UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY
Investment Company Act file number 811-22528
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First Trust Energy Infrastructure 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
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Date of fiscal year end: November 30
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Date of reporting period: August 31, 2017
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Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.
ITEM 1. SCHEDULE OF INVESTMENTS. The Schedule(s) of Investments is attached
herewith.
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (a)
AUGUST 31, 2017 (UNAUDITED)
SHARES DESCRIPTION VALUE
--------------- -------------------------------------------------------------------- --------------
COMMON STOCKS - 94.0%
ELECTRIC UTILITIES - 25.0%
90,900 Alliant Energy Corp................................................. $ 3,885,066
9,500 American Electric Power Co., Inc.................................... 699,485
104,500 Duke Energy Corp.................................................... 9,122,850
15,900 Edison International................................................ 1,274,862
247,900 Emera, Inc. (CAD)................................................... 9,520,948
155,000 Eversource Energy................................................... 9,765,000
257,200 Exelon Corp......................................................... 9,740,164
165,400 Fortis, Inc. (CAD).................................................. 6,051,752
188,300 Hydro One Ltd. (CAD) (b)............................................ 3,493,823
64,000 IDACORP, Inc........................................................ 5,694,720
66,900 NextEra Energy, Inc................................................. 10,069,119
189,300 Southern (The) Co................................................... 9,135,618
123,400 Xcel Energy, Inc.................................................... 6,108,300
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84,561,707
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GAS UTILITIES - 6.3%
45,600 Atmos Energy Corp................................................... 4,014,624
60,310 Chesapeake Utilities Corp........................................... 4,791,630
110,500 New Jersey Resources Corp........................................... 4,823,325
150,018 UGI Corp............................................................ 7,412,389
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21,041,968
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MULTI-UTILITIES - 18.1%
127,200 ATCO, Ltd., Class I (CAD)........................................... 4,686,664
211,700 Canadian Utilities Ltd., Class A (CAD).............................. 6,598,089
142,800 CMS Energy Corp..................................................... 6,931,512
157,592 National Grid PLC, ADR.............................................. 10,059,098
179,800 NiSource, Inc....................................................... 4,831,226
257,000 Public Service Enterprise Group, Inc................................ 12,037,880
4,100 SCANA Corp.......................................................... 247,558
73,900 Sempra Energy....................................................... 8,715,027
107,700 WEC Energy Group, Inc............................................... 7,024,194
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61,131,248
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OIL, GAS & CONSUMABLE FUELS - 44.2%
2,203,750 Enbridge Energy Management, LLC (c)................................. 31,756,037
625,200 Enbridge Income Fund Holdings, Inc. (CAD)........................... 15,505,461
232,400 Enbridge, Inc....................................................... 9,293,676
325,700 Inter Pipeline, Ltd. (CAD).......................................... 5,964,972
172,100 Keyera Corp. (CAD).................................................. 4,994,518
606,175 Kinder Morgan, Inc.................................................. 11,717,363
223,053 ONEOK, Inc.......................................................... 12,080,550
764,100 Plains GP Holdings, L.P............................................. 17,176,968
15,600 Targa Resources Corp................................................ 695,292
423,170 TransCanada Corp.................................................... 21,497,036
632,600 Williams (The) Cos., Inc............................................ 18,807,198
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149,489,071
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See Notes to Portfolio of Investments
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2017 (UNAUDITED)
SHARES/
UNITS DESCRIPTION VALUE
--------------- -------------------------------------------------------------------- --------------
COMMON STOCKS (CONTINUED)
WATER UTILITIES - 0.4%
