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 811-21940
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EIP Investment Trust
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(Exact name of registrant as specified in charter)
c/o Energy Income Partners, LLC
49 Riverside Avenue
Westport, CT 06880
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(Address of principal executive offices) (Zip code)
Linda Longville
c/o Energy Income Partners, LLC
49 Riverside Avenue
Westport, CT 06880
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(Name and address of agent for service)
registrant's telephone number, including area code: 203-349-8232
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2007
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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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
[EIP LOGO]
EIP GROWTH AND INCOME FUND
-------------------------------
DECEMBER 31, 2007 ANNUAL REPORT
EIP Growth and Income Fund
TABLE OF CONTENTS
Letter to Shareholders ............................................... 1
Schedule of Investments .............................................. 4
Statement of Assets and Liabilities .................................. 10
Statement of Operations .............................................. 11
Statements of Changes in Net Assets .................................. 12
Statement of Cash Flow ............................................... 13
Financial Highlights ................................................. 14
Notes to Financial Statements ........................................ 15
Report of Independent Registered
Public Accounting Firm ............................................ 21
Additional Information ............................................... 22
You should carefully consider the investment objectives, risks, charges, and
expenses of the Fund before making an investment decision. The private placement
memorandum contains this and other information - please read it carefully before
investing or sending money. Except as noted, numbers in the private placement
memorandum are unaudited. To obtain a copy of the private placement memorandum,
please call (203) 349-8232.
EIP Growth and Income Fund
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
We are pleased to submit this Annual Report for the EIP Growth and Income Fund
(the "Fund") for the year ended December 31, 2007. We are pleased to report that
we believe we are achieving the investment objective we embarked upon at the
Fund's start of operations in August 2006. For the year ended December 31, 2007,
the Fund's total return was 10.3%. From August 22, 2006 (Inception) to December
31, 2006, our total return was 5.6%.
The Fund's primary strategy is investing in publicly traded energy
infrastructure companies with high dividend payouts that offer attractive yields
and have the opportunity to grow. A large portion of the Fund's equity
investment opportunities are in publicly traded partnerships known as Master
Limited Partnerships ("MLPs"). These securities represent just under 25% of the
Fund's assets, which generally is the maximum percentage allowable for mutual
funds. About 20% of the Fund's assets are invested in securities with similar
characteristics to the energy-related MLPs, such as infrastructure income trusts
in Canada and infrastructure companies with MLP and infrastructure income trust
subsidiaries. We invest the remainder of the portfolio in high-quality corporate
and agency bonds with remaining maturities of 18 months or less or a coupon that
floats with prevailing interest rates. All of the Fund's corporate bonds are
required to have a rating at the time of investment of AA or better by Standard
& Poor's Corporation ("S&P"), or an equivalent rating by Moody's Investor
Services, Inc. ("Moody's"), or if unrated, have been determined by us to be of
similar quality. Because the large allocation to bonds with short duration has a
large dampening effect on the portfolio's volatility, we employ leverage in an
attempt to enhance the portfolio's returns.
BENCHMARKS:
We believe the following benchmarks provide appropriate comparisons of the
Fund's performance:
TOTAL RETURN
(YEAR ENDED
12/31/07)
------------
Wachovia Midstream MLP
Total Return Index 13.2%
Lehman Brothers Aggregate
Credit Index (1-3 year) 6.0%
Wachovia Midstream MLP Total Return Index.
The portion of our portfolio invested in MLPs, income trusts and other energy
equities would be compared to the Wachovia Midstream MLP Total Return Index. We
use this index rather than a broader MLP index as our investment style tends to
focus the portfolio on MLPs involved in pipeline transportation, storage,
terminaling and processing of petroleum and natural gas. These activities are
commonly known as "midstream" as opposed to oil and gas production ("upstream")
and refining and marketing ("downstream"). The upstream and downstream parts of
the energy industry are the customers of the midstream companies. And while much
of the equity portion of the portfolio is not invested in MLPs per se, their
business characteristics are similar: a heavy weighting in North American
midstream operations and a high payout ratio.
Lehman Brothers Aggregate Credit Index (1-3 year).
The Lehman Brothers Aggregate Credit Index (1-3 year) is an index of corporate
bonds with an average duration of about 1.8 years and an average credit quality
of between A1 and AA3 (Source: Lehman Brothers Inc, credit quality based on
Moody's). While slightly longer in duration and lower in credit quality, we
believe this major index is the best benchmark for how we run the bond portion
of our portfolio.
