UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
| | |
Investment Company Act file number | | 811-22958 |
Duff & Phelps Select Energy MLP Fund Inc. (Exact name of registrant as specified in charter) 100 Pearl Street, 9th Floor Hartford, CT 06103 (Address of principal executive offices) (Zip code) William Renahan, Esq. Virtus Investment Partners, Inc. 100 Pearl Street Hartford, CT 06103 (Name and address of agent for service) |
Registrant’s telephone number, including area code: 866-270-7598
Date of fiscal year end: November 30
Date of reporting period: November 30, 2015
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 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
ANNUAL REPORT
Duff & Phelps Select Energy MLP Fund Inc.
| | |
Not FDIC Insured No Bank Guarantee May Lose Value | | November 30, 2015 |
MESSAGE TO SHAREHOLDERS
Dear Duff & Phelps Select Energy MLP Fund Inc. Shareholder:
| | |
 | | Enclosed is the annual report for the Duff & Phelps Select Energy MLP Fund Inc. for the period from December 1, 2014 through November 30, 2015. The report includes commentary from the portfolio management team at Duff & Phelps Investment Management, with insights on the Fund’s performance during a prolonged period of volatility for energy-related securities, including master limited partnerships (MLPs). In the period, the Fund’s net asset value (NAV) decreased 50.79%, including $1.575 in reinvested distributions. For the same period, the average NAV of the constituents of the Lipper Energy MLP Closed End Fund category declined 41.74%, including reinvested dividends. |
With the ongoing weakness in oil and natural gas prices, this period was extremely challenging for both MLPs and the energy sector more generally. The portfolio management team expects that strong headwinds will continue in the U.S. energy market for the near term, but retains a positive longer-term view of the sector and believes that the MLPs should continue to play an important role in supporting U.S. energy infrastructure growth. On behalf of the investment professionals at Duff & Phelps, we thank you for entrusting your assets to us. If you have any questions, our customer service team is available to assist you at 1-866-270-7598 or through the closed-end fund section of our website, www.virtus.com. Sincerely, 
George R. Aylward President and Director Duff & Phelps Select Energy MLP Fund Inc. December 2015 This information does not represent an offer, or the solicitation of an offer, to buy or sell securities of the Fund. Performance data quoted represents past results. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above. |
1
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
MANAGER’S DISCUSSION OF FUND PERFORMANCE
NOVEMBER 30, 2015
(Unaudited)
About the Fund:
The Duff & Phelps Select Energy MLP Fund Inc. (NYSE: DSE) (the “Fund”) or “DSE” invests at least 80% of its Managed Assets in energy master limited partnerships (“MLPs”). The Fund’s “Managed Assets” are equal to its net assets plus any borrowings made for the purpose of leverage. The Fund may invest up to 20% of its Managed Assets in securities of issuers either: (i) in the energy sector and that are not MLPs or (ii) that produce products that are primarily for the use of companies in the energy sector (such as sand miners, certain chemical companies, and coking coal processors). The Fund’s investment objective is high level of total return resulting from a combination of current tax-deferred distributions and capital appreciation. There is no guarantee that the Fund will achieve its objective.
The use of leverage enables the Fund to borrow at short-term rates and invest at higher yields on its investments. As of November 30, 2015, the Fund’s leverage consisted of $94.5 million of debt, which represented approximately 33% of the Fund’s total assets.
Portfolio Review – Duff & Phelps Investment Management Co. (“DPIM”)
The Duff & Phelps Select Energy MLP Fund Inc. is subadvised by Duff & Phelps Investment Management Co., and managed by a team of two dedicated MLP investment professionals with average industry experience of more than 18 years: David D. Grumhaus, Jr., Senior Portfolio Manager, and Charles Georgas, CFA, Portfolio Manager. The following commentary discusses Fund’s performance from DPIM’s management of the Fund from December 1, 2014 through November 30, 2015.
How did the equity markets and MLPS perform during the Fund’s fiscal year?
While the S&P 500® Index managed to post a 2.7% gain for the 12 months ended
November 30, 2015, it was a very different story for master limited partnerships (MLPs). The MLP sector (as measured by the Alerian MLP Index) fell 34.0% on a total return basis for the fiscal year; the sector continued its steep fall in December and is now down 36.4% since the end of November 2014. MLPs were down in all four quarters, with much of the weakness driven by falling commodity prices. Additionally, as the sector continued to touch new lows near the end of 2015, we saw significant technical selling as investors looked to reduce their exposure.
Oil remained the headline driver of the negative performance. Crude oil prices closed fiscal 2014 sharply lower at $66.15 a barrel following the disastrous late November OPEC meeting. Oil rallied on the first day of the fiscal year, but never got back to those levels again. Oil prices fell to just above $42 in March, and while they did climb back above $60 in June, the market gave those gains all back and more in the second half, falling to a new cycle low of $34.17 on December 18, 2015. The big story continued to be an oversupplied market and higher global oil inventories. On the positive side, we have seen a significant U.S. production response driven by large capital expenditure cuts and a rig count that has fallen more than 60% from its peak. Additionally, global oil demand has been robust and is projected to have risen 1.8 million barrels per day (MMbd) in 2015. Nevertheless, even with lower U.S production and higher demand, the world market remains oversupplied as OPEC continues to push up production to gain market share and other countries manage to keep their production flat. The specter of Iran returning to production in early 2016 following the lifting of sanctions post the nuclear deal also continues to cast a pall over the sector.
Weak natural gas prices have also hurt the sector. Natural gas closed at $4.09 per million British thermal units (MMBtu) at the end of November 2014, and then quickly traded below $3. It spent most of 2015
2
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
MANAGER’S DISCUSSION OF FUND PERFORMANCE (Continued)
NOVEMBER 30, 2015
(Unaudited)
hovering between $2.50/MMBtu and $3.00/MMbtu before falling again later in the year as fears about a warm El Nino winter appeared to be coming to fruition. Gas closed at $1.76/MMBtu on December 17, 2015. Weak gas prices have primarily been driven by oversupply in the U.S. caused by continued production increases from the Marcellus and Utica shale basins, as well as higher associated gas coming from oil production.
Most MLPs with their fixed-fee, long-term contracts have typically not shown a high correlation to either oil or natural gas. Nevertheless, this year has proved to be different as the magnitude of the commodity drop has weighed heavily on the sector. Fundamentally, we have not seen a material drop in earnings. However, after a very strong five-year run for the sector, capital has seemingly been quick to exit. The selling has been especially pronounced into year-end, driven in part, we believe, by heavy tax-loss selling. As investors have pulled out of the sector, access for MLPs to both the equity and credit markets has been severely constrained. To illustrate, equity raised fell from $31.3 billion in the first half of calendar 2015 to $4.6 billion in the second half. With their high distribution payouts, MLPs are reliant on the capital markets to fund their growth, and thus with the equity markets mostly shut down, companies are being forced to re-evaluate their distribution strategies and explore alternative funding sources. The extreme decision by Kinder Morgan, Inc. (KMI) to cut its dividend in early December by 75% was the most prominent example of this re-evaluation. Admittedly, the move was a shock as just six weeks earlier, on its third-quarter earnings call, Kinder Morgan’s management had announced that they were lowering their distribution growth guidance for 2016 from a 10% increase to only a 6%-10% increase. Nevertheless, it is important to note that the combination of the company’s status as a pure C-corporation and not an MLP, its high leverage, and its
significant management ownership make it very different than most MLPs. In the end, there can be no question that the MLP model has been wounded, but we are firm believers that high quality MLPs will continue to thrive in the long run.
What affected the Fund’s performance during the period?
On a stock-price basis, the Fund fell 42.7% for the six-month period and 47.2% for the year. However, the Fund was able to maintain a fairly narrow discount to net asset value (“NAV”), and DSE’s stock price closed the year at a 2.4% discount to NAV.
On a NAV basis, the Fund returned -44.7% for the six-month period and -50.8% for the year. Leverage continued to have a significant negative effect on the Fund’s NAV, although it also continued to positively support the Fund’s distribution rate. The Fund paid down more than half its gross leverage during the year as we looked to maintain our 30% target, but the overall leverage still had a big impact on NAV returns.
The overall market cap and sub-sector makeup of the portfolio did not change materially over the past six months or even over the course of the year. Our allocation to the petroleum transportation and storage group increased as we added a couple of names, while our allocation to diversified MLPs fell largely as a result of significantly reducing our position in Kinder Morgan by selling 810,001 net shares at an average price of $36.79 over the year. Our allocation to upstream MLP names decreased from 6% to 1% through a combination of falling valuations and exiting a number of positions. At this point, the future of the upstream MLP sub-sector is in doubt as most upstream MLPs have either significantly cut or suspended their distributions and a number of them are facing significant leverage issues.
The biggest laggards in the portfolio were large-cap, midstream pipeline companies. Certainly, some of this result was driven by the fact that these represented our
3
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
MANAGER’S DISCUSSION OF FUND PERFORMANCE (Continued)
NOVEMBER 30, 2015
(Unaudited)
largest positions. Nevertheless, these companies also performed very poorly. During past downturns, large-cap, midstream names usually outperformed the sector with investors taking refuge in what are commonly viewed as safer, better contracted, and more liquid MLPs. Over the past year, however, these names have not traded that way. Their liquidity worked against them as investors turned to these companies when they needed to generate cash quickly to delever or reduce exposure; they are also the names most easily shorted by hedge funds.
Mergers and acquisitions have also had a negative effect on both the energy sector and our portfolio. The market has punished acquirers, and the two large deals between MPLX LP (MPLX) and Markwest Energy (MWE) and Energy Transfer Equity (ETE) and Williams Energy (WMB) were particularly impactful. Strategically, both these deals have merit, and both of the new combined companies will enjoy extremely advantaged positons in their respective markets. Nevertheless, all of the stocks involved were very beaten up.
In July, Markwest agreed to be acquired by MPLX, but the deal was rejected by holders of both stocks. Markwest holders felt that the company, which had long been viewed as a strong takeout candidate given its franchise position in the Marcellus shale and its lack of incentive distribution rights (IDRs), did not properly auction the company and get the best deal; MPLX shareholders felt the deal went against the strategic plan the company had laid out and that acquiring a company that was multiple times bigger than itself would inevitably impact the company’s growth rate; additionally, they believed the deal was far more beneficial to MPLX’s parent, Marathon Petroleum (MPC) than to MPLX. From the time the deal was announced to its closing on December 1, MWE’s stock fell 36.8%.