15,900 American Water Works Co., Inc....................................... $ 1,286,310
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TOTAL COMMON STOCKS................................................. 317,510,304
(Cost $312,905,897) --------------
MASTER LIMITED PARTNERSHIPS - 35.7%
CHEMICALS - 0.2%
22,000 Westlake Chemical Partners, L.P..................................... 526,900
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GAS UTILITIES - 1.6%
122,152 AmeriGas Partners, L.P.............................................. 5,300,175
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INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS - 5.0%
410,555 NextEra Energy Partners, L.P. (d)................................... 17,021,611
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OIL, GAS & CONSUMABLE FUELS - 28.9%
79,700 Alliance Holdings GP, L.P........................................... 2,195,735
306,330 Alliance Resource Partners, L.P..................................... 5,789,637
65,700 Buckeye Partners, L.P............................................... 3,757,383
7,600 Dominion Energy Midstream Partners, L.P............................. 217,740
757,700 Enterprise Products Partners, L.P................................... 19,753,239
176,100 EQT Midstream Partners, L.P......................................... 13,448,757
266,976 Holly Energy Partners, L.P.......................................... 8,714,097
100,300 Magellan Midstream Partners, L.P.................................... 6,759,217
121,472 NGL Energy Partners, L.P............................................ 1,087,174
103,600 Phillips 66 Partners, L.P........................................... 4,950,008
65,000 Plains All American Pipeline, L.P................................... 1,407,900
41,000 Shell Midstream Partners, L.P....................................... 1,134,470
280,300 Spectra Energy Partners, L.P........................................ 12,425,699
47,328 Tallgrass Energy Partners, L.P...................................... 2,237,195
161,495 TC PipeLines, L.P................................................... 8,497,867
56,002 TransMontaigne Partners, L.P........................................ 2,534,650
75,000 Williams Partners, L.P.............................................. 2,955,000
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97,865,768
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TOTAL MASTER LIMITED PARTNERSHIPS................................... 120,714,454
(Cost $101,471,778) --------------
REAL ESTATE INVESTMENT TRUSTS - 1.4%
EQUITY REAL ESTATE INVESTMENT TRUSTS - 1.4%
49,101 CorEnergy Infrastructure Trust, Inc................................. 1,602,166
142,050 InfraREIT, Inc...................................................... 3,194,704
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TOTAL REAL ESTATE INVESTMENT TRUSTS................................. 4,796,870
(Cost $4,641,045) --------------
TOTAL INVESTMENTS - 131.1%.......................................... 443,021,628
(Cost $419,018,720) (e) --------------
See Notes to Portfolio of Investments
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2017 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
--------------- ------------------------------------ -------------- -------------- -------------- --------------
CALL OPTIONS WRITTEN - (0.7%)
600 Buckeye Partners, L.P. ............. $ 3,431,400 $ 60.00 Jan 2018 $ (66,000)
800 CMS Energy Corp. (f) ............... 3,883,200 50.00 Sep.2017 (4,000)
700 Enbridge, Inc. ..................... 2,799,300 42.50 Jan 2018 (50,750)
1,600 Enbridge, Inc. ..................... 6,398,400 45.00 Jan 2018 (36,000)
500 Enterprise Products Partners, L.P.
(f) ............................. 1,303,500 28.00 Sep.2017 (1,000)
6,400 Enterprise Products Partners, L.P... 16,684,800 29.00 Dec 2017 (80,000)
600 Enterprise Products Partners, L.P... 1,564,200 27.00 Jan 2018 (39,000)
600 Exelon Corp. ....................... 2,272,200 39.00 Sep 2017 (6,000)
900 Exelon Corp. ....................... 3,408,300 38.00 Oct 2017 (81,000)
900 Exelon Corp. ....................... 3,408,300 39.00 Oct 2017 (40,500)
100 Exelon Corp. ....................... 378,700 40.00 Oct 2017 (1,500)
1,300 Kinder Morgan, Inc. ................ 2,512,900 20.00 Sep 2017 (11,700)
4,700 Kinder Morgan, Inc. ................ 9,085,100 21.00 Sep 2017 (9,400)
600 Magellan Midstream Partners, L.P.... 4,043,400 72.50 Sep 2017 (3,000)
200 Magellan Midstream Partners, L.P.... 1,347,800 70.00 Oct 2017 (10,000)
200 Magellan Midstream Partners, L.P.... 1,347,800 72.50 Oct 2017 (3,000)
1,500 National Grid PLC .................. 9,574,500 65.00 Dec 2017 (202,500)
100 NextEra Energy, Inc. ............... 1,505,100 150.00 Sep 2017 (19,500)
1,000 NiSource, Inc. ..................... 2,687,000 27.00 Oct 2017 (52,500)
700 NiSource, Inc. ..................... 1,880,900 28.00 Oct 2017 (10,500)
