Investment Objective, Policies, Risks and Effects of Leverage (Continued)
First Trust MLP and
Energy Income Fund (FEI)
October 31, 2022
(Unaudited)
Fundamental Investment
Policies
The Fund, as a
fundamental policy, may not:
1) Issue senior securities, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”), other than (i) preferred shares which immediately after issuance will have
asset coverage of at least 200%, (ii) indebtedness which immediately after issuance will have asset coverage of at least 300%, or (iii) the borrowings permitted by investment restriction (2) set forth below;
2) Borrow money, except as permitted by the 1940 Act, as amended, the rules thereunder and interpretations thereof or pursuant to a Securities and Exchange Commission exemptive order;
3) Act as underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933, as amended, in
connection with the purchase and sale of portfolio securities;
4) Purchase or sell real estate, but this shall not prevent the Fund from investing in securities of companies that deal in real estate or are engaged in the real estate business, including real
estate investment trusts, and securities secured by real estate or interests therein and the Fund may hold and sell real estate or mortgages on real estate acquired through default, liquidation, or other distributions
of an interest in real estate as a result of the Fund’s ownership of such securities;
5) Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options,
futures contracts, derivative instruments or from investing in securities or other instruments backed by physical commodities);
6) Make loans of funds or other assets, other than by entering into repurchase agreements, lending portfolio securities and through the purchase of securities in accordance with its investment
objective, policies and limitations; or
7) Concentrate (invest 25% or more of total assets) the Fund’s investments in any particular industry, except that the Fund will concentrate its assets in the following group of industries
that are part of the energy sector: transporting, processing, storing, distributing, marketing, exploring, developing, managing and producing natural gas, natural gas liquids (including propane), crude oil, refined
petroleum products, coal and electricity, and supplying products and services in support of pipelines, power transmission, petroleum and natural gas production, transportation and storage.
The Fund may incur
borrowings and/or issue series of notes or other senior securities in an amount up to 33-1/3% (or such other percentage to the extent permitted by the 1940 Act) of its total assets (including the amount borrowed) less
all liabilities other than borrowings.
Principal Risks
The Fund is a closed-end
management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all
investments, there can be no assurance that the Fund will achieve its investment objective.
The following discussion
summarizes the principal risks associated with investing in the Fund, which includes the risk that you could lose some or all of your investment in the Fund. The Fund is subject to the informational requirements of
the Securities Exchange Act of 1934 and the Investment Company Act of 1940 and, in accordance therewith, files reports, proxy statements and other information that is available for review. The order of the below risk
factors does not indicate the significance of any particular risk factor.
Covered Call Options
Risk. As the writer (seller) of a call option, the Fund forgoes, during the life of the option, the opportunity to profit from increases in the market value of the portfolio security covering the
option above the sum of the premium and the strike price of the call option but retains the risk of loss should the price of the underlying security decline. The value of call options written by the Fund, which are
priced daily, are determined by trading activity in the broad options market and will be affected by, among other factors, changes in the value of the underlying security in relation to the strike price, changes in
dividend rates of the underlying security, changes in interest rates, changes in actual or perceived volatility of the stock market and the underlying security, and the time remaining until the expiration date. The
value of call options written by the Fund may be adversely affected if the market for the option is reduced or becomes illiquid. There can be no assurance that a liquid market will exist when the Fund seeks to close
out an option position.
Cyber Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause the
Fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
Item 7. Disclosure of Proxy Voting
Policies and Procedures for Closed-End Management Investment Companies.
Proxy Voting Policies and Procedures
EIP Investment Trust
Proxy Voting Policies and Procedures
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. |
I. 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.
To the extent that an issuer files additional proxy information
sufficiently in advance of the submission deadline for votes, EIP shall consider such information prior to exercising its voting authority.
EIP notes that it shall not override the votes that are prepopulated by ISS in accordance with its policies unless there is information
in the additional proxy information that in the opinion of EIP that would require a change in vote and such ISS recommendation is not
in the best interest of the client.
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.
II. 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.
III. 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. Finally, EIP will disclose in its ADV Part 2A, (1)the extent to which automated voting is used and (2) the how
these policies and procedures address the use of automated voting in the cases where it becomes aware before the submission deadline for
proxies to be voted at the shareholder meeting that an issuer intends to file or has filed additional soliciting materials with the SEC
regarding the matter to be voted on.
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.
IV. Proxy Materials
EIP personnel will instruct custodians to forward to ISS
all proxy materials received on securities held in EIP client accounts.
V. 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. |
VI. 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.
VII. 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.
Updated December 2020
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 January 5, 2023.
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 includes 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 $5.2 billion of assets as of October 31, 2022. 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, 2022.
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: |
7 |
3,665,000,000 |
0 |
$0 |
| |
Other Pooled Investment Vehicles: |
2 |
163,000,000 |
2 |
163,000,000 |
| |
Other Accounts: |
139 |
805,000,000 |
0 |
$0 |
| |
|
|
|
|
|
| 2. Eva Pao |
Registered Investment Companies: |
7 |
3,665,000,000 |
0 |
$0 |
| |
Other Pooled Investment Vehicles: |
2 |
163,000,000 |
2 |
163,000,000 |
| |
Other Accounts: |
139 |
805,000,000 |
0 |
$0 |
| |
|
|
|
|
|
| 3. John Tysseland |
Registered Investment Companies: |
7 |
3,665,000,000 |
0 |
$0 |
| |
Other Pooled Investment Vehicles: |
2 |
163,000,000 |
2 |
163,000,000 |
| |
Other Accounts: |
147 |
805,000,000 |
0 |
$0 |
* Information excludes the registrant
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, 2022.
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, 2022.
| Name
|
Dollar
Range of Fund Shares
Beneficially Owned |
| James J. Murchie |
None |
| Eva Pao |
None |
| John Tysseland |
None |
(b) Not
applicable.
Item 9. Purchases of Equity Securities
by Closed-End Management Investment Company and Affiliated Purchasers.
The Fund’s share repurchase program ended
on March 15, 2021.
Item 10. Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures
by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after
the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required
by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.