W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
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. § 3507.
Item 7. Disclosure of Proxy
Voting Policies and Procedures for Closed-End Management Investment Companies.
If an adviser exercises voting authority with
respect to client securities, Advisers Act Rule 206(4)-6 requires the adviser to adopt and implement written policies and procedures
reasonably designed to ensure that client securities are voted in the best interest of the client. This is consistent with legal
interpretations which hold that an adviser’s fiduciary duty includes handling the voting of proxies on securities held in
client accounts over which the adviser exercises voting discretion in a manner consistent with the best interest of the client.
Absent unusual circumstances, EIP exercises
voting authority with respect to securities held in client accounts pursuant to provisions in its advisory agreements. Accordingly,
EIP has adopted these policies and procedures with the aim of meeting the following requirements of Rule 206(4)-6:
• ensuring that proxies
are voted in the best interest of clients;
• addressing material conflicts
that may arise between EIP’s interests and those of its clients in the voting of proxies;
• disclosing to clients
how they may obtain information on how EIP voted proxies with respect to the client’s securities;
• describing to clients EIP’s
proxy voting policies and procedures and, upon request, furnishing a copy of the policies and procedures to the requesting client.
Engagement of Institutional Shareholder
Services Inc.
With the aim of ensuring that proxies are voted
in the best interests of EIP clients, EIP has engaged Institutional Shareholder Services Inc. (“ISS”) as its independent
proxy voting service to provide EIP with proxy voting recommendations, as well as to handle the administrative mechanics of proxy
voting. EIP, after reviewing ISS’s own Proxy Voting Guidelines, has concluded that ISS’s Proxy Voting Guidelines are
reasonably designed to vote proxies in the best interests of EIP’s clients, and has therefore directed ISS to utilize its
Proxy Voting Guidelines in making recommendations to vote, as those guidelines may be amended from time to time.
Notwithstanding anything herein to the contrary,
from time to time EIP may determine that voting in contravention to a recommendation made by ISS may be in the best interest of
EIP’s clients. When EIP chooses to override an ISS voting recommendation, EIP will document the occurrence, including the
reason(s) that it chose to do so. Documentation of any override of an ISS voting recommendation shall be reviewed at the next scheduled
Brokerage Committee meeting.
In certain circumstances, voting situations
may arise in which the optimal voting decision may not be easily captured by a rigid set of voting guidelines. This is particularly
the case for significant corporate events, including, but not necessarily limited to, mergers and acquisitions, dissolutions, conversions
and consolidations. While each such transaction is unique in its terms, conditions and potential economic outcome, EIP will conduct
such additional analysis as it deems necessary to form the voting decision that it believes is in the best interests of its clients.
All records relating to such analyses will be maintained and reviewed periodically by the Chief Compliance Officer (“CCO”)
or her designee.
On an annual basis, EIP’s Brokerage Committee
shall be responsible for approving the ongoing use of ISS as a proxy voting service provider. Such approval shall be based upon,
among other things, a reviews of (1) ISS’s Proxy Voting Guidelines, including any changes thereto; (2) the results of internal
testing regarding ISS’s adherence to its proxy voting guidelines; (3) periodic due diligence over ISS as described further
below; and (4) any potential factual errors, potential incompleteness, or potential methodological weaknesses in ISS’s analysis
that were identified and documented throughout the preceding twelve month period.
Conflicts of Interest in Proxy Voting
There may be instances where EIP’s interests
conflict, or appear to conflict, with client interests in the voting of proxies. For example, EIP may provide services to, or have
an investor who is a senior member of, a company whose management is soliciting proxies. There may be a concern that EIP would
vote in favor of management because of its relationship with the company or a senior officer. Or, for example, EIP (or its senior
executive officers) may have business or personal relationships with corporate directors or candidates for directorship.
EIP addresses these conflicts or appearances
of conflicts by ensuring that proxies are voted in accordance with the recommendations made by ISS, an independent third-party
proxy voting service. As previously noted, in most cases, proxies will be voted in accordance with ISS’s own pre-existing
proxy voting guidelines, subject to EIP’s right to override an ISS voting recommendation. Under no circumstances will EIP
override an ISS recommendation in any instance in which EIP identifies a potential conflict of interest.
