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: February 28, 2015
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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
FEBRUARY 28, 2015 (UNAUDITED)
SHARES DESCRIPTION VALUE
--------------- -------------------------------------------------------------------- --------------
COMMON STOCKS - 92.3%
ELECTRIC UTILITIES - 16.2%
72,400 American Electric Power Co., Inc. (a)............................... $ 4,168,792
38,200 Duke Energy Corp. .................................................. 3,000,610
176,400 Emera, Inc. (CAD) (a)............................................... 5,781,224
241,600 Eversource Energy (a)............................................... 12,502,800
168,700 Exelon Corp. (a).................................................... 5,722,304
176,800 Fortis, Inc. (CAD) (a).............................................. 5,597,747
60,000 IDACORP, Inc. (a)................................................... 3,757,200
280,800 ITC Holdings Corp. (a).............................................. 10,875,384
93,300 NextEra Energy, Inc. (a)............................................ 9,652,818
104,300 NRG Yield, Inc., Class A (a)........................................ 5,351,633
117,900 Southern (The) Co. (a).............................................. 5,398,641
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71,809,153
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GAS UTILITIES - 7.8%
111,800 Atmos Energy Corp. (a).............................................. 5,929,872
27,810 Chesapeake Utilities Corp. (a)...................................... 1,312,632
161,000 ONE Gas, Inc. (a)................................................... 6,699,210
150,000 Piedmont Natural Gas Co., Inc. ..................................... 5,595,000
69,000 South Jersey Industries, Inc. (a)................................... 3,910,920
323,718 UGI Corp. (a)....................................................... 11,003,175
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34,450,809
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INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS - 0.9%
137,000 Pattern Energy Group, Inc. (a)...................................... 3,811,340
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MULTI-UTILITIES - 16.3%
49,000 Alliant Energy Corp. (a)............................................ 3,116,400
142,200 ATCO, Ltd., Class I (CAD) (a)....................................... 5,486,206
191,000 Canadian Utilities Ltd., Class A (CAD) (a).......................... 6,348,332
116,000 CMS Energy Corp. (a)................................................ 4,075,080
113,900 Dominion Resources, Inc. (a)........................................ 8,211,051
64,000 National Grid PLC, ADR ............................................. 4,387,840
222,900 NiSource, Inc. (a).................................................. 9,564,639
229,000 Public Service Enterprise Group, Inc. .............................. 9,631,740
85,000 SCANA Corp. ........................................................ 4,840,750
56,000 Sempra Energy (a)................................................... 6,059,200
205,100 Wisconsin Energy Corp. (a).......................................... 10,455,998
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72,177,236
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OIL, GAS & CONSUMABLE FUELS - 50.2%
1,425,938 Enbridge Energy Management, LLC (a) (b)............................. 53,158,969
458,600 Enbridge Income Fund Holdings, Inc. (CAD) (a)....................... 14,475,927
264,169 Enbridge, Inc. (a).................................................. 12,268,008
422,000 Inter Pipeline, Ltd. (CAD) (a)...................................... 11,207,423
90,300 Keyera Corp. (CAD) (a).............................................. 6,048,171
1,347,875 Kinder Morgan, Inc. (a)............................................. 55,276,354
150,000 ONEOK, Inc. ........................................................ 6,639,000
153,100 Pembina Pipeline Corp. (CAD) (a).................................... 4,896,359
434,400 Spectra Energy Corp. (a)............................................ 15,416,856
495,700 TransCanada Corp. (a)............................................... 21,726,531
Page 1 See Notes to Quarterly Portfolio of Investments
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2015 (UNAUDITED)
SHARES/
UNITS DESCRIPTION VALUE
--------------- -------------------------------------------------------------------- --------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
434,600 Williams (The) Cos., Inc. (a)....................................... $ 21,312,784
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222,426,382
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REAL ESTATE INVESTMENT TRUSTS - 0.9%
135,000 CorEnergy Infrastructure Trust ..................................... 907,200
109,150 InfraREIT, Inc. .................................................... 2,960,148
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3,867,348
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TOTAL COMMON STOCKS ................................................ 408,542,268
(Cost $347,793,510) --------------
MASTER LIMITED PARTNERSHIPS - 35.0%
GAS UTILITIES - 3.6%
263,752 AmeriGas Partners, L.P. (a)......................................... 12,984,511
67,000 Suburban Propane Partners, L.P. (a)................................. 2,957,380
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15,941,891
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INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS - 0.8%