In the case of ETE and Williams, ETE publically announced its desire to acquire Williams in June. Williams promptly announced that it would pursue strategic options, but at the conclusion of the process, ETE ended up offering the highest bid, and on September 28, Williams agreed to be acquired by ETE. While the deal will not close until later in 2016, ETE’s stock price was down 58.9% (from June 19 through December 31) since it first came public with its offer for Williams, while Williams’ stock fell 44.9%. One of the biggest issues with the deal is that it has severely impacted the larger ETE family. From June 19 until December 31, Energy Transfer Partners fell 36.1%, Williams Partners fell 45.3%, and Sunoco Logistics (also owned by ETE) fell 30.7%. Some of this performance is simply due to sector weakness. However, the merger has also caused many investors to sell companies in the ETE family because they either have specific restrictions about family ownership or are simply worried about having too much exposure to one MLP family.
What is your outlook for the sector?
We still believe that patient investors will be rewarded. 2016 will continue to be a roller coaster ride.
Growth will likely slow, especially as the sector moves beyond the completion of projects in 2016 and 2017. However, we still expect there to be demand for new projects. 2008 was a very different time in the world, but it may offer a blueprint of where we are headed. MLPs fell 37% in 2008, and, amid fears about the capital markets and distribution cuts, distribution growth slowed from 10.1% in 2008 to just 3% in 2009. By the end of 2009, however, MLPs were up 75% and just beginning a long run up. Distribution growth also bounced back in 2010, up 6.1%. In the end, as we saw after 2008, MLPs remain a critical funding vehicle for U.S. energy producers. We believe the combination of their
4
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
MANAGER’S DISCUSSION OF FUND PERFORMANCE (Continued)
NOVEMBER 30, 2015
(Unaudited)
advantaged tax status and the attractive yields they offer are not going away anytime soon, and we believe investors will eventually find their way back to them.
There can be no assurance that the Fund will achieve its investment objectives.
An investment in the shares of the Fund is subject to the risk of loss of principal; shares may decrease in value.
A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund.
The Fund’s portfolio holdings are subject to change and may not be representative of the portfolio managers’ current or future investments. The mention of individual securities held by the Fund is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional.
Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.
MLPs: Investments in Master Limited Partnerships may be adversely impacted by tax law changes, regulation, or factors affecting underlying assets. The Fund has elected to be treated as a “C” corporation, for United States federal and state income tax purposes. Accordingly, the Fund may pay federal and applicable state corporate taxes.
Leverage: When a fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded.
Energy Sector Concentration: The fund’s investments are concentrated in the energy sector and may present more risks than if the fund were broadly diversified over numerous sectors of the economy.
Market Price/NAV: Shares of closed-end funds often trade at a discount to their net asset value, which may increase investors’ risk of loss. At the time of sale, an investor’s shares may have a market price that is above or below the fund’s NAV.
5
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOVEMBER 30, 2015
(Unaudited)
The following tables present the portfolio holdings within certain
sectors or countries as a percentage of total investments as of November 30, 2015.
| | | | |
| |
| Asset Allocation | |
| | |
| Energy | | | 94 | % |
Utilities | | | 5 | |
Other (includes short-term investments) | | | 1 | |
| | | | | |
Total | | | 100 | % |
| | | | | |
| | | | |
| |
| Country Weightings | |
| | |
United States (includes short-term investments) | | | 91 | % |
Marshall Islands | | | 9 | |
| | | | | |
Total | | | 100 | % |
| | | | | |
| | | | |
| |
| Sector Weightings | |
| | |
Traditional Midstream | | | 81 | % |
Downstream/Other | | | 9 | |
Marine/Shipping | | | 9 | |
Upstream | | | 1 | |
| | | | | |
| | | | 100 | % |
| | | | | |
6
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOVEMBER 30, 2015
(Unaudited)
KEY INVESTMENT TERMS
Alerian MLP Index
The Alerian MLP Index is the leading gauge of large- and mid-cap energy Master Limited Partnerships (MLPs). The float-adjusted, capitalization-weighted index, which includes 50 prominent companies and captures approximately 75% of available market capitalization, is disseminated real-time on a price-return basis (AMZ) and on a total-return basis. The index is unmanaged, its returns do not reflect any fees, tax assets or liabilities, expenses, or sales charges, and it is not available for direct investment.
Lipper Energy MLP Closed-End Fund Average
The Lipper Energy MLP Closed-End Fund Average is the average performance at market of all funds within the Lipper fund classification of Energy MLP closed-end funds, which invest primarily in Master Limited Partnerships (MLPs) engaged in the transportation, storage, and processing of minerals and natural resources. Returns include the reinvestment of all distributions, including returns of capital, if any, calculated among the funds. Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments.
Master Limited Partnerships (MLPs)
Entities commonly referred to as “MLPs” are generally organized under state law as limited partnerships or limited liability companies. The securities issued by many MLPs are listed and traded on a securities exchange. An MLP typically issues general partner and limited partner interests, or managing member and member interests. The general partner or managing member manages and often controls, has an ownership stake in, and is normally eligible to receive incentive distribution payments from, the MLP. If publicly traded, MLPs must derive at least 90% of their gross income from qualifying sources as described in the Internal Revenue Code in order to be treated as partnerships for United States federal income tax purposes.
Organization of the Petroleum Exporting Countries (OPEC)
The Organization of the Petroleum Exporting Countries was originally organized in September 1960 with 5 member countries and there are currently 12 member countries. The organization’s objective is to co-ordinate and unify petroleum policies among member countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.
S&P 500® Index
The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it is not available for direct investment.
7
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 2015
($ reported in thousands)
| | | | | | | | |
| | | SHARES/
UNITS | | | VALUE | |
| | | | | | | | |
| | | | | | | | |
| COMMON STOCK—2.2% | |
| Diversified—2.2% | |
Kinder Morgan, Inc. | | | 184,395 | | | $ | 4,346 | |
TOTAL COMMON STOCK
(Identified Cost $6,395) | | | | 4,346 | |
| MASTER LIMITED PARTNERSHIPS AND RELATED COMPANIES—144.5% | |
| Diversified—19.3% | |
Enterprise Products Partners LP | | | 138,000 | | | | 3,504 | |
NGL Energy Partners LP | | | 250,000 | | | | 4,387 | |
ONEOK Partners LP | | | 214,291 | | | | 6,478 | |
Williams Partners LP | | | 843,914 | | | | 23,140 | |
| | | | | | | | |
| | | | | | | 37,509 | |
| | | | | | | | |
| Downstream/Other—13.4% | |
Emerge Energy Services LP | | | 95,000 | | | | 668 | |
Enviva Partners LP | | | 130,000 | | | | 1,990 | |
Northern Tier Energy LP | | | 600,476 | | | | 16,285 | |
SunCoke Energy Partners LP | | | 198,785 | | | | 1,388 | |
Sunoco LP | | | 150,000 | | | | 5,580 | |
| | | | | | | | |
| | | | | | | 25,911 | |
| | | | | | | | |
| Gathering/Processing—35.2% | |
Crestwood Equity Partners LP | | | 306,783 | | | | 5,746 | |
DCP Midstream Partners LP | | | 341,000 | | | | 8,661 | |
EnLink Midstream Partners LP | | | 916,399 | | | | 13,673 | |
MarkWest Energy Partners LP | | | 496,100 | | | | 23,813 | |
Targa Resources Partners LP | | | 451,573 | | | | 10,314 | |
Western Gas Partners LP | | | 129,000 | | | | 6,194 | |
| | | | | | | | |
| | | | | | | 68,401 | |
| | | | | | | | |
| Marine/Shipping—12.8% | |
Gaslog Partners LP | | | 436,830 | | | | 7,872 | |
Knot Offshore Partners LP | | | 271,000 | | | | 4,309 | |
Seadrill Partners LLC | | | 805,584 | | | | 6,912 | |
Teekay LNG Partners LP | | | 250,408 | | | | 5,684 | |
| | | | | | | | |
| | | | | | | 24,777 | |
| | | | | | | | |
| Natural Gas Pipelines—16.2% | |
Energy Transfer Partners LP | | | 727,235 | | | | 27,788 | |
| | | | | | | | |
| | | SHARES/
UNITS | | | VALUE | |
| | | | | | | | |
| Natural Gas Pipelines (continued) | |
Tallgrass Energy Partners LP | | | 85,000 | | | $ | 3,659 | |
| | | | | | | | |
| | | | | | | 31,447 | |
| | | | | | | | |
| | | | | | | | |
| Petroleum Transportation & Storage—39.1% | |
Enbridge Energy Partners LP | | | 1,020,000 | | | | 25,347 | |
Genesis Energy LP | | | 70,000 | | | | 2,755 | |
NuStar Energy LP | | | 430,000 | | | | 17,209 | |
Plains All American Pipeline LP | | | 518,000 | | | | 12,836 | |
Sunoco Logistics Partners LP | | | 290,000 | | | | 8,083 | |
Tesoro Logistics LP | | | 193,122 | | | | 9,646 | |
| | | | | | | | |
| | | | | | | 75,876 | |
| | | | | | | | |
| Retail Propane—7.1% | |
AmeriGas Partners LP | | | 350,000 | | | | 13,723 | |
| | | | | �� | | | |
| Upstream—1.4% | |
EV Energy Partner LP | | | 138,110 | | | | 482 | |
Memorial Production Partners LP | | | 615,000 | | | | 2,251 | |
| | | | | | | | |
| | | | | | | | 2,733 | |
| TOTAL MASTER LIMITED PARTNERSHIPS AND RELATED COMPANIES | |
| (Identified Cost $466,023) | | | | 280,377 | |
| TOTAL LONG TERM INVESTMENTS—146.7% | |
| (Identified Cost $472,418) | | | | 284,723 | |
| SHORT-TERM INVESTMENTS—1.5% | |
| Money Market Mutual Fund—1.5% | | | | |
BlackRock Liquidity Funds TempFund Portfolio – Institutional Shares (seven-day effective yield 0.010%) | | | 2,941,894 | | | | 2,942 | |
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $2,942) | | | | 2,942 | |
TOTAL INVESTMENTS—148.2%
(Identified Cost $475,360) | | | | 287,665 | (1)(2) |
Other assets and liabilities,
net—(48.2)% | | | | (93,599 | ) |
| | | | | | | | |
| NET ASSETS—100.0% | | | | | | $ | 194,066 | |
| | | | | | | | |
See Notes to Financial Statements
8
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
SCHEDULE OF INVESTMENTS (Continued)
NOVEMBER 30, 2015
($ reported in thousands)
FOOTNOTE LEGEND:
| (1) | Income Tax Information: For tax information at November 30, 2015, see Note 5 Federal Income Tax Information in the Notes to Financial Statements. |
| (2) | All or a portion of the portfolio is segregated as collateral for borrowings. |
The following table provides a summary of inputs used to value the Fund’s investments as of November 30, 2015 (see Security Valuation Note 2A in the Notes to Financial Statements):
| | | | | | | | |
| | | Total Value at
November 30,
2015 | | | Level 1
Quoted Prices | |
Equity Securities: | | | | | | | | |
Common Stocks | | $ | 4,346 | | | $ | 4,346 | |
Master Limited Partnerships and Related Companies | | | 280,377 | | | | 280,377 | |
Short-Term Investments | | | 2,942 | | | | 2,942 | |
| | | | | | | | |
Total Investments | | $ | 287,665 | | | $ | 287,665 | |
| | | | | | | | |
There were no Level 2 (significant observable inputs) or Level 3 (significant unobservable inputs) priced securities.
