 $16.0025 96,707 447,971
04/30/2011)
Month #4
(05/01/2011 - 23,022 $15.7543 119,729 424,949
05/31/2011)
Total 119,729 $15.4992 119,729 424,949
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On February 24, 2011, the Registrant commenced a share repurchase program for
purposes of enhancing shareholder value and reducing the discount at which the
Registrant's shares trade from their net asset value. The program will expire on
August 23, 2011. For the six months ended May 31, 2011, the Registrant
repurchased 119,729 of its shares at a weighted-average discount of 6.38% from
net asset value per share. On July 19, 2011, the Registrant announced the
continuation of the previously announced share repurchase program, whereby the
share repurchase program will continue until the earlier of (i) the repurchase
of the remaining 275,649 shares, or (ii) February 23, 2012.
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
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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 18, 2011
-------------------------
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 18, 2011
-------------------------
By (Signature and Title)* /s/ Mark R. Bradley
-------------------------------------------------------
Mark R. Bradley, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer)
Date July 18, 2011
-------------------------
* Print the name and title of each signing officer under his or her signature.