84,300 NextEra Energy Partners, L.P. (a)................................... 3,325,635
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OIL, GAS & CONSUMABLE FUELS - 30.6%
46,000 Alliance Holdings GP, L.P. (a)...................................... 2,417,300
219,430 Alliance Resource Partners, L.P. (a)................................ 8,678,457
34,200 Columbia Pipeline Partners, L.P. (c)................................ 946,998
97,000 Energy Transfer Equity, L.P. (a).................................... 6,195,390
285,400 Energy Transfer Partners, L.P. (a).................................. 16,975,592
241,200 Enterprise Products Partners, L.P. (a).............................. 8,041,608
89,700 EQT Midstream Partners, L.P. (a).................................... 7,464,834
180,539 Golar LNG Partners, L.P. (a)........................................ 4,713,873
19,800 Hoegh LNG Partners, L.P. ........................................... 444,510
208,876 Holly Energy Partners, L.P. (a)..................................... 6,945,127
70,600 Magellan Midstream Partners, L.P. (a)............................... 5,803,320
201,239 Natural Resource Partners, L.P. (a)................................. 1,595,825
178,172 NGL Energy Partners, L.P. (a)....................................... 5,437,809
190,200 ONEOK Partners, L.P. (a)............................................ 7,948,458
47,100 Phillips 66 Partners, L.P. (a)...................................... 3,353,049
173,486 Plains All American Pipeline, L.P. (a).............................. 8,655,217
18,600 Shell Midstream Partners, L.P. (a).................................. 726,516
141,900 Spectra Energy Partners, L.P. (a)................................... 7,568,946
20,000 Targa Resources Partners, L.P. ..................................... 876,400
125,095 TC Pipelines, L.P. (a).............................................. 8,253,768
159,628 Teekay LNG Partners, L.P. (a)....................................... 5,914,217
175,762 TransMontaigne Partners, L.P. (a)................................... 6,255,370
201,938 Williams Partners, L.P. (a)......................................... 10,327,109
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135,539,693
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TOTAL MASTER LIMITED PARTNERSHIPS .................................. 154,807,219
(Cost $126,954,451) --------------
TOTAL INVESTMENTS - 127.3% ......................................... 563,349,487
(Cost $474,747,961) (d) --------------
Page 2 See Notes to Quarterly Portfolio of Investments
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2015 (UNAUDITED)
NUMBER OF
CONTRACTS DESCRIPTION VALUE
--------------- -------------------------------------------------------------------- --------------
CALL OPTIONS WRITTEN - (0.3%)
American Electric Power Co., Inc. Calls
420 @ $65.00 due March 2015 (e)....................................... $ (1,260)
20 @ 65.00 due May 2015............................................. (300)
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(1,560)
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CMS Energy Corp. Call
710 @ 40.00 due June 2015............................................ (19,525)
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Dominion Resources, Inc. Calls
630 @ 77.50 due April 2015........................................... (16,380)
70 @ 82.50 due April 2015........................................... (350)
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(16,730)
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Duke Energy Corp. Call
230 @ 87.50 due April 2015........................................... (1,150)
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Enbridge, Inc. Call
1,630 @ 55.00 due April 2015 (e)....................................... (37,490)
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Eversource Energy Call
1,490 @ 55.00 due April 2015........................................... (52,150)
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Exelon Corp. Calls
1,030 @ 37.00 due April 2015........................................... (11,330)
350 @ 39.00 due April 2015 (e)....................................... (700)
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(12,030)
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IDACORP, Inc. Calls
100 @ 70.00 due August 2015.......................................... (8,000)
270 @ 75.00 due August 2015.......................................... (7,425)
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(15,425)
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Kinder Morgan, Inc. Calls
300 @ 40.00 due March 2015........................................... (40,500)
2,750 @ 42.50 due March 2015........................................... (41,250)
2,190 @ 45.00 due March 2015........................................... (4,380)
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(86,130)
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National Grid PLC, ADR Call
390 @ 75.00 due March 2015 (e)....................................... (5,070)
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NextEra Energy Partners, L.P. Call
570 @ 120.00 due September 2015...................................... (49,875)
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NiSource, Inc. Calls
320 @ 45.00 due April 2015........................................... (14,400)
1,060 @ 47.00 due July 2015............................................ (68,900)
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(83,300)
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Page 3 See Notes to Quarterly Portfolio of Investments