There were no transfers between Level 1 and Level 2 related to securities held at November 30, 2015.
See Notes to Financial Statements
9
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2015
(Reported in thousands except shares and per share amounts)
| | | | |
| Assets | | | | |
Investment in securities at value (Identified cost $475,360) | | $ | 287,665 | |
| Receivables | | | | |
Investment securities sold | | | 1,395 | |
Dividends | | | 119 | |
Deferred tax asset, net (Note 5) | | | — | |
Prepaid director retainer | | | 9 | |
Prepaid expenses | | | 32 | |
| | | | |
Total assets | | | 289,220 | |
| | | | |
| Liabilities | | | | |
| Payables | | | | |
Borrowings (Note 8) | | | 94,500 | |
Investment advisory fee | | | 256 | |
Administration and accounting fees | | | 96 | |
Professional fee | | | 184 | |
Directors’ fees and expenses | | | 33 | |
Interest payable on borrowings | | | 31 | |
Transfer agent fees and expenses | | | 2 | |
Other accrued expenses | | | 52 | |
| | | | |
Total liabilities | | | 95,154 | |
| | | | |
| Net Assets | | $ | 194,066 | |
| | | | |
| |
| Net Assets Consist of: | | | | |
Common stock ($0.001 par value 100,000,000 shares authorized) | | $ | 26 | |
Capital paid in on shares of beneficial interest | | | 445,390 | |
Accumulated undistributed net investment income (loss), net of taxes | | | (6,272 | ) |
Accumulated undistributed net realized gain (loss), net of taxes | | | (57,383 | ) |
Net unrealized appreciation (depreciation), net of taxes | | | (187,695 | ) |
| | | | |
| Net Assets | | $ | 194,066 | |
| | | | |
Net Asset Value Per Share
(Net assets/shares outstanding) Shares outstanding 25,972,391 | | $ | 7.47 | |
| | | | |
See Notes to Financial Statements
10
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 2015
($ reported in thousands)
| | | | |
| Investment Income | | | | |
Dividends and distributions | | $ | 38,594 | |
Less return of capital distributions (Note 2C) | | | (35,016 | ) |
| | | | |
Total investment income | | | 3,578 | |
| | | | |
| Expenses | | | | |
Investment advisory fees | | | 4,807 | |
Administration and accounting fees | | | 666 | |
Professional fees | | | 182 | |
Directors’ fees and expenses | | | 181 | |
Printing fees and expenses | | | 140 | |
Registration fees | | | 24 | |
Custodian fees | | | 6 | |
Transfer agent fees and expenses | | | 14 | |
Miscellaneous | | | 62 | |
| | | | |
Total expenses before interest expense | | | 6,082 | |
Interest expense | | | 1,442 | |
| | | | |
Total expenses after interest expense | | | 7,524 | |
| | | | |
Net investment income (loss) before income taxes | | | (3,946 | ) |
Current tax benefit (expense) | | | — | |
| | | | |
| Net investment income (loss) | | | (3,946 | ) |
| | | | |
| Net Realized and Unrealized Gain (Loss) on Investments | | | | |
Net realized gain (loss) on investments before income taxes | | | (72,986 | ) |
Deferred tax benefit (expense) | | | — | |
| | | | |
Net realized gain (loss) on investments | | | (72,986 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on investments before income taxes | | | (138,396 | ) |
Deferred tax benefit (expense) | | | — | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | (138,396 | ) |
| | | | |
| Net realized and unrealized gain (loss) on investments after income taxes | | | (211,382 | ) |
| | | | |
| Net increase (decrease) in net assets resulting from operations | | $ | (215,328 | ) |
| | | | |
See Notes to Financial Statements
11
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
($ reported in thousands)
| | | | | | | | |
| | | Year Ended
November 30, 2015 | | | From
Inception June 25, 2014
to November 30, 2014 | |
| INCREASE/(DECREASE) IN NET ASSETS | | | | | | | | |
| From Operations | | | | | | | | |
Net investment income (loss) | | $ | (3,946 | ) | | $ | (2,326 | ) |
Net realized gain (loss) | | | (72,986 | ) | | | 9,875 | |
Net change in unrealized appreciation (depreciation) | | | (138,396 | ) | | | (43,571 | ) |
| | | | | | | | |
| Increase (decrease) in net assets resulting from operations | | | (215,328 | ) | | | (36,022 | ) |
| | | | | | | | |
| From Distributions to Shareholders | | | | | | | | |
Return of capital | | | (40,791 | ) | | | (8,144 | ) |
| | | | | | | | |
| Decrease in net assets from distributions to shareholders | | | (40,791 | ) | | | (8,144 | ) |
| | | | | | | | |
| From Share Transactions | | | | | | | | |
Proceeds from initial public offering of 25,855,236 shares | | | — | | | | 493,835 | |
Offering costs | | | — | | | | (1,034 | ) |
Reinvestment of distributions resulting in the issuance of common stock (117,155 and 0 shares, respectively) | | | 1,550 | | | | — | |
| | | | | | | | |
| Increase (decrease) in net assets from share transactions | | | 1,550 | | | | 492,801 | |
| | | | | | | | |
| Net increase (decrease) in net assets | | | (254,569 | ) | | | 448,635 | |
| | |
| Net Assets | | | | | | | | |
Beginning of period | | | 448,635 | | | | — | |
| | | | | | | | |
| End of period | | $ | 194,066 | | | $ | 448,635 | |
| | �� | | | | | | |
Accumulated undistributed net investment income (loss) net of taxes at end of period | | $ | (6,272 | ) | | $ | (2,326 | ) |
See Notes to Financial Statements
12
DUFF & PHELPS SELECT ENERGY FUND INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 2015
| | | | |
| Increase (decrease) in cash | | | | |
| Cash Flows Provided by (Used for) Operating Activities: | | | | |
Net increase (decrease) in net assets resulting from operations | | $ | (215,328 | ) |
| | | | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided/(used) by operating activities: | | | | |
Proceeds from sales of long-term investments | | | 186,481 | |
(Increase) Decrease in investment securities sold receivable | | | 581 | |
Purchase of long-term investments | | | (95,432 | ) |
Increase (Decrease) in investment securities purchased payables | | | (2,444 | ) |
Net (purchases) or sales of short-term securities | | | 18,257 | |
Net change in unrealized (appreciation)/depreciation | | | 138,396 | |
Net realized gains/(loss) on investments | | | 72,986 | |
Return of capital distributions on investments | | | 35,016 | |
(Increase) Decrease in dividends receivable | | | (48 | ) |
(Increase) Decrease in prepaid expenses | | | (5 | ) |
(Increase) Decrease in prepaid directors’ retainer | | | (1 | ) |
Increase (Decrease) in interest payable on borrowings | | | 16 | |
Increase (Decrease) in investment advisory fees payable | | | (291 | ) |
Increase (Decrease) in administration and accounting fees payable | | | (25 | ) |
Increase (Decrease) in directors’ fees payable | | | 8 | |
Increase (Decrease) in other accrued expenses payable | | | 74 | |
| | | | |
Cash provided by (used for) operating activities | | | 138,241 | |
| | | | |
| Cash provided by (used for) financing activities: | | | | |
Cash payments for borrowings | | | (99,000 | ) |
Cash dividends paid to shareholders | | | (39,241 | ) |
| | | | |
Cash provided by (used for) financing activities: | | | (138,241 | ) |
| | | | |
| Net increase (decrease) in cash | | | — | |
| | | | |
| Cash: | | | | |
Cash and foreign currency at beginning of period | | | — | |
| | | | |
Cash and foreign currency at end of period | | $ | — | |
| | | | |
| Cash flow information: | | | | |
Reinvestment of dividends and distributions | | $ | 1,550 | |
Cash paid during the period for interest | | | 1,426 | |
See Notes to Financial Statements
13
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
| | | | | | | | |
| | | For the
Year Ended
November 30, 2015 | | | From Inception(1)
to November 30, 2014 | |
| PER SHARE OPERATING DATA: | | | | | | | | |
Net asset value, beginning of period | | $ | 17.35 | | | $ | 19.10 | (1)(2) |
| | | | | | | | |
| Income from investment operations: | | | | | | | | |
Net investment income/(loss)(3) | | | (0.15 | ) | | | (0.09 | ) |
Net realized and unrealized gain/(loss) | | | (8.15 | ) | | | (1.30 | ) |
| | | | | | | | |
Total from investment operations | | | (8.30 | ) | | | (1.39 | ) |
| | | | | | | | |
| Dividends and/or Distributions to Shareholders: | | | | | | | | |
Distributions from return of capital | | | (1.58 | ) | | | (0.32 | ) |
| | | | | | | | |
Total dividends and distributions to shareholders | | | (1.58 | ) | | | (0.32 | ) |
| | | | | | | | |
Offering costs charged to paid in capital | | | — | | | | (0.04 | ) |
| | | | | | | | |
Net asset value, end of period | | $ | 7.47 | | | $ | 17.35 | |
| | | | | | | | |
Market price, end of period(4) | | $ | 7.29 | | | $ | 15.80 | |
| | | | | | | | |
Total return, net asset value(5) | | | (50.79 | )% | | | (7.64 | )%(9) |
Total return, market value(6) | | | (47.24 | )% | | | (19.72 | )%(9) |
Net assets, end of period (000’s) | | $ | 194,066 | | | $ | 448,635 | |
| | |
| RATIOS/SUPPLEMENTAL DATA: | | | | | | | | |
Ratio of total expenses after interest expense to average net assets(7)(8) | | | 2.28 | % | | | 2.02 | %(10)(11) |
Ratio of net investment income/(loss) to average net assets | | | (1.20 | )% | | | (1.16 | )%(10)(11) |
Portfolio turnover rate | | | 20 | % | | | 22 | %(9) |
| | |
| Bank Borrowings: | | | | | | | | |
Loan outstanding, end of period (000’s) | | $ | 94,500 | | | $ | 193,500 | |
Asset coverage for loan outstanding, end of period | | | 305 | % | | | 332 | % |
| (1) | The Fund commenced operations on June 25, 2014, the date which its initial public offering shares were issued. |
| (2) | Initial public offering price of $20.00 per share less sales load of $0.90. |
| (3) | Calculated based on average shares outstanding. |
| (4) | Closing Price – New York Stock Exchange. |
| (5) | NAV return is calculated using the opening Net Asset Value of the Fund’s common stock on the first business day and the closing Net Asset Value of the Fund’s common stock on the last business day of each period reported. Dividends and distributions, if any, are assumed, for the purpose of this calculation, to be reinvested at prices obtained under the Fund’s Automatic Reinvestment and Cash Purchase Plan. |
| (6) | Total investment return is calculated assuming a purchase of common shares on the opening of the first day and sale on the closing of the last day of each period reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s Automatic Reinvestment and Cash Purchase Plan. Total investment return is not annualized for periods of less than one year. Brokerage commissions that a shareholder may pay are not reflected. Total return does not reflect the deduction of taxes that a shareholder may pay on fund distributions or the sale of fund shares. |
| (7) | Ratio of operating expenses to average net assets, before interest expense and before tax benefit (expense), was 1.84% for the period ended November 30, 2015, and 1.73% for the period ended November 30, 2014. |
See Notes to Financial Statements
14
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
FINANCIAL HIGHLIGHTS (Continued)
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
| (8) | Ratio of operating expenses to average net assets, before interest expense and after tax benefit (expense), was 1.84% for the period ended November 30, 2015, and 1.73% for the period ended November 30, 2014. |
| (11) | Ratio is calculated starting June 30, 2014, the date the Fund began accruing expenses. |
See Notes to Financial Statements
15
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2015
Note 1. Organization
The Fund is organized as a non-diversified, closed-end management investment company registered under the Investment Company Act of 1940 as amended (the “1940 Act”). The Fund was incorporated as a Maryland corporation on March 28, 2014. The Fund’s initial public offering was on June 25, 2014, and the Fund commenced investment operations on June 30, 2014. The Fund’s primary investment objective is to seek a high level of total return resulting from a combination of current tax-deferred distributions and capital appreciation. There can be no assurance that the Fund will achieve its investment objective.