MLPS AND OTHER EQUITIES
As measured by the Wachovia Midstream MLP Total Return Index, the total return
for MLPs over the year ended December 31, 2007 was 13.2%. This return reflects
an initial yield of about 6.3% and share appreciation of about 6.9%. While in
the short-term, share appreciation can be volatile, we believe that over the
long-term, share appreciation will approximate growth in per share quarterly
cash distributions paid by MLPs. Over the last 12 months, the average growth in
per share cash distributions of MLPs has been about 12%, so the share price
performance lagged the growth rate in per share cash distributions. In the early
part of the year, MLP shares appreciated faster than this growth rate. Since
July, share appreciation has reversed, even though growth in cash distributions
continued at about the same pace.
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL
$10,000 INVESTMENT
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Lehman Brothers
Wachovia Midstream Aggregate Credit
MLP Total Return Index
EIP Growth & Income Index (1-3 years)
8/22/2006 $10,000 $10,000 $10,000
9/30/2006 $ 9,970 $ 9,932 $10,085
12/31/2006 $10,562 $11,077 $10,200
3/31/2007 $11,367 $12,476 $10,360
6/30/2007 $12,292 $13,148 $10,429
9/30/2007 $11,528 $11,917 $10,620
12/31/2007 $11,649 $12,535 $10,808
The Wachovia Midstream MLP Total Return Index consists of 31 energy MLPs and
represents the Midstream sub-sector of the Wachovia MLP Composite Index. The
index is calculated by S&P using a float-adjusted market capitalization
methodology. Unlike the Fund, the index does not incur fees and expenses.
The Lehman Brothers Aggregate Credit Index (1-3 year) is an index of corporate
bonds with an average duration of about 1.8 years and an average credit quality
of between A1 and AA3. Unlike the Fund, the index does not incur fees and
expenses.
EIP GROWTH AND INCOME FUND
RETURNS FOR YEAR ENDED 12/31/07
Average Annual Total Returns
- ------------------------------------------
One Year 10.29%
Since Inception 11.89%
- ------------------------------------------
Inception Date 08/22/06
The performance data quoted represents past performance and does not guarantee
future results. The performance stated may have been due to extraordinary market
conditions, which may not be duplicated in the future. Current performance may
be lower or higher than the performance data quoted. The investment return and
principal value of the fund will fluctuate so that an investor's shares, when
sold, may be worth more or less than the original cost. Calculations do not
reflect the deduction in taxes that a shareholder would pay on fund
distributions or the redemption of shares. Calculations assume reinvestment of
dividends and capital gain distributions. To obtain more recent performance
data, please contact the Energy Income Partners Information Center at
1-203-349-8232.
- --------------------------------------------------------------------------------
| 1
EIP Growth and Income Fund
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The weakness in the second half of 2007 appears to be driven by concerns that
MLPs will be unable to fund their growth due to a tighter credit market. Since
MLPs pay out most or all of their cash flow every quarter, growth opportunities
need to be financed with the issuance of new shares and new debt. We believe
that over the long term, this need to "get approval" from the capital markets
for new projects imposes a welcome extra layer of scrutiny over these projects.
However, there will be times when the capital markets are tight and less willing
to provide new funding. We believe today's credit market is one of those times.
We believe managers of equity and fixed-income funds are more worried about
sanitizing their existing portfolios than worrying about missing opportunities
in new issues.
There are large differences, however, across the MLP universe. Smaller and newer
MLPs involved in cyclical businesses are having the most difficult time
accessing capital. Meanwhile, older, more established MLPs involved in
non-cyclical midstream operations, seem to have about the same ability to raise
new capital. And since the bulk of the market capitalization of the MLP universe
is made up of these more established midstream companies, we believe the sector
as a whole is unlikely to experience any lasting negative effects from the
current credit market turmoil.
The Fund's equity portfolio tends to be weighted towards higher credit quality
and larger than average market cap MLPs and infrastructure companies, which we
believe positively contributed to the performance of the equity portion of the
Fund's portfolio.
The Canadian income trusts we invest in are involved in energy infrastructure
and other fee-for-service businesses. This group was up about 16% on a market
capitalization weighted basis over the course of the year and therefore
contributed to our positive performance versus our benchmarks. This group
performed poorly in 2006 due to the announcement by the Canadian Finance
Ministry that income trusts would be taxed. That change has now become law and
income trusts will pay tax beginning in 2011. However, reductions to both
corporate and individual tax rates will result in similar after-tax returns to
taxable shareholders in Canada.
FIXED INCOME
Our bond portfolio has a minimum credit quality of AA at the time of investment,
or an equivalent rating by Moody's, or if unrated, have been determined by us to
be of similar quality. This credit quality is slightly above the credit quality
of the Fund's benchmark.
OUTLOOK
The MLP asset class continues to grow. As of December 31, 2007, energy-related
MLPs numbered 70 with approximately $135 billion of market capitalization, up
from 57 MLPs a year ago with a market cap of approximately $106 billion. The
Initial Public Offerings over this period account for about $3 billion of the
increase in market cap; secondary share offerings account for about $12 billion;
and share appreciation of about $14 billion accounts for the rest. The growth in
the asset class is being driven by the market's demand for yield and the energy
industry's need to finance its organic spending opportunities.