Disclosure on How Proxies Were Voted
EIP will disclose to clients in Part 2A of
its Form ADV how clients can obtain information on how their proxies were voted, by contacting EIP at its office in Westport, CT.
EIP will also disclose in the ADV a summary of these proxy voting policies and procedures and that upon request, clients will be
furnished a full copy of these policies and procedures.
It is the responsibility of the CCO to ensure
that any requests made by clients for proxy voting information are responded to in a timely fashion and that a record of requests
and responses are maintained in EIP’s books and records.
Proxy Materials
EIP personnel will instruct custodians to forward
to ISS all proxy materials received on securities held in EIP client accounts.
Limitations
In certain circumstances, where EIP has determined
that it is consistent with the client’s best interest, EIP will not take steps to ensure that proxies are voted on securities
in the client’s account. The following are circumstances where this may occur:
• Limited Value: Proxies
will not be required to be voted on securities in a client’s account if the value of the client’s economic interest
in the securities is indeterminable or insignificant (less than $1,000). Proxies will also not be required to be voted for any
securities that are no longer held by the client’s account.
• Securities Lending Program:
When securities are out on loan, they are transferred into the borrower’s name and are voted by the borrower, in its discretion.
In most cases, EIP will not take steps to see that loaned securities are voted. However, where EIP determines that a proxy vote,
or other shareholder action, is materially important to the client’s account, EIP will make a good faith effort to recall
the security for purposes of voting, understanding that in certain cases, the attempt to recall the security may not be effective
in time for voting deadlines to be met.
• Unjustifiable Costs: In certain
circumstances, after doing a cost-benefit analysis, EIP may choose not to vote where the cost of voting a client’s proxy
would exceed any anticipated benefits to the client of the proxy proposal.
Oversight of Policy
The CCO will follow the following procedures
with respect to the oversight of ISS in making recommendation with respect to and voting client proxies:
• Periodically, but no less
frequently than semi-annually, sample proxy votes to review whether they complied with EIP’s proxy voting policies and procedures,
including a review of those items that relate to certain proposals that may require more analysis (e.g., non-routine matters).
• Collect information, no less
frequently than annually, reasonably sufficient to support the conclusion that ISS has the capacity and competency to adequately
analyze proxy issues. In this regard, the CCO shall consider, among other things: • the adequacy and quality of ISS’s
staffing and personnel;
• the robustness of its policies
and procedures regarding its ability to (i) ensure that its proxy voting recommendations are based on current and accurate information
and (ii) identify, disclose and address any conflicts of interest;
• ISS’s engagement
with issuers, including ISS’s process for ensuring that it has complete and accurate information about each issuer and each
particular matter, and ISS’s process, if any, for EIP to access the issuer’s views about ISS’s voting recommendations
in a timely and efficient manner;
• ISS’s efforts to
correct any identified material deficiencies in its analysis;
• ISS’s disclosure
to EIP regarding the sources of information and methodologies used in formulating voting recommendations or executing voting instructions;
• ISS’s consideration
of factors unique to a specific issuer or proposal when evaluating a matter subject to a shareholder vote; and
• any other considerations that
the CCO believes would be appropriate in considering the nature and quality of the services provided by ISS.
For purposes of these procedures, the CCO may
rely upon information posted by ISS on its website, provided that ISS represents that the information is complete and current.
If a circumstance occurs in which EIP becomes
aware of potential factual errors, potential incompleteness, or potential methodological weaknesses in ISS’s analysis that
may materially affect the voting recommendation provided by ISS, EIP shall investigate the issue in a timely manner and shall request
additional information from ISS as is necessary to identify and resolve the identified discrepancy. EIP shall document the results
of each such investigation and present the results to the Brokerage Committee at its next scheduled meeting.