Note 2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates, and those differences could be significant.
Security valuation procedures for the Fund, which include nightly price variance, as well as back-testing such as bi-weekly unchanged price, monthly secondary source and transaction analysis, have been approved by the Board of Directors (the “Board”, or the “Directors”). All internally fair valued securities are approved by a valuation committee (the “Valuation Committee”) approved by the Board. The Valuation Committee is comprised of certain members of management as identified to the Board and convenes independently from portfolio management. All internally fair valued securities are updated daily and reviewed in detail by the Valuation Committee monthly unless changes occur within the period. The Valuation Committee reviews the validity of the model inputs and any changes to the model. Quarterly fair valuations are reviewed by the Board.
The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The Fund’s policy is to recognize transfers between levels at the end of the reporting period.
| | • Level 1 – | quoted prices in active markets for identical securities (security types generally include listed equities). |
| | • Level 2 – | prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
| | • Level 3 – | prices determined using significant unobservable inputs (including the Valuation Committee’s own assumptions in determining the fair value of investments). |
A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:
Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded or, if no closing price is available, at the last bid price and are categorized as Level 1 in the hierarchy. Restricted equity
16
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 2015
securities and private placements that are not widely traded, are illiquid, or are internally fair valued by the Valuation Committee, are generally categorized as Level 3 in the hierarchy.
Certain non-U.S. securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that non-U.S. markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (“NAV”) (at the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets. In such cases the Fund fair values non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, Exchange-Traded Funds, and certain indexes, as well as prices for similar securities. Such fair valuations are categorized as Level 2 in the hierarchy. Because the frequency of significant events is not predictable, fair valuation of certain non-U.S. common stocks may occur on a frequent basis.
Debt securities, including restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. For most bond types, the pricing service utilizes matrix pricing that considers one or more of the following factors: yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type, and current day trade information, as well as dealer supplied prices. These valuations are generally categorized as Level 2 in the hierarchy. Structured debt instruments, such as mortgage- backed and asset-backed securities, may also incorporate collateral analysis and utilize cash flow models for valuation and are generally categorized as Level 2 in the hierarchy. Pricing services do not provide pricing for all securities and therefore indicative bids from dealers are utilized which are based on pricing models used by market makers in the security and are generally categorized as Level 2 in the hierarchy. Debt securities that are not widely traded, are illiquid, or are internally fair valued by the Valuation Committee, are generally categorized as Level 3 in the hierarchy.
Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are categorized as Level 1 in the hierarchy. Over-the-counter derivative contracts, which include forward currency contracts and equity-linked instruments, do not require material subjectivity as pricing inputs are observed from actively quoted markets and are categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at NAV. Investments in closed-end funds are valued as of the close of regular trading on the NYSE each business day. Both are categorized as Level 1 in the hierarchy.
A summary of the inputs used to value the Fund’s net assets by each major security type is disclosed at the end of the Schedule of Investments for the Fund. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
17
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 2015
| | B. | Security Transactions and Investment Income |
Security transactions are recorded on the trade date. Realized gains and losses from sales of securities are determined on the identified cost basis. Dividend income is recognized on the ex-dividend date or, in the case of certain foreign securities, as soon as the fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts using the effective interest method.
| | C. | Investment Income and Return of Capital Estimates |
The Fund invests in master limited partnerships (“MLPs”) which make distributions that are primarily attributable to return of capital. The Fund records investment income and return of capital in the Statement of Operations using management’s estimate of the percentage of income included in the distributions received from each MLP based on historical information from the MLPs and other industry sources. These estimates may be adjusted based on information received from the MLPs after the tax and fiscal year ends.
The return of capital portion of the MLP distributions is a reduction to investment income and a reduction in the cost basis of each investment which increases net realized gain (loss) and net change in unrealized appreciation (depreciation). If the return of capital distributions exceed its cost basis, the distributions are treated as realized gains. The actual amounts of income and return of capital are only determined by each MLP after its fiscal year-end and may differ from the estimated amounts. For the year (the “period”) ended November 30, 2015, the Fund estimates that 91.7% of the MLP distributions received will be treated as a return of capital.
| | D. | Federal and State Income Taxes |
Due to the fact that the Fund invests primarily in MLPs, it cannot qualify as a Regulated Investment Company under current tax laws. Thus, the Fund is treated as a regular corporation, or “C” corporation, for U.S. income tax purposes. Accordingly, the Fund generally is subject to U.S. federal income tax on its taxable income at statutory rates applicable to “C” corporations (currently at a maximum rate of 35%). The Fund may also be subject to a 20% alternative minimum tax to the extent that alternative minimum tax exceeds the Fund’s regular income tax liability. In addition, as a “C” corporation, the Fund is subject to various state income taxes by reason of its investments in MLPs (state effective rate currently estimated at 2.02%, net of federal tax benefit). As a limited partner in the MLPs, the Fund includes its distributable share of the MLP’s taxable income in computing its own taxable income.
| | E. | Income Tax Accounting Policy |
The Fund applies ASC 740 (Accounting for income taxes) in computing the income tax provision. The Fund records deferred income taxes to reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Such temporary differences are principally: (i) taxes on unrealized gains (losses), which are attributable to the temporary difference between fair market value and tax basis, and (ii) the net tax benefit of accumulated net operating losses and capital loss carryforwards. Deferred tax assets and liabilities are measured using effective tax rates expected to apply to taxable income in the years such temporary differences are realized or otherwise settled. To the extent the Fund has a deferred tax asset, consideration is given to whether or not a
18
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 2015
valuation allowance is required. The determination of whether a valuation allowance is required is based upon whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Fund considers all positive and negative factors in assessing any valuation allowance including the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods and the associated risk that operating and capital loss carryforwards may expire unused. The Fund also accrues additional tax expense relating to uncertain tax positions and includes interest and penalty on such positions as a component of tax expense.
| | F. | Distributions to Shareholders |
Distributions to shareholders are declared and paid on a quarterly basis and are recorded on the ex-dividend date. The Fund uses a cash flow-based distribution approach in amounts based on the Fund’s net cash flow received from portfolio investments, i.e. cash distributions received from the Fund’s investments in MLPs less expenses.
The estimated character of the distributions paid will either be a dividend (ordinary income eligible to be treated as qualified dividend income) or a return of capital. Distributions made from current or accumulated earnings and profits of the Fund will be taxable to shareholders as dividend income. Distributions that are in an amount greater than the Fund’s current and accumulated earnings and profits will represent a return of capital to the extent of a shareholder’s basis in their common shares, and such distributions will correspondingly increase the realized gain upon the sale of their common shares (or decrease the realized loss). Additionally, distributions not paid from current or accumulated earnings and profits that exceed a shareholder’s tax basis in their common shares will generally be taxed as a capital gain. This estimate is based on the Fund’s operating results during the period. The Fund is unable to make a final determination as to the tax character of distributions until after the end of the calendar year when the Fund can determine earnings and profits for federal income tax purposes.
The Fund will inform the shareholder of the final tax character of its distributions on Form 1099-DIV in February 2016. For the period ended November 30, 2015, we currently estimate that 100% of the distributions will be considered return of capital for federal income tax purposes.
| | G. | Foreign Currency Translation |
Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and the date it is paid is treated as a gain or loss on foreign currency. The Fund does not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
19
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 2015
Expenses incurred together by the Fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expense to each fund or an alternative allocation method can be more appropriately used.
In addition to the net annual operating expenses that the Fund bears directly, the shareholders of the Fund indirectly bear the Fund’s pro-rata expenses of any underlying mutual funds in which the Fund invests.
Note 3. Investment Advisory Fees and Related Party Transactions
($ reported in thousands)
Virtus Alternative Investment Advisers, Inc. (the “Adviser”), an indirect wholly owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the investment adviser to the Fund. The Adviser supervises the Fund’s investment program and general operations of the Fund, including the Fund’s subadviser. As compensation for its services to the Fund, the Adviser will receive a monthly fee at an annual rate of 1.00% of the Fund’s average daily Managed Assets. “Managed Assets” is defined as the value of the total assets of the Fund minus the sum of all accrued liabilities of the Fund (other than the aggregate amount of any outstanding borrowings or other indebtedness entered into for the purpose of leverage).
Duff & Phelps Investment Management Co. (“DPIM”), an indirect wholly owned subsidiary of Virtus, is the subadviser for the Fund. The subadviser is responsible for the day-to-day portfolio management of the Fund. For its services, DPIM receives an annual fee, payable monthly from the Adviser. No fee is paid to DPIM directly from the Fund.
Virtus Fund Services, LLC (“VFS”), an indirect wholly owned subsidiary of Virtus, serves as the administrator to the Fund.
For the period ended November 30, 2015, the Fund incurred administration fees totaling $481 which are included in the Statement of Operations. A portion of those fees is paid to sub-administrators that also provide services to the Fund.
For the period ended November 30, 2015, the Fund incurred Directors’ fees totaling $147 which are included in the Statement of Operations.