Historically, the energy industry has been slow to sell its infrastructure
assets (pipelines, terminals, storage facilities, etc.) to MLPs or to create
MLPs from portions of their existing assets as they preferred to retain the more
stable cash flows in order to stabilize their overall business. But after years
of under-investment, we believe energy infrastructure in North America is in
need of much new capacity. Creating new infrastructure MLPs provides a valuable
financing tool to fund these new projects. Very often, these assets will trade
at a higher valuation once they are spun out into a pure-play infrastructure MLP
with an attractive yield. In our view, this has spurred the energy industry to
accelerate the creation of MLPs or dropdown of assets to MLP affiliates.
Along with the creation of new infrastructure MLPs, there has been a spate of
MLP IPOs whose primary business is the production of oil and gas, shipping, or
refining. While some of these MLPs are attractive and have the potential for
higher growth, they come with more risk associated with the cyclical nature of
their businesses. Looking forward, we believe the MLP space will become less
homogeneous and increasingly include all aspects of the energy industry. We
welcome the new mix of companies as it provides opportunities for us to add
value through our rigorous research and portfolio construction discipline.
However, we will continue to have the bulk of the Fund's portfolio invested in
companies whose primary business is non-cyclical energy infrastructure.
We believe the total return proposition of owning energy-related MLPs has been
and continues to be yield plus growth. Over the last ten years, growth has
averaged about 7% annually. Recently, this average growth rate has accelerated
to about 12%, both last year and this year. The yield of the energy-related MLPs
- - weighted by market capitalization as of November 30, 2007 was about 6.7%.
The growth in MLP cash distributions is running above the long-term average
primarily because of the profitable organic growth opportunities available
today, in our view. These include the rapid growth of oil production out of
Canada's oil sands development, the growth in onshore natural gas production
from the application of new technologies in areas like the Rocky Mountains and
the Fort Worth Basin in Texas, increased imports of crude oil and liquefied
natural gas, and increased demand for motor fuel additives like ethanol and
bio-diesel. All these developments require additional pipelines, storage and
terminaling investment. We believe the MLPs as a group have done a great job
capitalizing on these opportunities. By contrast, the pipeline divisions inside
the utility and oil companies are often viewed as cost centers and not
profitable businesses in their own right and are therefore not viewed as
platforms for growth. With higher oil and gas prices, the oil companies are
inclined to spend their time drilling up new reserves and are content to let
someone else do the more mundane work of building infrastructure.
The credit markets remain under a great deal of stress related to the sub-prime
mortgage lending crisis. One positive aspect is that the cost of the portfolio's
leverage has decreased. Leverage is achieved by the use of reverse repurchase
agreements ("repos") using certain bonds as collateral. The lending rate on the
repos is linked to the federal funds rate ("fed funds"). Since the fed funds
rate has been falling, the Fund has been saving money on its borrowing costs.
| 2
EIP Growth and Income Fund
- --------------------------------------------------------------------------------
And so while the current market environment is choppy, we expect continued
uncertainty from the credit crisis to have the same minimal effect on our bond
portfolio as it did in 2007, and we expect the business of adding to North
America's energy infrastructure backed by long-term contracts or regulated
returns will continue to grind on. While we do not know how long growth rates
will continue above their long-term averages, we believe there is currently no
slow down on the horizon.
If you have any questions concerning your investment, please contact the Energy
Income Partners Information Center at 1-203-349-8232. Thank you for your
investment in EIP Growth and Income Fund.
Sincerely,
James Murchie
President
EIP Growth and Income Fund
January 14, 2008
The views expressed in this commentary reflect those of the Fund's portfolio
management team as of the date of this commentary. Any such views are subject to
change at any time based on market or other conditions, and the Fund disclaims
any responsibility to update such views. These views are not intended to be a
forecast of future events, a guarantee of future results or advice. Because
investment decisions for the Fund are based on numerous factors, these views may
not be relied upon as an indication of trading intent on behalf of the Fund. The
information contained herein has been prepared from sources believed to be
reliable, but is not guaranteed by the Fund as to its accuracy or completeness.
| 3
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
CORPORATE NOTES AND BONDS 41%
COMMON STOCKS 15%
MASTER LIMITED PARTNERSHIPS 25%
CANADIAN INCOME TRUSTS 6%
U.S. GOVERNMENT AGENCY OBLIGATIONS 8%
INVESTMENT COMPANY 5%
% OF TOTAL INVESTMENTS
FAIR
PAR VALUE VALUE
- ------------- --------------
CORPORATE NOTES AND BONDS (a) - 73.44%+
BANKS - NATIONAL COMMERCIAL - 12.70%+
$ 4,000,000 Bank of America Corp.