Recordkeeping on Proxies
It is the responsibility of EIP’s CCO
to ensure that the following proxy voting records are maintained:
• a copy of EIP’s
proxy voting policies and procedures;
• a copy of all proxy statements
received on securities in client accounts (EIP may rely on ISS or the SEC’s EDGAR system to satisfy this requirement);
• a record of each vote
cast on behalf of a client (EIP relies on ISS to satisfy this requirement);
• a copy of any document
prepared by EIP that was material to making a voting decision or that memorializes the basis for that decision;
• a copy of each written
client request for information on how proxies were voted on the client’s behalf or for a copy of EIP’s proxy voting
policies and procedures, and
• a copy of any written response
to any client request for information on how proxies were voted on their behalf or furnishing a copy of EIP’s proxy voting
policies and procedures.
The CCO will see that these books and records
are made and maintained in accordance with the requirements and time periods provided in Rule 204-2 of the Advisers Act.
For any registered investment companies advised
by EIP, votes made on its behalf will be stored electronically or otherwise recorded so that they are available for preparation
of the Form N-PX, Annual Report of Proxy Voting Record of Registered Management Investment Company.
The ISS
Guidelines referenced in the policy outlined above are attached herewith.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a)(1) Identification of Portfolio Managers or Management
Team Members and Description of Role of Portfolio Managers or Management Team Members
Information provided as of October
31, 2020.
Energy Income Partners, LLC
Energy Income Partners, LLC (“EIP”), located
in Westport, CT, was founded in 2003 to provide professional asset management services in publicly traded energy-related infrastructure
companies with above average dividend payout ratios operating pipelines and related storage and handling facilities, electric power
transmission and distribution as well as long contracted or regulated power generation from renewables and other sources. The corporate
structure of the portfolio companies include C-corporations, partnerships and energy infrastructure real estate investment trusts.
EIP mainly focuses on investments in assets that receive steady fee-based or regulated income from their corporate and individual
customers. EIP manages or supervises approximately $3.7 billion of assets as of October 31, 2020. EIP advises two privately offered
partnerships for U.S. high net worth individuals and an open-end mutual fund. EIP also manages separately managed accounts and
provides its model portfolio to unified managed accounts. Finally, EIP serves as a sub-advisor to three closed-end management investment
companies in addition to the Fund, two actively managed exchange-traded funds, a sleeve of an actively managed exchange-traded
fund and a sleeve of a series of variable insurance trust. EIP is a registered investment advisor with the Securities and Exchange
Commission.
James J. Murchie, Co-Portfolio Manager
James J. Murchie is the Founder, Chief Executive
Officer, co-portfolio manager and a Principal of Energy Income Partners. After founding Energy Income Partners in October 2003,
Mr. Murchie and the Energy Income Partners investment team joined Pequot Capital Management Inc. (“Pequot Capital”)
in December 2004. In August 2006, Mr. Murchie and the Energy Income Partners investment team left Pequot Capital and re-established
Energy Income Partners. Prior to founding Energy Income Partners, Mr. Murchie was a Portfolio Manager at Lawhill Capital Partners,
LLC (“Lawhill Capital”), a long/short equity hedge fund investing in commodities and equities in the energy and basic
industry sectors. Before Lawhill Capital, Mr. Murchie was a Managing Director at Tiger Management, LLC, where his primary responsibility
was managing a portfolio of investments in commodities and related equities. Mr. Murchie was also a Principal at Sanford C. Bernstein.
He began his career at British Petroleum, PLC. Mr. Murchie holds a BA from Rice University and an MA from Harvard University.
Eva Pao, Co-Portfolio Manager
Eva Pao is a Principal of Energy
Income Partners and is co-portfolio manager. She has been with EIP since inception in 2003. From 2005 to mid-2006, Ms. Pao joined
Pequot Capital Management during EIP’s affiliation with Pequot. Prior to Harvard Business School, Ms. Pao was a Manager at
Enron Corp where she managed a portfolio in Canadian oil and gas equities for Enron’s internal hedge fund that specialized
in energy-related equities and managed a natural gas trading book. Ms. Pao holds degrees from Rice University and Harvard Business
School.