Note 4. Purchases and Sales of Securities
($ reported in thousands)
Purchases and sales of securities (excluding U.S. Government and agency securities, and short term investments) during the period ended November 30, 2015, were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
| | $ | 95,432 | | | $ | 186,481 | |
There were no purchases or sales of long-term U.S. Government and agency securities for the period ended November 30, 2015.
20
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 2015
Note 5. Income Tax Information
($ reported in thousands)
The Fund’s taxes include current and deferred income taxes. Current income taxes reflect the estimated income tax liability of the Fund as of the period ended November 30, 2015. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. The Fund’s tax expense or benefit is recognized on the Statement of Operations based on the component of income or gains (losses) to which such expense or benefit relates. During the year ended November 30, 2015, the Fund reevaluated its blended state income tax rate, increasing the rate from 1.71% to 2.02% due to anticipated state apportionment of income and gains.
The Fund’s income tax provision consists of the following as of November 30, 2015:
| | | | | | | | | | | | | | | | |
| | | Current tax
expense
(benefit) | | | Deferred tax
expense
(benefit) | | | Valuation
Allowance
expense
(benefit) | | | Total tax
expense
(benefit) | |
Federal tax expense (benefit) | | $ | — | | | $ | (73,749 | ) | | $ | 73,749 | | | $ | — | |
State tax expense (benefit) | | | — | | | | (6,913 | ) | | | 6,913 | | | | — | |
| | | | | | | | | | | | | | | | |
Total tax expense (benefit) | | $ | — | | | $ | (80,662 | ) | | $ | 80,662 | | | $ | — | |
| | | | | | | | | | | | | | | | |
The reconciliation between the federal statutory income tax rate of 35% and the effective tax rate on net investment income (loss) and realized and unrealized gain (loss) follows:
| | | | | | | | |
| | | Amount | | | Rate | |
Application of statutory income tax rate | | $ | 75,365 | | | | 35.00 | % |
State income taxes, net of federal benefit | | | 4,339 | | | | 2.02 | |
Return to provision and other | | | 958 | | | | 0.44 | |
Effect of valuation allowance | | | (80,662 | ) | | | (37.46 | ) |
| | | | | | | | |
Total income tax expense (benefit) | | $ | — | | | | 0.00 | % |
| | | | | | | | |
Components of the Fund’s net deferred tax asset (liability) as of November 30, 2015, are as follows:
| | | | |
| Deferred tax asset: | | | | |
Net unrealized depreciation on investments (tax basis) | | $ | 63,117 | |
Capital loss carryforward (tax basis) | | | 18,957 | |
Net operating loss carryforward (tax basis) | | | 11,810 | |
Charitable contribution carryforward | | | 3 | |
| | | | |
| Net deferred tax asset before valuation allowance | | | 93,887 | |
| | | | |
Less: Valuation allowance | | | (93,887 | ) |
| | | | |
| Net deferred tax asset (liability) | | $ | — | |
| | | | |
The Fund may rely, to some extent, on information provided by the MLPs, which may not necessarily be timely, to estimate taxable income allocable to MLP units held, and to
21
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 2015
estimate their associated deferred tax benefit/liability. Such estimates are made in good faith. From time to time, as new information becomes available, the Fund will modify its estimates or assumptions regarding its tax benefit/liability which may have a material impact on the Fund’s net asset value. Realization of the deferred tax assets and carryforwards are dependent, in part, on generating sufficient taxable income of the appropriate character prior to expiration of the loss carryforwards.
At the tax year ended November 30, 2015, the Fund has net operating loss carryforwards (“NOL”) available for federal income tax purposes of $31,907. If not utilized, the federal NOL expires in tax years 2033 through 2035. Additionally, as of November 30, 2015, the Fund has capital loss carryforwards of $51,213 which may be carried forward for 5 years. If not utilized, the capital loss will expire in tax years 2018 through 2020. The Fund has recorded a valuation allowance for $93,887 of the net deferred tax asset at November 30, 2015, as the Fund believes it is more likely than not that the asset will not be realized within the relevant carryforward period.
For all open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. All tax years since inception remain open and subject to examination by tax jurisdictions. Furthermore, management of the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
At November 30, 2015, federal tax cost and aggregate gross unrealized appreciation (depreciation) of securities held is as follows:
| | | | | | |
Federal
Tax Cost | | Unrealized
Appreciation | | Unrealized
(Depreciation) | | Net Unrealized
Appreciation
(Depreciation) |
| $458,181 | | $3,500 | | $(174,016) | | $(170,516) |
The differences between the book basis and tax basis of unrealized appreciation (depreciation) and the cost of investments is primarily attributable to MLP earnings and basis adjustments.
Note 6. Indemnifications
Under the Fund’s organizational documents, its officers and Directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Each Director has also entered into an indemnification agreement with the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide a variety of indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund and that have not occurred. However, the Fund has not had prior claims or losses pursuant to such arrangements and expects the risk of loss to be remote.
Note 7. Capital Transactions
At November 30, 2015, the Fund had one class of common stock, par value $0.001 per share, of which 100,000,000 shares are authorized and 25,972,391 shares are outstanding. Registered shareholders may elect to have all distributions paid by check mailed directly to the shareholder by Computershare as dividend paying agent. Pursuant to the Automatic Reinvestment and Cash Purchase Plan (the “Plan”), shareholders not making such election will have all such amounts automatically reinvested by Computershare, as the Plan agent,
22
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 2015
in whole or fractional shares of the Fund, as the case may be. During the period ended November 30, 2015, there were 117,155 shares issued pursuant to the Plan.
Note 8. Borrowings
($ reported in thousands)
The Fund has entered into a Credit Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Fund to borrow cash from the Bank, up to a limit of $190,000 (“Commitment Amount”). Borrowings under the Agreement are collateralized by investments of the Fund. The Agreement results in the Fund being subject to certain covenants including asset coverage and portfolio composition (among others). If the Fund fails to meet or maintain certain covenants as required under the Agreement, the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the credit agreement, necessitating the sale of securities at potentially inopportune times. Interest is charged at LIBOR (London Interbank Offered Rate) plus an additional percentage rate on the amount borrowed. Commitment fees are charged on the undrawn balance, if less than 75% of the Commitment Amount is outstanding as a loan to the Fund. Total commitment fees paid and accrued for the period ended November 30, 2015, were $62 and are included in interest expense on the Statement of Operations. Agreement has a term of 364 days and is renewable by the Fund with the Bank’s consent. The Agreement can also be converted into a 364 day fixed term facility, one time at the Fund’s option. The Bank has the ability to require repayment of outstanding borrowings under the Agreement upon certain circumstances such as an event of default. From December 1, 2014 to November 30, 2015, the average daily borrowings under the Agreement and the weighted daily average interest rate were $150,271 and 0.909%, respectively. At November 30, 2015, the amount of such outstanding borrowings was as follows:
| | |
Outstanding
Borrowings | | Interest
Rate |
| $94,500 | | 0.955% |
Note 9. Credit Risk and Asset Concentrations
The Fund may invest a high percentage of its assets in specific sectors of the market in the pursuit of its investment objective. Fluctuations in these sectors of concentration may have a greater impact on the Fund, positive or negative, than if the Fund did not concentrate its investments in such sectors.
The Fund’s investments are concentrated in the energy sector and may present more risks than if the Fund were broadly diversified over numerous sectors of the economy. A downturn in the energy sector would have a larger impact on the Fund than on an investment company that does not concentrate in the sector. The performance of the securities in the energy sector may lag the performance of other industries or the broader market as a whole.
The Fund borrows through its line of credit for the purpose of leveraging. While leverage presents opportunities for increasing the Fund’s total return, it also has the effect of potentially increasing losses. Accordingly, any event which adversely affects the value of an investment held by the Fund would be magnified to the extent the Fund is leveraged.
23
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOVEMBER 30, 2015
Note 10. Regulatory Matters and Litigation
From time to time, the Fund’s investment adviser and/or its affiliates and/or subadvisers may be involved in litigation and arbitration as well as examinations and investigations by various regulatory bodies, including the SEC, involving compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting their products and other activities. The outcomes of such matters are not likely, either individually or in the aggregate, to be material to these financial statements.
Note 11. Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there are no subsequent events requiring recognition or disclosure in these financial statements.
24
Report of Independent Registered Public
Accounting Firm
To the Board of Directors and Shareholders of
Duff & Phelps Select Energy MLP Fund Inc.:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets, and of cash flows and the financial highlights present fairly, in all material respects, the financial position of Duff & Phelps Select Energy MLP Fund Inc. (the “Fund”) at November 30, 2015, the results of its operations and its cash flows for the year then ended, and the changes in its net assets and the financial highlights for the year ended November 30, 2015 and the period June 25, 2014 (commencement of operations) through November 30, 2014, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 21, 2016
25
CERTIFICATION
The Fund’s Chief Executive Officer (“CEO”) will file the required annual CEO certification regarding compliance with the NYSE’s listing standards no more than 30 days after the Fund’s annual shareholder meeting and the Fund also has included the certifications of the Fund’s CEO and Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act in the Fund’s Form N-CSR filed with the SEC for the period of this report.
KEY INFORMATION
Duff & Phelps Select Energy MLP Fund Inc. Shareholder Relations: 1-866-270-7598
For general information and literature, as well as updates on net asset value, share price, major industry groups and other key information.
REINVESTMENT PLAN
The Reinvestment Plan (the “Plan”) offers shareholders a convenient way to acquire additional shares of the Fund. Registered holders will be automatically placed in the Plan. If shares are held at a brokerage firm, contact your broker about participation in the Plan.
REPURCHASE OF SECURITIES
Notice is hereby given in accordance with Section 23(c) of the 1940 Act that the Fund may from time to time purchase its shares of common stock in the open market when Fund shares are trading at a discount from their net asset value.
PROXY VOTING INFORMATION (FORM N-PX)
The Adviser and subadvisers vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Fund’s Board. You may obtain a description of these procedures, along with information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, free of charge, by calling toll-free 1-866-270-7598. This information is also available through the SEC’s website at http://www.sec.gov.
FORM N-Q INFORMATION
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC’s website at http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC’s Public Reference Room. Information on the operation of the SEC’s Public Reference Room can be obtained by calling toll-free 1-800-SEC-0330.