700 ONEOK, Inc. ........................ 3,791,200 52.50 Oct 2017 (199,500)
1,500 ONEOK, Inc. ........................ 8,124,000 55.00 Oct 2017 (210,000)
600 Plains All American Pipeline, L.P... 1,299,600 23.00 Nov 2017 (36,000)
2,500 Public Service Enterprise Group,
Inc. ............................ 11,710,000 45.00 Dec 2017 (595,000)
600 Sempra Energy ...................... 7,075,800 125.00 Jan 2018 (64,500)
200 Southern (The) Co. ................. 965,200 50.00 Oct 2017 (5,000)
1,600 Southern (The) Co. ................. 7,721,600 49.00 Nov 2017 (124,800)
100 Targa Resources Corp. .............. 445,700 50.00 Oct 2017 (1,500)
800 TransCanada Corp. .................. 4,064,000 50.00 Nov 2017 (112,000)
400 WEC Energy Group, Inc. ............. 2,608,800 65.00 Oct 2017 (53,200)
1,500 Williams (The) Cos., Inc. .......... 4,459,500 30.00 Sep 2017 (36,000)
2,100 Williams (The) Cos., Inc. (f)....... 6,243,300 33.00 Sep.2017 (4,200)
2,700 Williams (The) Cos., Inc. .......... 8,027,100 31.00 Nov 2017 (148,500)
600 Williams Partners, L.P. ............ 2,364,000 40.00 Sep 2017 (21,000)
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TOTAL CALL OPTIONS WRITTEN.......................................................... (2,339,050)
(Premiums received $2,163,155) --------------
OUTSTANDING LOAN - (33.6%).......................................................... (113,500,000)
NET OTHER ASSETS AND LIABILITIES - 3.2%............................................. 10,842,251
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NET ASSETS - 100.0%................................................................. $ 338,024,829
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See Notes to Portfolio of Investments
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2017 (UNAUDITED)
-----------------------------
INTEREST RATE SWAP AGREEMENTS:
FLOATING EXPIRATION NOTIONAL FIXED
COUNTERPARTY RATE (1) DATE AMOUNT RATE (1) VALUE
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Bank of Nova Scotia 1 month LIBOR 10/08/20 $ 36,475,000 2.121% $ (714,076)
Bank of Nova Scotia 1 month LIBOR 09/03/24 36,475,000 2.367% (1,432,680)
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$ 72,950,000 $ (2,146,756)
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(1) The Fund pays the fixed rate and receives the floating rate. The floating
rate on August 31, 2017 was 1.229% and 1.232%, respectively.
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(a) All of these securities are available to serve as collateral for the
outstanding loans.
(b) 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 foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(c) Non-income producing security that makes payment-in-kind ("PIK")
distributions. For the fiscal year-to-date period (December 1, 2016
through August 31, 2017), the Fund received 137,069 PIK shares of Enbridge
Energy Management, LLC.
(d) NextEra Energy Partners, L.P. is taxed as a "C" corporation for federal
income tax purposes.
(e) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of August 31, 2017, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $48,111,257 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $26,431,000. The net unrealized appreciation
was $21,680,257. The amounts presented are inclusive of derivative
contracts.
(f) This security is fair valued by First Trust Advisors L.P.'s Pricing
Committee in accordance with procedures adopted by the Fund's Board of
Trustees, and in accordance with the provisions of the Investment Company
Act of 1940, as amended. At August 31, 2017, securities noted as such are
valued at $(9,200) or (0.0)% of net assets.
ADR American Depositary Receipt
CAD Canadian Dollar - Security is denominated in Canadian Dollars and is
translated into U.S. Dollars based upon the current exchange rate.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
2017 is as follows (see Note 2A - Portfolio Valuation in the Notes to Portfolio
of Investments):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2017 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Common Stocks*................................ $ 317,510,304 $ 317,510,304 $ -- $ --
Master Limited Partnerships*.................. 120,714,454 120,714,454 -- --
Real Estate Investment Trusts*................ 4,796,870 4,796,870 -- --
--------------- --------------- --------------- ---------------
Total Investments............................. $ 443,021,628 $ 443,021,628 $ -- $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2017 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Call Options Written.......................... $ (2,339,050) $ (1,830,100) $ (508,950) $ --
Interest Rate Swaps**......................... (2,146,756) -- (2,146,756) --
--------------- --------------- --------------- ---------------
$ (4,485,806) $ (1,830,100) $ (2,655,706) $ --
=============== =============== =============== ===============
* See Portfolio of Investments for industry breakout.