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2015 (UNAUDITED)
NUMBER OF
CONTRACTS DESCRIPTION VALUE
--------------- -------------------------------------------------------------------- --------------
CALL OPTIONS WRITTEN (CONTINUED)
ONE Gas, Inc. Calls
590 @ $40.00 due April 2015........................................... $ (169,625)
400 @ 50.00 due July 2015............................................ (25,000)
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(194,625)
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ONEOK, Inc. Calls
600 @ 50.00 due April 2015........................................... (16,500)
330 @ 50.00 due July 2015............................................ (29,040)
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(45,540)
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Plains All American Pipeline, L.P. Call
450 @ 55.00 due August 2015.......................................... (40,950)
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Public Service Enterprise Group, Inc. Calls
700 @ 40.00 due March 2015........................................... (129,500)
370 @ 45.00 due March 2015 (e)....................................... (4,810)
570 @ 45.00 due April 2015........................................... (11,400)
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(145,710)
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SCANA Corp. Call
520 @ 65.00 due August 2015.......................................... (23,400)
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Sempra Energy Call
340 @ 125.00 due July 2015........................................... (6,800)
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Southern (The) Co. Calls
530 @ 50.00 due May 2015............................................. (9,540)
200 @ 55.00 due May 2015............................................. (600)
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(10,140)
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Spectra Energy Corp. Calls
1,200 @ 37.00 due March 2015........................................... (21,000)
160 @ 38.00 due April 2015........................................... (3,200)
1,330 @ 38.00 due June 2015............................................ (66,500)
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(90,700)
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TransCanada Corp. Calls
500 @ 50.00 due March 2015 (e)....................................... (5,000)
500 @ 50.00 due May 2015 (e)......................................... (12,500)
800 @ 55.00 due May 2015 (e)......................................... (4,800)
1,270 @ 50.00 due August 2015.......................................... (69,850)
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(92,150)
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UGI Corp. Call
2,565 @ 40.00 due April 2015 (e)....................................... (89,775)
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Williams (The) Cos., Inc. Calls
500 @ 48.00 due March 2015........................................... (70,000)
754 @ 52.50 due April 2015........................................... (25,636)
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(95,636)
Page 4 See Notes to Quarterly Portfolio of Investments
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2015 (UNAUDITED)
NUMBER OF
CONTRACTS DESCRIPTION VALUE
--------------- -------------------------------------------------------------------- --------------
CALL OPTIONS WRITTEN (CONTINUED)
Wisconsin Energy Corp. Call
1,580 @ $60.00 due July 2015............................................ $ (27,650)
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TOTAL CALL OPTIONS WRITTEN ......................................... (1,243,511)
(Premiums received $1,620,845) --------------
OUTSTANDING LOAN - (34.1%) ......................................... (151,000,000)
NET OTHER ASSETS AND LIABILITIES - 7.1% ............................ 31,599,526
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NET ASSETS - 100.0% ................................................ $ 442,705,502
==============
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(a) All or a portion of this security serves as collateral on the
outstanding loan.
(b) Non-income producing security which pays in-kind ("PIK")
distributions. For the fiscal year-to-date period (December 1, 2014
through February 28, 2015), the Fund received 21,350 PIK shares of
Enbridge Energy Management, LLC.
(c) Non-income producing security.
(d) Aggregate cost for financial reporting purposes, which approximates
the aggregate cost for federal income tax purposes. As of February 28,
2015, the aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost was $98,645,790
and the aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value was $10,044,264.
(e) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Fund's Board of Trustees and
in accordance with provisions of the Investment Company Act of 1940,
as amended. At February 28, 2015, securities noted as such are valued
at $(161,405) or (0.04%) 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.
INTEREST RATE SWAP AGREEMENTS:
NOTIONAL
COUNTERPARTY FLOATING RATE(1) EXPIRATION DATE AMOUNT FIXED RATE(1) VALUE
---------------------------------------------------------------------------------------------------------
Bank of Nova Scotia 1 month LIBOR 10/08/20 $ 36,475,000 2.121% $ (1,122,049)
Bank of Nova Scotia 1 month LIBOR 09/03/24 36,475,000 2.367% (1,443,503)
-------------- ------------
$ 72,950,000 $ (2,565,552)
============== ============
(1) The Fund pays the fixed rate and receives the floating rate. The floating
rate on February 28, 2015 was 0.17%.