26
DIVIDEND REINVESTMENT PLAN
It is the policy of Duff & Phelps Select Energy MLP Fund Inc. (the “Fund”) to automatically reinvest distributions payable to holders (“Common Stockholders”) of the Fund’s shares of common stock, $0.001 par value (“Common Stock”). A “registered” Common Stockholder automatically becomes a participant in the Fund’s Automatic Reinvestment and Cash Purchase Plan (the “Plan”). The Plan authorizes the Fund to credit all shares of Common Stock to participants upon a distribution regardless of whether the shares are trading at a discount or premium to the net asset value. Registered Common Stockholders may terminate their participation and receive distributions in cash by contacting Computershare Trust Company, N.A. (the “Plan Administrator”). The termination will become effective with the next distribution if the Plan Administrator is notified at least 7 business days prior to the distribution payment date. Registered Common Stockholders that wish to change their distribution option from cash payment to reinvest may do so by contacting the Plan Administrator at 1-866-270-7598. In the case of banks, brokers, or other nominees which hold your shares for you as the beneficial owner, the Plan Administrator will administer the Plan based on the information provided by the bank, broker or nominee. To the extent that you wish to participate in the Plan, you should contact the broker, bank or nominee holding your shares to ensure that your account is properly represented. If necessary, you may have your shares taken out of the name of the broker, bank or nominee and register them in your own name. When a distribution is declared, nonparticipants in the Plan will receive cash. Participants in the Plan will receive shares of the Fund valued as described below.
If on the payable date of the distribution, the market price of the Fund’s Common Stock is less than the net asset value, the Plan Administrator will buy Fund shares on behalf of the participant in the open market, on the NYSE or elsewhere. The price per share will be equal to the weighted average price of all shares purchased, including commissions. Commission rates are currently $0.02 per share, although the rate is subject to change and may vary. If, following the commencement of purchases and before the Plan Administrator has completed its purchases, the trading price equals or exceeds the most recent net asset value of the Common Stock, the Plan Administrator may cease purchasing shares on the open market and the Fund may issue the remaining shares at a price equal to the greater of (a) the net asset value on the last day the Plan Administrator purchased shares or (b) 95% of the market price on such day. In the case where the Plan Administrator has terminated open market purchase and the Fund has issued the remaining shares, the number of shares received by the participant in respect of the cash distribution will be based on the weighted average of prices paid for shares purchased in the open market and the price at which the Fund issued the remaining shares. Under certain circumstances, the rules and regulations of the SEC may require limitation or temporary suspension of market purchases of shares under the Plan. The Plan Administrator will not be accountable for its inability to make a purchase during such a period.
If on the payable date of the distribution, the market price is equal to or exceeds the net asset value, participants will be issued new shares by the Fund at the greater of the (a) the net asset value on the payable date or (b) 95% of the market price on such date.
The automatic reinvestment of distributions will not relieve participants of any income tax which may be payable on such distributions. If you participate in the Plan, you will receive a Form 1099-DIV concerning the federal income tax status of distributions paid to you during the year.
As a participant in the Plan you will not pay any charge to have your distributions reinvested in additional shares. The Plan Administrator’s fees for handling the reinvestment of distributions will be paid by the Fund. There will be no brokerage commissions for shares issued directly by the Fund in payment of distributions. However, each participant will pay a pro rata share of brokerage
27
DIVIDEND REINVESTMENT PLAN (Continued)
commissions incurred (currently $0.02 per share, but may vary and is subject to change) with respect to the Plan Administrator’s open market purchases in connection with the reinvestment of distributions.
Participants in the Plan have the option of making additional cash payments for investment in shares of the Fund. Such payments can be made in any amount from $100 per payment to $3,000 per month. The Plan Administrator will use the funds received to purchase Fund shares in the open market on the 15th of each month or the next business day if the 15th falls on a weekend or holiday (the “Investment Date”). The purchase price per share will be equal to the weighted average price of all shares purchased on the Investment Date, including commissions. There is no charge to Common Stockholders for such cash purchases. The Plan Administrator’s fee will be paid by the Fund. However, each participating Common Stockholder will pay pro rata share of brokerage commissions incurred (currently $0.02 per share, but may vary and is subject to change) with respect to the Plan Administrator’s open market purchases in connection with all cash investments. Voluntary cash payments should be sent to Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078.
Participants have an unconditional right to obtain the return of any cash payment if the Plan Administrator receives written notice at least 5 business days before such payment is to be invested.
Participants in the Plan may purchase additional shares by means of an Automatic Monthly Investment of not less than $100 nor more than $3,000 per month by electronic funds transfer from a predesignated U.S. bank account. If a participant has already established a Plan account and wishes to initiate Automatic Monthly Investments, the participant must complete and sign an automatic monthly investment form and return it to the Plan Administrator together with a voided check or deposit slip for the account from which funds are to be withdrawn. Automatic monthly investment forms may be obtained from the Plan Administrator by calling 1-866-270-7598.
Common Stockholders wishing to liquidate shares held with the Plan Administrator must do so in writing or by calling 1-866-270-7598. The Plan Administrator does not charge a fee for liquidating your shares; however, a brokerage commission of $0.02 will be charged. This charge may vary and is subject to change.
Once terminated, you may re-enroll in the Plan (provided you still have shares registered in your name) by contacting the Plan Administrator at 1-866-270-7598.
For more information regarding the Plan, please contact the Plan Administrator at 1-866-270-7598 or visit our website at Virtus.com.
The Fund reserves the right to amend or terminate the Plan as applied to any voluntary cash payments made and any dividend or distribution paid subsequent to written notice of the change sent to the members of the Plan at least 90 days before the record date for such distribution. The Plan also may be amended or terminated by the Plan Administrator with at least 90 days written notice to participants in the Plan.
28
FUND MANAGEMENT TABLES
Information pertaining to the Director and Officers of the Company as of December 31, 2015, is set forth below. The statement of additional information (SAI) includes additional information about the Directors and is available without charge, upon request, by calling (800) 367-5877.
The address of each individual, unless otherwise noted, is c/o Duff & Phelps Select Energy MLP Fund Inc., 100 Pearl Street, Hartford, CT 06103.
Disinterested Directors
| | |
Name Year of Birth
Year Elected # of
Portfolios in Fund
Complex Overseen
by Director | | Principal Occupation(s)
During Past 5 Years and
Other Directorships Held by Director |
Philip R. McLoughlin YOB: 1946 Elected: 2014 Chairman 66 Portfolios | | Partner (2006 to 2010), Cross Pond Partners, LLC (investment management consultant); and Managing Director (2008 to 2010), SeaCap Partners, LLC (strategic advisory firm). Director (since 1991) and Chairman (since 2010), World Trust Fund (closed-end investment firm in Luxembourg); Director (since 1995), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); Chairman (since 2002) and Trustee (since 1999), Virtus Mutual Fund Complex (43 portfolios); Chairman and Trustee (since 2003), Virtus Variable Insurance Trust (9 portfolios); Trustee/Director and Chairman (since 2011), Virtus Closed-End Funds (3 portfolios); and Trustee and Chairman (since 2013), Virtus Alternative Solutions Trust (7 portfolios). |
Thomas F. Mann YOB: 1950 Elected: 2014 10 Portfolios | | Managing Director and Group Head Financial Institutions Group (2003 to 2012), Societe Generale Sales of Capital Market Solutions and Products. Founder, MannMaxx Management (since 2010); Trustee (since 2002), The Hatteras Funds (20 portfolios); Trustee/Director (since 2011), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios). |
William R. Moyer YOB: 1944 Elected: 2014 10 Portfolios | | Financial and Operations Principal (2006 to present), Newcastle Distributors LLC (broker dealer); Partner (2006 to 2012), CrossPond Partners, LLC (strategy consulting firm); Partner (2008 to 2010), Seacap Partners, LLC (investment management); and former Chief Financial Officer, Phoenix Investment Partners. Trustee/Director (since 2011), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios). |
James M. Oates YOB: 1946 Elected: 2014 53 Portfolios | | Managing Director (since 1994), Wydown Group (consulting firm). Trustee (since 1987), Virtus Mutual Fund Complex (43 portfolios); Director (since 1996), Stifel Financial; Director (since 1998), Connecticut River Bancorp; Chairman and Director (1999 to 2014), Connecticut River Bank; Chairman (2000 to 2014), Emerson Investment Management, Inc.; Director (since 2002), New Hampshire Trust Company; Chairman and Trustee (2005 to 2014), John Hancock Fund Complex (228 portfolios); Non-Executive Chairman (2007 to present), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services); Trustee/Director (since 2013), Virtus Closed-End Funds (3 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios). |
29
FUND MANAGEMENT TABLES (Continued)
Interested Director
The individual listed below is an “interested person” of the Trust, as defined in Section 2(a)(19) of the 1940 Act, as amended, and the rules and regulations thereunder.
| | |
Name Year of Birth
Year Elected # of
Portfolios in Fund
Complex Overseen
by Director | | Principal Occupation(s)
During Past 5 Years and
Other Directorships Held by Director |
George R. Aylward* Trustee and President YOB: 1964 Elected: 2014 63 Portfolios | | Director, President and Chief Executive Officer (since 2008), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; and various senior officer positions with Virtus affiliates (since 2005). Trustee (since 2006), Virtus Mutual Funds (43 portfolios); Chairman, President and Chief Executive Officer (since 2006), The Zweig Closed-End Funds (2 portfolios); Trustee (since 2012) and President (since 2010), Virtus Variable Insurance Trust (9 portfolios); Trustee and President (since 2011), Virtus Closed-End Funds (3 portfolios); Director (since 2013), Virtus Global Funds, PLC (2 portfolios); and Trustee (since 2013), Virtus Alternative Solutions Trust (7 portfolios). |
| * | Mr. Aylward is an “interested person,” as defined in the 1940 Act, by reason of his position as President and Chief Executive Officer of Virtus Investment Partners, Inc. (“Virtus”), the ultimate parent company of the Adviser, and various positions with its affiliates, including the Adviser. |
30
FUND MANAGEMENT TABLES (Continued)
Officers of the Company Who Are Not Directors
| | | | |
Name, Address and
Year of Birth | | Position(s) Held with
Company and Length of
Time Served | | Principal Occupation(s)
During Past 5 Years |
Francis G. Waltman YOB: 1962 | | Senior Vice President since 2014 | | Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2013), Senior Vice President (2008 to 2013), Virtus Mutual Fund Complex; Executive Vice President (since 2013), Senior Vice President (2010 to 2013), Virtus Variable Insurance Trust; Executive Vice President (since 2013), Senior Vice President (2011 to 2013), Virtus Closed-End Funds; Director (since 2013), Virtus Global Funds PLC; and Executive Vice President (since 2013), Virtus Alternative Solutions Trust. |
Nancy J. Engberg YOB: 1956 | | Vice President and Chief Compliance Officer since 2014 | | Vice President (since 2008) and Chief Compliance Officer (2008 to 2011), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2003) with Virtus affiliates; Vice President and Chief Compliance Officer (since 2011), Virtus Mutual Fund Complex; Vice President (since 2010), Chief Compliance Officer (since 2011), Virtus Variable Insurance Trust; Vice President and Chief Compliance Officer (since 2011), Virtus Closed-End Funds; Vice President and Chief Compliance Officer (since 2012), The Zweig Closed-End Funds; and Vice President and Chief Compliance Officer (since 2013), Virtus Alternative Solutions Trust. |
W. Patrick Bradley YOB: 1972 | | Vice President, Chief Financial Officer and Treasurer since 2014 | | Senior Vice President, Fund Services (since 2010), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2006) with Virtus affiliates; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2004), Virtus Variable Insurance Trust; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2006), Virtus Mutual Fund Complex; Senior Vice President (since 2013), Vice President (2012 to 2013) and Treasurer (Chief Financial Officer) (since 2007), The Zweig Closed-End Funds; Senior Vice President (since 2013), Vice President (2011 to 2013), Chief Financial Officer and Treasurer (since 2011), Virtus Closed-End Funds; Vice President and Assistant Treasurer (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Director (since 2013), Virtus Global Funds, PLC; and Senior Vice President, Chief Financial Officer and Treasurer (since 2013), Virtus Alternative Solutions Trust. |
William Renahan YOB: 1970 | | Vice President, Chief Legal Officer, Counsel and Secretary since 2014 | | Vice President, Chief Legal Officer, and Secretary of various Virtus-affiliated closed-end funds (since 2012); Vice President and Secretary of Duff & Phelps Global Utility Income Fund Inc. (since 2012), DNP Select Income Funds Inc., Duff & Phelps Utility and Corporate Bond Trust, Inc., and DTF Tax-Free Income Funds Inc. (since 2015); Secretary (since 2014) and General Counsel (since 2015) of Duff & Phelps Investment Management Co.; and Managing Director, Legg Mason, Inc. and predecessor firms (1999-2012). |
31
DUFF & PHELPS SELECT ENERGY MLP FUND INC.