John K. Tysseland, Co-Portfolio Manager
John Tysseland is a Principal and co-portfolio manager. From
2005 to 2014, he worked at Citi Research most currently serving as a Managing Director where he covered midstream energy companies
and MLPs. From 1998 to 2005, he worked at Raymond James & Associates as a Vice President who covered the oilfield service industry
and established the firm’s initial coverage of MLPs in 2001. Prior to that, he was an Equity Trader at Momentum Securities
from 1997 to 1998 and an Assistant Executive Director at Sumar Enterprises from 1996 to 1997. He graduated from The University
of Texas at Austin in 1996 with a BA in economics.
|
(a)(2)
|
Other Accounts Managed by Portfolio Managers or Management Team Member and Potential Conflicts of Interest
|
Information provided as of October
31, 2020.
Name of Portfolio Manager or
Team Member
|
Type of Accounts*
|
Total
# of Accounts
Managed**
|
Total Assets
|
# of Accounts Managed for which Advisory Fee is Based on Performance
|
Total Assets for which Advisory Fee is Based on Performance
|
|
|
|
|
|
|
1. James Murchie
|
Registered Investment Companies:
|
8
|
$2,733
|
0
|
$0
|
|
Other Pooled Investment Vehicles:
|
2
|
$114
|
2
|
$114
|
|
Other Accounts:
|
243
|
$717
|
0
|
$0
|
|
|
|
|
|
|
2. Eva Pao
|
Registered Investment Companies:
|
8
|
$2,733
|
0
|
$0
|
|
Other Pooled Investment Vehicles:
|
2
|
$114
|
2
|
$114
|
|
Other Accounts:
|
243
|
$717
|
0
|
$0
|
|
|
|
|
|
|
3. John Tysseland
|
Registered Investment Companies:
|
8
|
$2,733
|
0
|
$0
|
|
Other Pooled Investment Vehicles:
|
2
|
$114
|
2
|
$114
|
|
Other Accounts:
|
243
|
$717
|
0
|
$0
|
Portfolio Manager Potential Conflicts
of Interests
Potential conflicts of interest may
arise when a fund’s portfolio manager has day-to-day management responsibilities with respect to one or more other funds
or other accounts, as is the case for the portfolio managers of the Fund. These potential conflicts may include:
Besides the Fund, Energy Income Partners,
LLC (“EIP”) portfolio managers serves as portfolio managers to separately managed accounts
and provides its model portfolio to unified managed accounts and serve as portfolio managers to three closed-end management investment
companies other than the Fund, two actively managed exchange-traded funds (ETFs), a sleeve of an ETF, and a sleeve of a series
of a variable insurance trust.
The portfolio managers also serve as portfolio
managers two private investment funds (the “Private Funds”), both of which have a performance fee and an open end registered
mutual fund.
EIP has written policies and procedures regarding
order aggregation and allocation that seek to ensure that all accounts are treated fairly and equitably and that no account is
at a disadvantage. EIP will generally execute client transactions on an aggregated basis when EIP believes that to do so will allow
it to obtain best execution and to negotiate more favorable commission rates or avoid certain transaction costs that might have
otherwise been paid had such orders been placed independently. EIP’s ability to implement this may be limited by an account’s
custodian, directed brokerage arrangements or other constraints limiting EIP’s use of a common executing broker.
An aggregated order may be allocated on a basis
different from that specified herein provided that all clients receive fair and equitable treatment and there is a legitimate reason
for the different allocation. Reasons for deviation may include (but are not limited to): a client’s investment guidelines
and restrictions, available cash, liquidity or legal reasons, and to avoid odd-lots or in cases when an allocation would result
in a de minimis allocation to one or more clients.
Notwithstanding the above, due to differing tax ramifications
and compliance ratios, as well as dissimilar risk constraints and tolerances, accounts with similar investment mandates may trade
the same securities at differing points in time. Additionally, for the reasons noted above, certain accounts, including funds in
which EIP, its affiliates and/or employees (“EIP Funds”) have a financial interest including proprietary accounts,
may trade separately from other accounts and participate in transactions which are deemed to be inappropriate for other accounts
with similar investment mandates. Further, during periods in which EIP intends to trade the same securities across multiple accounts,
transactions for those accounts that must be traded through specific brokers and/or platforms will often be executed after those
for accounts over which EIP exercises full brokerage discretion, including the EIP Funds.
|
|
(a)(3) Compensation Structure of Portfolio Managers
or Management Team Members
Portfolio Manager Compensation
Information provided as of October 31,
2020.