Page 5 See Notes to Quarterly Portfolio of Investments
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2015 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 28,
2015 is as follows (see Note 2A - Portfolio Valuation in the Notes to Quarterly
Portfolio of Investments):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL SIGNIFICANT SIGNIFICANT
VALUE AT LEVEL 1 QUOTED OBSERVABLE UNOBSERVABLE
2/28/2015 PRICES INPUTS INPUTS
---------------- ---------------- ---------------- ----------------
Common Stocks*................................ $ 408,542,268 $ 408,542,268 $ -- $ --
Master Limited Partnerships *................. 154,807,219 154,807,219 -- --
--------------- --------------- ---------------- --------------
TOTAL ........................................ $ 563,349,487 $ 563,349,487 $ -- $ --
=============== =============== ================ ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL SIGNIFICANT SIGNIFICANT
VALUE AT LEVEL 1 QUOTED OBSERVABLE UNOBSERVABLE
2/28/2015 PRICES INPUTS INPUTS
---------------- ---------------- ---------------- ----------------
Call Options Written.......................... $ (1,243,511) $ (1,082,106) $ (161,405) $ --
Interest Rate Swaps** ........................ (2,565,552) -- (2,565,552) --
--------------- --------------- ----------------- --------------
TOTAL ........................................ $ (3,809,063) $ (1,082,106) $ (2,726,957) $ --
=============== =============== ================= ==============
* 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 be
transferred on the last day of the period at their current value. There were no
transfers between Levels at February 28, 2015.
Page 6 See Notes to Quarterly Portfolio of Investments
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
FEBRUARY 28, 2015 (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 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").
2. VALUATION AND INVESTMENT PRACTICES
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 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 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. (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") and other equity
securities listed on any national or foreign exchange (excluding The
NASDAQ(R) 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 at 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) for which a 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 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;
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;
Page 7
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
FEBRUARY 28, 2015 (UNAUDITED)
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 Februray 28, 2015, 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 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 security is less than the option's strike price, the option will
likely expire without being exercised. The option premium received by the Fund
will, in this case, be treated as short-term capital gain on the expiration date
of the option. The Fund may also elect to close out its position in an option
prior to its expiration by purchasing an option of the same series as the option
written (sold) by the Fund.
The options that the Fund writes (sells) give the option holder the right, but
not the obligation, to purchase a security from the Fund at the strike price on
or prior to the option's expiration date. The ability to successfully implement
the writing (selling) of covered call options depends on the ability of the
Sub-Advisor to predict pertinent market movements, which cannot be assured.
Thus, the use of options may require the Fund to sell portfolio securities at
inopportune times or for prices other than current market value, which may limit
Page 8
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
FEBRUARY 28, 2015 (UNAUDITED)
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 the Counterparty, the Fund will seek withdrawal of this
collateral and may incur certain costs exercising its right 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 a
change 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 February 28, 2015 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 February 28, 2015. 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:
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.
Page 9
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST ENERGY INFRASTRUCTURE FUND (FIF)
FEBRUARY 28, 2015 (UNAUDITED)
3. DERIVATIVES TRANSACTIONS
Written option activity for the Fund for the fiscal year-to-date period
(December 1, 2014 through February 28, 2015) was as follows:
NUMBER
OF
WRITTEN OPTIONS CONTRACTS PREMIUMS
----------------------------------------------------------------------------
Options outstanding at November 30, 2014... 28,408 $ 1,585,058
Options Written............................ 38,709 2,151,030
Options Expired............................ (18,449) (1,079,986)
Options Exercised.......................... (12,314) (788,815)
Options Closed............................. (5,065) (246,442)
----------- -------------
Options outstanding at February 28, 2015... 31,289 $ 1,620,845
=========== =============
The average volume of interest rate swaps was $72,950,000 for the fiscal
year-to-date period (December 1, 2014 through February 28, 2015).
Page 10
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
-----------------------------------------------------
By (Signature and Title)* /s/ Mark R. Bradley
----------------------------------------
Mark R. Bradley
President and Chief Executive Officer
(principal executive officer)
Date: April 17, 2015
---------------------
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/ Mark R. Bradley
----------------------------------------
Mark R. Bradley
President and Chief Executive Officer
(principal executive officer)
Date: April 17, 2015
---------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas
Treasurer, Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: April 17, 2015
---------------------
*Print the name and title of each signing officer under his or her signature.