101 Munson Street
Greenfield, MA 01301-9668
Board of Directors
Philip R. McLoughlin, Chairman
George R. Aylward
Thomas F. Mann
William R. Moyer
James M. Oates
Officers
George R. Aylward, President
Francis G. Waltman, Executive Vice President
W. Patrick Bradley, Senior Vice President, Chief Financial Officer and Treasurer
Nancy J. Engberg, Vice President and Chief Compliance Officer
William Renahan, Vice President, Chief Legal Officer and Secretary
Investment Adviser
Virtus Alternative Investment Advisers, Inc.
100 Pearl Street
Hartford, CT 06103-4506
Administrator
Virtus Fund Services, LLC
100 Pearl Street
Hartford, CT 06103-4506
Custodian
Bank of New York Mellon
1 Wall Street
New York, NY 10286
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
2 Commerce Square Suite 1700
2001 Market Street
Philadelphia, PA 19103-7042
Transfer Agent
Computershare Trust Company NA
P.O. Box 43078
Providence, RI 02940-3078
How to Contact Us
Shareholder Services 1-866-270-7598
Web site www.Virtus.com
Important Notice to Shareholders
The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-866-270-7598.
For more information about
Virtus Closed-End Funds, please
contact us at 1-866-270-7598
or closedendfunds@virtus.com
or visit Virtus.com.
c/o Computershare Investor Services
P.O. Box 43078
Providence, RI 02940
Item 2. Code of Ethics.
| | (a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| | (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
| | (d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of directors has determined that William R. Moyer is qualified to serve as an audit committee financial expert serving on its audit committee and that he is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Audit Fees
| | (a) | The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $45,000 for 2015 and $4,500 for 2014. |
Audit-Related Fees
| | (b) | The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item are $1,468 |
| | for 2015 and $525 for 2014. Such audit-related fees include out of pocket expenses and cross fund fees. |
Tax Fees
| | (c) | The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $14,500 for 2015 and $0 for 2014. |
“Tax Fees” are those primarily associated with review of the Trust’s tax provision and qualification as a regulated investment company (RIC) in connection with audits of the Trust’s financial statement, review of year-end distributions by the Fund to avoid excise tax for the Trust, periodic discussion with management on tax issues affecting the Trust, and reviewing and signing the Fund’s federal income tax returns.
All Other Fees
| | (d) | The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2015 and $0 for 2014. |
| | (e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
The Duff & Phelps Select Energy MLP Fund Inc. (the “Fund”) Board has adopted policies and procedures with regard to the pre-approval of services provided by PwC. Audit, audit-related and tax compliance services provided to the Fund on an annual basis require specific pre-approval by the Board. As noted above, the Board must also approve other non-audit services provided to the Fund and those non-audit services provided to the Fund’s Affiliate Service Providers that related directly to the operations and financial reporting of the Fund. Certain of these non-audit services that the Board believes are a) consistent with the SEC’s auditor independence rules and b) routine and recurring services that will not impair the independence of the independent auditors may be approved by the Board without consideration on a specific case-by-case basis (“general pre-approval”).
The Audit Committee has determined that Mr. William Moyer, Chair of the Audit Committee, may provide pre-approval for such services that meet the above requirements in the event such approval is sought between regularly scheduled meetings. In any event, the Board is informed is each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting.
| | (e)(2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: |
(b) 0%
(c) 0%
(d) N/A
| | (f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
| | (g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $553,483 for 2015 and $427,962 for 2014. |
| | (h) | The registrant’s audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed Registrants.
| | (a) | The registrant has a separately designated audit committee consisting of all the independent directors of the registrant. The members of the audit committee are: Thomas F. Mann; Philip R. McLoughlin; William R. Moyer; and James M. Oates. |
Item 6. Investments.
| | (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| | |
| Item 7. | | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
The Proxy Voting Policies are attached herewith.
POLICY REGARDING PROXY VOTING
| I. | Definitions. As used in this Policy, the following terms shall have the meanings ascribed below: |
| | A. | “Adviser” refers to the primary adviser of each registered investment company covered by this policy. |
| | B. | “Board” refers to the Boards of Trustees or Directors of the Funds (collectively, the “Fund”). |
| | C. | “Corporate Governance Matters” refers to changes involving the corporate ownership or structure of an issuer whose securities are within a Portfolio Holding, including changes in the state of incorporation, changes in capital structure, including increases and decreases of capital and preferred stock issuance, mergers and other corporate restructurings, and anti-takeover provisions such as staggered boards, poison pills, and supermajority voting provisions. |
| | D. | “Delegate” refers to the Adviser or Subadviser to whom responsibility has been delegated to vote proxies for the applicable Portfolio Holding, including any qualified, independent organization engaged by an Adviser or Subadviser to vote proxies on behalf of such delegated entity. |
| | E. | “Management Matters” refers to stock option plans and other management compensation issues. |
| | F. | “Portfolio Holding” refers to any company or entity whose securities are held within the investment portfolio(s) of one or more of the Funds as of the date a proxy is solicited. |
| | G. | “Proxy Contests” refer to any meeting of shareholders of an issuer for which there are at least two sets of proxy statements and proxy cards, one solicited by management and the others by a dissident or group of dissidents. |
| | H. | “Social Issues” refers to social and environmental issues. |
| | I. | “Subadviser” refers, individually or collectively, to each registered investment adviser that serves as investment subadviser to one or more of the Fund. |
| | J. | “Subadviser Procedures” shall have such meaning as described in Article IV, Section C hereof. |
| | K. | “Takeover” refers to hostile or “friendly” efforts to effect radical change in the voting control of the board of directors of a company. |
| II. | General Policy. It is the intention of the Fund to exercise stock ownership rights in Portfolio Holdings in a manner that is reasonably anticipated to further the best economic interests of shareholders of the Fund. Accordingly, the Fund or its Delegate(s) shall endeavor to analyze and vote all proxies that are considered likely to have financial implications, and, where appropriate, to participate in corporate governance, shareholder proposals, management communications and |
| | 1 Funds include Virtus Alternative Solutions Trust, Virtus Equity Trust, Virtus Insight Trust, Virtus Opportunities Trust, Virtus Retirement Trust, Virtus Global Multi-Sector Income Fund, Virtus Total Return Fund, Virtus Variable Insurance Trust, Duff & Phelps Select Energy MLP Fund, Inc., The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc. |
| | legal proceedings. The Fund and its Delegate(s) must also identify potential or actual conflicts of interest in voting proxies and address any such conflict of interest in accordance with this Policy. |
| III. | Factors to consider when voting. |
| | A. | A Delegate may abstain from voting when it concludes that the effect on shareholders’ economic interests or the value of the Portfolio Holding is indeterminable or insignificant. |
| | B. | In analyzing anti-takeover measures, the Delegate shall vote on a case-by-case basis taking into consideration such factors as overall long-term financial performance of the target company relative to its industry competition. Key measures which shall be considered include, without limitation, five-year annual compound growth rates for sales, operating income, net income, and total shareholder returns (share price appreciation plus dividends). Other financial indicators that will be considered include margin analysis, cash flow, and debit levels. |
| | C. | In analyzing contested elections, the Delegate shall vote on a case-by-case basis taking into consideration such factors as the qualifications of all director nominees. The Delegate shall also consider the independence and attendance record of board and key committee members. A review of the corporate governance profile shall be completed highlighting entrenchment devices that may reduce accountability. |
| | D. | In analyzing corporate governance matters, the Delegate shall vote on a case-by-case basis taking into consideration such factors as tax and economic benefits associated with amending an issuer’s state of incorporation, dilution or improved accountability associated with changes in capital structure, management proposals to require a supermajority shareholder vote to amend charters and bylaws and bundled or “conditioned” proxy proposals. |
| | E. | In analyzing executive compensation proposals and management matters, the Adviser shall vote on a case-by-case basis taking into consideration such factors as executive pay and spending on perquisites, particularly in conjunction with sub-par performance and employee layoffs. |
| | F. | In analyzing proxy contests for control, the Delegate shall vote on a case-by-case basis taking into consideration such factors as long-term financial performance of the target company relative to its industry; management’s track record; background to the proxy contest; qualifications of director nominees (both slates); evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and stock ownership positions. |
| | G. | A Delegate shall generally vote against shareholder social matters proposals. |
| | A. | In the absence of a specific direction to the contrary from the Board of the Fund, the Adviser or Sub-adviser that is managing a Fund is responsible for voting proxies for all Portfolio Holdings of such Fund in accordance with this Policy, or for delegating such responsibility as described below. |
| | B. | The Adviser and any Subadviser delegated with authority to vote proxies for Portfolio Holdings shall be deemed to assume a duty of care to safeguard the best interests of the Fund and its shareholders. No Delegate shall accept direction or inappropriate influence |
| | from any other client, director or employee of any affiliated company and shall not cast any vote inconsistent with this Policy without obtaining the prior approval of the Fund or its duly authorized representative(s). |
| | C. | With regard to each Fund for which there is a duly appointed Subadviser, the Subadviser shall vote proxies for the Portfolio Holdings in accordance with Articles II, III and V of this Policy, provided, however, that the Subadviser may vote proxies in accordance with its own proxy voting policy/procedures (“Subadviser Procedures”) provided that the Adviser must have reviewed the Subadviser Procedures and determined them to be reasonably designed to further the best economic interests of the affected Fund shareholders. The Subadviser will promptly notify the Adviser of any material changes to the Subadviser Procedures. The Adviser will periodically review the votes by the Subadviser for consistency with this Policy. |
| | A. | The Fund and its Delegate(s) seek to avoid actual or perceived conflicts of interest in the voting of proxies for Portfolio Holdings between the interests of Fund shareholders, on one hand, and those of the Adviser, Subadviser, Delegate, principal underwriter, or any affiliated person of the Fund, on the other hand. The Board may take into account a wide array of factors in determining whether such a conflict exists, whether such conflict is material in nature, and how to properly address or resolve the same. |