The Fund’s
portfolio managers are compensated by a competitive minimum base salary and share in the profits of EIP in relation to their ownership
of EIP. The profits of EIP are influenced by the assets under management and the performance of the Funds (i.e. all Funds managed
or sub-advised by EIP) as described above. Therefore, their success is based on the growth and success for all the funds, not just
the funds that charge an incentive fee. The Fund’s portfolio managers understand that you cannot have asset growth without
the trust and confidence of investors, therefore, they do not engage in taking undue risk to generate performance.
The compensation of the EIP team members
is determined according to prevailing rates within the industry for similar positions. EIP wishes to attract, retain and reward
high quality personnel through a competitive compensation package.
(a)(4) Disclosure of Securities Ownership
Information provided as of October
31, 2020.
Name
|
Dollar Range of Fund Shares Beneficially Owned
|
James J. Murchie
|
$100,001-$500,000
|
John Tysseland
|
$10,001-$50,000
|
(b) Not
applicable.
Item 9. Purchases of Equity
Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Period
|
(a) Total Number of Shares
(or Units) Purchased
|
(b) Average Price Paid
per Share (or Unit)
|
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
|
(d) Maximum Number
(or Approximate Dollar Value)
of Shares
(or Units) that May Yet Be Purchased Under the Plans
or Programs
|
Month #1
(11/01/2019– 11/30/2019)
|
0
|
0
|
0
|
0
|
Month #2
(12/01/2019– 12/31/2019)
|
0
|
0
|
0
|
0
|
Month #3
(01/01/2020– 01/31/2020)
|
0
|
0
|
0
|
0
|
Month #4
(02/01/2020– 02/29/2020)
|
0
|
0
|
0
|
0
|
Month #5
(03/01/2020– 03/31/2020)
|
0
|
0
|
0
|
0
|
Month #6
(04/01/2020– 04/30/2020)
|
0
|
0
|
0
|
0
|
Month #7
(05/01/2020– 05/31/2020)
|
0
|
0
|
0
|
0
|
Month #8
(06/01/2020– 06/30/2020)
|
0
|
0
|
0
|
0
|
Month #9
(07/01/2020– 07/31/2020)
|
0
|
0
|
0
|
0
|
Month #10
(08/01/2020– 08/31/2020)
|
0
|
0
|
0
|
0
|
Month #11
(09/01/2020– 09/30/2020)
|
0
|
0
|
0
|
1,285,769
|
Month #12
(10/01/2020– 10/31/2020)
|
91,867
|
$3.92
|
91,867
|
1,193,902
|
Total
|
91,867
|
$3.92
|
91,867
|
1,193,902
|
Item 10. Submission of Matters to a Vote of Security Holders
On October 19, 2020, after a thorough
review, and consistent with the interests of the Fund, the Board of Trustees adopted Amended and Restated By-Laws, dated October
19, 2020 (the “Amended and Restated By-Laws”).
Among other changes, the Amended and
Restated By-Laws contain new timelines for advance notice of nominees for Trustee to be brought before a meeting of shareholders.
Further, the Amended and Restated By-Laws require compliance with certain procedural and informational requirements in connection
with the advance notice of nominations, including a requirement to provide certain information about the nominee, and if requested,
requires a nominee to sit for an interview with the Board to determine whether the nominee has the ability to critically review,
evaluate, question and discuss information provided to the Board, and interact effectively with the other Trustees and management
of the Fund, among other parties. Additionally, the Amended and Restated By-Laws include qualifications and eligibility requirements
for Trustees. Any shareholder considering making a nomination should carefully review and comply with those provisions of the Amended
and Restated By-Laws.
This discussion is only a high-level
summary of certain aspects of the Amended and Restated By-Laws, and is qualified in its entirety by reference to the Amended and
Restated By-Laws. Shareholders should refer to the Amended and Restated By-Laws for more information. A copy of the Amended and
Restated By-Laws can be found in the Current Report on Form 8-K filed by the Fund with the Securities and Exchange Commission on
October 20, 2020, which is available at www.sec.gov, and may also be obtained by writing to the Secretary of the Fund at the Fund’s
principal executive office.