** See Interest Rate Swap Agreements for contract detail.
All transfers in and out of the Levels during the period are assumed to occur on
the last day of the period at their current value. There were no transfers
between Levels at August 31, 2017.
See Notes to Portfolio of Investments
NOTES TO PORTFOLIO OF INVESTMENTS
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
AUGUST 31, 2017 (UNAUDITED)
1. ORGANIZATION
First Trust Energy Infrastructure Fund (the "Fund") is a non-diversified,
closed-end management investment company organized as a Massachusetts business
trust on February 22, 2011 and is registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund trades under the ticker symbol FIF on the New York Stock
Exchange ("NYSE").
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies."
2. SIGNIFICANT ACCOUNTING POLICIES
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. Foreign securities are
priced using data reflecting the earlier closing of the principal markets for
those securities. The Fund's NAV per Common Share is calculated by dividing the
value of all assets of the Fund (including accrued interest and dividends), less
all liabilities (including accrued expenses, dividends declared but unpaid and
any borrowings of the Fund) by the total number of Common Shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Fund's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. The Fund's investments are valued as follows:
Common stocks, master limited partnerships ("MLPs"), real estate
investment trusts ("REITs"), and other equity securities listed on any
national or foreign exchange (excluding The Nasdaq Stock Market LLC
("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, or for Nasdaq and AIM securities, the official
closing price. Securities traded on more than one securities exchange are
valued at the last sale price or official closing price, as applicable, at
the close of the securities exchange representing the principal market for
such securities.
Exchange-traded options contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded options contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price. Over-the-counter options contracts are fair
valued at the mean of their most recent bid and asked price, if available,
and otherwise their closing bid price.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Swaps are fair valued utilizing quotations provided by a third-party
pricing service or, if the pricing service does not provide a value, by
quotes provided by the selling dealer or financial institution.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Fund's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended (the "1933 Act")) for which a third-party pricing service is
unable to provide a market price; securities whose trading has been formally
suspended; a security whose market or fair value price is not available from a
pre-established pricing source; a security with respect to which an event has
occurred that is likely to materially affect the value of the security after the
market has closed but before the calculation of the Fund's NAV or make it
difficult or impossible to obtain a reliable market quotation; and a security
whose price, as provided by the third-party pricing service, does not reflect
the security's fair value. As a general principle, the current fair value of a
security would appear to be the amount which the owner might reasonably expect
to receive for the security upon its current sale. When fair value prices are
used, generally they will differ from market quotations or official closing
prices on the applicable exchanges. A variety of factors may be considered in
determining the fair value of such securities, 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;
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
AUGUST 31, 2017 (UNAUDITED)
5) price quotes from dealers and/or third-party 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.
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 investments. An active market is a market in which
transactions for the investment 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 investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, 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
investment (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
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of August 31, 2017, is
included with the Fund's Portfolio of Investments.
B. OPTION CONTRACTS
The Fund is subject to equity price risk in the normal course of pursuing its
investment objective and may write (sell) options to hedge against changes in
the value of equities. Also, the Fund seeks to generate additional income, in
the form of premiums received, from writing (selling) the options. The Fund may
write (sell) covered call or put options ("options") on all or a portion of the
common stock and MLPs held in the Fund's portfolio as determined to be
appropriate by Energy Income Partners, LLC ("EIP" or the "Sub-Advisor"). The
number of options the Fund can write (sell) is limited by the amount of common
stock and MLPs the Fund holds in its portfolio. The Fund will not write (sell)
"naked" or uncovered options. Options are marked-to-market daily and their value
will be affected by changes in the value and dividend rates of the underlying
equity securities, changes in interest rates, changes in the actual or perceived
volatility of the securities markets and the underlying equity securities and
the remaining time to the options' expiration. The value of options may also be
adversely affected if the market for the options becomes less liquid or trading
volume diminishes.
Options the Fund writes (sells) will either be exercised, expire or be cancelled
pursuant to a closing transaction. If the price of the underlying equity
security exceeds the option's exercise price, it is likely that the option
holder will exercise the option. If an option written (sold) by the Fund is
exercised, the Fund would be obligated to deliver the underlying equity security
to the option holder upon payment of the strike price. In this case, the option
premium received by the Fund will be added to the amount realized on the sale of
the underlying security for purposes of determining gain or loss. If the price
of the underlying equity security is less than the option's strike price, the
option will likely expire without being exercised. The option premium received
by the Fund will, in this case, be treated as short-term capital gain on the
expiration date of the option. The Fund may also elect to close out its position
in an option prior to its expiration by purchasing an option of the same series
as the option written (sold) by the Fund.