| | B. | While each conflict situation varies based on the particular facts presented and the requirements of governing law, the Board or its delegate(s) may take the following actions, among others, or otherwise give weight to the following factors, in addressing material conflicts of interest in voting (or directing Delegates to vote) proxies pertaining to Portfolio Holdings: (i) rely on the recommendations of an established, independent third party with qualifications to vote proxies such as Institutional Shareholder Services; (ii) vote pursuant to the recommendation of the proposing Delegate; (iii) abstaining; or (iv) where two or more Delegates provide conflicting requests, vote shares in proportion to the assets under management of each proposing Delegate. |
| | C. | Each Adviser or Subadviser that is managing a Fund shall promptly notify the Chief Compliance Officer of the Fund (or, in the case of a Subadviser, the Chief Compliance Officer of the Adviser) in the event that any actual or potential conflict of interest is identified, and provide the Adviser’s or Subadviser’s recommendations for protecting the best interests of Fund’s shareholders. No Adviser (or Subadviser) shall waive any conflict of interest or vote any conflicted proxies without the prior approval of the Board or the President of the Fund pursuant to section D of this Article. |
| | D. | In the event that a determination, authorization or waiver under this Policy is requested at a time other than a regularly scheduled meeting of the Board, the President of the Fund shall be empowered with the power and responsibility to interpret and apply this Policy and provide a report of his or her determinations at the next following meeting of the Board. |
| | A. | A copy of the current Policy with Respect to Proxy Voting and the voting records for each Fund reconciling proxies with Portfolio Holdings and recording proxy voting guideline compliance and justification, shall be kept in an easily accessible place and |
| | available for inspection either physically or through electronic posting on an approved website. |
| | B. | The Adviser shall present a report of any material deviations from this Policy at every regularly scheduled meeting of the Board and shall provide such other reports as the Board may request from time to time. Each Adviser shall provide to the Fund or any shareholder a record of its effectuation of proxy voting pursuant to this Policy at such times and in such format or medium as the Fund or such shareholders shall reasonably request. Each Adviser and each affected Subadviser shall be solely responsible for complying with the disclosure and reporting requirements under applicable laws and regulations, including, without limitation, Rules 204-2 and 206(4)-6 under the Investment Advisers Act of 1940 (the “1940 Act”), as amended. Each Adviser shall gather, collate and present information relating to the its proxy voting activities of those of each Delegate in such format and medium as the Fund shall determine from time to time in order for the Fund to discharge its disclosure and reporting obligations pursuant to Rule 30b1-4 under the 1940 Act. |
| | C. | Each Adviser and/or each affected Subadviser shall pay all costs associated with proxy voting for Portfolio Holdings pursuant to this Statement of Policy and assisting the Fund in providing public notice of the manner in which such proxies were voted. |
| | D. | Each Adviser or Subadviser may delegate its responsibilities hereunder to a proxy committee established from time to time by the Adviser or Subadviser, as the case may be. In performing its duties hereunder, the Adviser or Subadviser, or any duly authorized committee, may engage the services of a research and/or voting adviser or agent, the cost of which shall be borne by such entity. |
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
| (a)(1) | Duff & Phelps Investment Management Co. Portfolio Management Team |
David D. Grumhaus, Jr.
David Grumhaus is a Senior Managing Director and Senior Portfolio Manager with Duff & Phelps’ utility equity team, and leads the firm’s master limited partnership effort. Prior to joining Duff & Phelps in 2014, Mr. Grumhaus served as a portfolio manager and director of research for Copia Capital, LLC. Previously, he was an investment banker for Goldman, Sachs & Co., as well as William Blair & Company, LLC.
Charles Georgas, CFA
Charles Georgas is a Managing Director at Duff & Phelps Investment Management and co-portfolio manager of the Duff & Phelps Select Energy MLP Fund and Virtus Select MLP and Energy Fund and the Midstream MLP Total Return Strategy, Mr. Georgas concentrates his research on the midstream energy MLP sector. Prior to joining Duff & Phelps Investment Management in 2008, he was a Senior Equity Analyst covering the consumer sector of Marquis Investment Research. Mr. Georgas’s work experience within the investment industry includes eight years in the hedge fund industry.
| (a)(2) | Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest |
There may be certain inherent conflicts of interest that arise in connection with the portfolio managers’ management of the Fund’s investments and the investments of any other accounts they manage. Such conflicts could include the aggregation of orders for all accounts managed by a particular portfolio manager, the allocation of purchases across all such accounts, the allocation of IPOs and any soft dollar arrangements that the adviser may have in place that could benefit the Fund and/or such other accounts. The Board of Trustees has adopted policies and procedures designed to address any such conflicts of interest to ensure that all transactions are executed in the best interest of the Fund’s shareholders. Each Adviser is required to certify its compliance with these procedures to the Board of Trustees on a quarterly basis. There have been no material compliance issues with respect to any of these policies and procedures during the Fund’s most recent fiscal year. Additionally, there are no material conflicts of interest between the investment strategy of any Fund and the investment strategy of other accounts managed by portfolio managers since portfolio managers generally manage funds and other accounts having similar investment strategies.
The following table provides information as of November 30, 2015, regarding any other accounts managed by the portfolio managers and portfolio management team members for the Fund. As noted in the table, the portfolio managers managing the Funds may also manage or be members of management teams for other mutual funds within the Virtus Mutual Fund complex or other similar accounts.
| | | | | | | | | | |
Name of Portfolio Manager or Team Member | | Type of Accounts | | Total No. of Accounts Managed | | Total Assets | | No. of Accounts where Advisory Fee is Based | | Total Assets in Accounts where Advisory Fee is Based |
| | | | | | | | | | |
| | | | | | | | | on Performance | | on Performance |
David D. Grumhaus, Jr. | | Registered Investment Companies: | | 1 | | 4,077,691.00 | | 0 | | 0 |
| | | Other Pooled Investment Vehicles: | | 0 | | 0 | | 0 | | 0 |
| | | Other Accounts: | | 0 | | 0 | | 0 | | 0 |
| | | | | | | | | | | |
Charles Georgas | | Registered Investment Companies: | | 1 | | 4,077,691.00 | | 0 | | 0 |
| | | Other Pooled Investment Vehicles: | | 0 | | 0 | | 0 | | 0 |
| | | Other Accounts: | | 0 | | 0 | | 0 | | 0 |
| (a)(3) | Compensation Structure of Portfolio Manager(s) or Management Team Members |
Virtus and certain of its affiliated investment management firms, including Duff & Phelps, Euclid, Kayne, Newfleet and Newfound (collectively, “Virtus”), believe that the firm’s compensation program is adequate and competitive to attract and retain high-caliber investment professionals. Investment professionals at Virtus receive a competitive base salary, an incentive bonus opportunity and a benefits package. Certain professionals who supervise and manage others also participate in a management incentive program reflecting their personal contribution and team performance. Certain key individuals also have the opportunity to take advantage of a long-term incentive compensation program, including potential awards of Virtus restricted stock units (“Virtus RSUs”) with multi-year vesting, subject to Virtus board of directors’ approval.
Following is a more detailed description of Virtus’ compensation structure.
Base Salary. Each portfolio manager is paid a fixed base salary, which is designed to be competitive in light of the individual’s experience and responsibilities. Base salary is determined using compensation survey results of investment industry compensation conducted by an independent third party in evaluating competitive market compensation for its investment management professionals.
Incentive Bonus. Annual incentive payments are based on targeted compensation levels, adjusted based on profitability, investment performance factors and a subjective assessment of contribution to the team effort. The short-term incentive payment is generally paid in cash, but a portion may be made in Virtus RSUs. Individual payments are assessed using comparisons of actual investment performance with specific peer group or index measures. Performance of the Funds managed is generally measured over one-, three- and five year periods and an individual manager’s participation is based on the performance of each Fund/account managed.
While portfolio manager compensation contains a performance component, this component is adjusted to reward investment personnel for managing within the stated framework and for not taking unnecessary risk. This approach ensures that investment management personnel remain focused on managing and acquiring securities that correspond to a Fund’s mandate and risk profile and are discouraged from taking on more risk and unnecessary exposure to chase performance for personal gain. Virtus believes it has appropriate controls in place to handle any potential conflicts that may result from a substantial portion of portfolio manager compensation being tied to performance.
Other benefits. Portfolio managers are also eligible to participate in broad-based plans offered generally to employees of Virtus and its affiliates, including 401(k), health and other employee benefit plans.
In summary, the Investment Manager believes that overall compensation is both fair and competitive while rewarding employees for not taking unnecessary risks to chase personal performance.
| (a)(4) | Disclosure of Securities Ownership |
For the most recently completed fiscal year ended November 30, 2015, beneficial ownership of shares of the Fund by Messrs. Grumhaus and Georgas are as follows. Beneficial ownership was determined in accordance with rule 16a-1(a)(2) under the Securities Exchange Act of 1934 (17 CFR 240.161-1(a)(2)).
| | |
Name of Portfolio Manager or Team Member | | Dollar ($) Range of Fund Shares Beneficially Owned |
| |
| David Grumhaus | | $10,001- $50,000 |
| |
| Charles Georgas | | $10,001- $50,000 |
| | |
| Item 9. | | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
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.
Item 11. Controls and Procedures.
| | (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| | (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
| | (a)(1) | Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto. |
| | (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| | (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(12.other) Not applicable.
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) | | | | Duff & Phelps Select Energy MLP Fund Inc. |
| | | | |
By (Signature and Title)* | | | | /s/ George R. Aylward |
| | | | George R. Aylward, President |
| | | | (principal executive officer) |
| | | | |
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/ George R. Aylward |
| | | | George R. Aylward, President |
| | | | (principal executive officer) |
| | | | |
By (Signature and Title)* | | | | /s/ W. Patrick Bradley |
| | | | W. Patrick Bradley, Senior Vice President, |
| | | | Chief Financial Officer and Treasurer |
| | | | (principal financial officer) |
* Print the name and title of each signing officer under his or her signature.