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
AUGUST 31, 2017 (UNAUDITED)
The options that the Fund writes (sells) give the option holder the right, but
not the obligation, to purchase a security from the Fund at the strike price on
or prior to the option's expiration date. The ability to successfully implement
the writing (selling) of covered call options depends on the ability of the
Sub-Advisor to predict pertinent market movements, which cannot be assured.
Thus, the use of options may require the Fund to sell portfolio securities at
inopportune times or for prices other than current market value, which may limit
the amount of appreciation the Fund can realize on an investment, or may cause
the Fund to hold a security that it might otherwise sell. As the writer (seller)
of a covered option, the Fund foregoes, during the option's life, the
opportunity to profit from increases in the market value of the security
covering the option above the sum of the premium and the strike price of the
option, but has retained the risk of loss should the price of the underlying
security decline. The writer (seller) of an option has no control over the time
when it may be required to fulfill its obligation as a writer (seller) of the
option. Once an option writer (seller) has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying security to the
option holder at the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum equity
price risk for purchased options is limited to the premium initially paid. In
addition, certain risks may arise upon entering into option contracts including
the risk that an illiquid secondary market will limit the Fund's ability to
close out an option contract prior to the expiration date and that a change in
the value of the option contract may not correlate exactly with changes in the
value of the securities hedged.
C. SWAP AGREEMENTS
The Fund may enter into total return equity swap and interest rate swap
agreements. A swap is a financial instrument that typically involves the
exchange of cash flows between two parties ("Counterparties") on specified dates
(settlement dates) where the cash flows are based on agreed upon prices, rates,
etc. Swap agreements are individually negotiated and involve the risk of the
potential inability of the Counterparties to meet the terms of the agreement. In
connection with these agreements, cash and securities may be identified as
collateral in accordance with the terms of the respective swap agreements to
provide assets of value and recourse in the event of default under the swap
agreement or bankruptcy/insolvency of a party to the swap agreement. In the
event of a default by a Counterparty, the Fund will seek withdrawal of the
collateral and may incur certain costs exercising its rights with respect to the
collateral. If a Counterparty becomes bankrupt or otherwise fails to perform its
obligations due to financial difficulties, the Fund may experience significant
delays in obtaining any recovery in a bankruptcy or other reorganization
proceeding. The Fund may obtain only limited recovery or may obtain no recovery
in such circumstances.
Swap agreements may increase or decrease the overall volatility of the
investments of the Fund. The performance of swap agreements may be affected by
changes in the specific interest rate, security, currency, or other factors that
determine the amounts of payments due to and from the Fund. The Fund's maximum
equity price risk to meet its future payments under swap agreements outstanding
at August 31, 2017 is equal to the total notional amount as shown on the
Portfolio of Investments. The notional amount represents the U.S. dollar value
of the contract as of the day of the opening transaction or contract reset.
The Fund held interest rate swap agreements at August 31, 2017 to hedge against
changes in borrowing rates under the Fund's committed facility agreement. An
interest rate swap agreement involves the Fund's agreement to exchange a stream
of interest payments for another party's stream of cash flows. Interest rate
swaps do not involve the delivery of securities or other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate swaps is
limited to the net amount of interest payments that the Fund is contractually
obligated to make.
D. 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.
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 investments and items of income and expense are
translated on the respective dates of such transactions.
3. DERIVATIVE TRANSACTIONS
During the fiscal period ended August 31, 2017, the premiums for written options
opened were $6,361,015, and the premiums for written options closed, exercised
and expired were $5,565,045.
The average volume of interest rate swaps was $72,950,000 for the fiscal
year-to-date period (December 1, 2016 through August 31, 2017).
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter
that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) First Trust Energy Infrastructure Fund
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By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas
President and Chief Executive Officer
(principal executive officer)
Date: October 19, 2017
------------------
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 M. Dykas
----------------------------------------
James M. Dykas
President and Chief Executive Officer
(principal executive officer)
Date: October 19, 2017
------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade
Treasurer, Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: October 19, 2017
------------------
*Print the name and title of each signing officer under his or her signature.