Senior Unsecured Notes
4.994%, 08/02/10 (b) ...................... $ 3,988,992
4,000,000 Citigroup Global Markets
Series D, MTN
5.191%, 03/07/08 (b) ...................... 4,002,140
4,000,000 Citigroup, Inc.
3.500%, 02/01/08 .......................... 3,994,936
5,000,000 Citigroup, Inc.
Unsecured Notes
5.024%, 01/30/09 (b) ...................... 4,960,170
3,000,000 Fortis Bank SA/NV NY
4.800%, 04/28/08 (b) ...................... 2,999,064
4,000,000 HSBC Bank (USA) NA NY
Senior Notes
5.286%, 06/10/09 (b) ...................... 3,986,196
2,400,000 Wells Fargo & Co.
Senior Unsecured Notes
4.944%, 03/23/10 (b) ...................... 2,382,701
--------------
26,314,199
--------------
BANKS - STATE COMMERCIAL - 9.07%+
4,000,000 American Express Centurion Bank
Bank Note
5.253%, 03/10/08 (b) ...................... 3,999,056
2,544,000 Bank One Texas
Bank Note
6.250%, 02/15/08 .......................... 2,547,340
3,000,000 Credit Suisse First Boston, NY
6.500%, 05/01/08 (c) ...................... 3,011,268
3,000,000 Fifth Third Bank
Bank Note, Series 1
5.051%, 10/27/09 (b) ...................... 2,993,583
5,000,000 National City Bank
Bank Note
4.874%, 03/25/08 (b) ...................... 5,000,435
1,250,000 National City Bank
Bank Note
5.254%, 04/18/08 (b) ...................... 1,249,985
--------------
18,801,667
--------------
FAIR
PAR VALUE VALUE
- ------------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
CREDIT - MISCELLANEOUS BUSINESS - 9.38%+
$ 10,000,000 General Electric Capital Corp., MTN
5.258%, 05/05/26 (b) ...................... $ 9,591,410
10,000,000 General Electric Capital Corp., MTN
5.443%, 01/08/16 (b) ...................... 9,839,640
--------------
19,431,050
--------------
CREDIT - PERSONAL - 8.30%+
4,000,000 American Express Credit
Series B, MTN
Senior Notes
5.386%, 10/04/10 (b) ...................... 3,908,992
6,000,000 American Express Credit, MTN
5.188%, 06/16/11 (b) ...................... 5,844,198
3,000,000 HSBC Finance Corp.
Senior Notes
5.493%, 01/15/14 (b) ...................... 2,848,455
5,000,000 SLM Corp., MTN
5.244%, 07/26/10 (b) ...................... 4,605,080
--------------
17,206,725
--------------
DEPARTMENT STORES - 3.38%+
7,000,000 Wal-Mart Stores, Inc.
Senior Notes
4.891%, 06/16/08 (b) ...................... 7,002,562
--------------
ELECTRONICS - COMPUTERS - 1.95%+
4,050,000 International Business
Machines Corp., MTN
3.800%, 02/01/08 .......................... 4,047,298
--------------
FINANCE - 0.48%+
1,000,000 JPMorgan Chase & Co.
6.000%, 08/01/08 .......................... 1,005,309
--------------
INSURANCE - FIRE AND MARINE - 4.14%+
1,000,000 Allstate Life Global Funding Trust, MTN
4.830%, 06/30/08 (b) ...................... 999,395
5,000,000 American International Group, Inc.
Senior Notes
4.884%, 06/23/08 (b) (c) .................. 5,003,155
1,350,000 MassMutual Global Funding II
2.550%, 07/15/08 (c) ...................... 1,334,456
1,250,000 MassMutual Global Funding II
5.120%, 08/26/11 (b) (c) .................. 1,248,279
--------------
8,585,285
--------------
INSURANCE - LIFE - 3.87%+
4,000,000 Jackson National Life Fund
5.401%, 04/01/09 (b) (c) .................. 4,010,808
4,000,000 Nationwide Life Global Funding, MTN
4.964%, 09/23/08 (b) (c) .................. 4,001,700
--------------
8,012,508
--------------
LUMBER AND OTHER MATERIALS - 3.90%+
8,250,000 Home Depot, Inc. (The)
Senior Unsecured Notes
5.116%, 12/16/09 (b) ...................... 8,086,246
--------------
PETROLEUM REFINING - 3.73%+
1,750,000 BP Capital Markets PLC, EMTN
Series 27, Tranche 1
3.375%, 12/15/08 .......................... 1,734,131
6,000,000 ChevronTexaco Capital Corp.
3.375%, 02/15/08 .......................... 5,991,606
--------------
7,725,737
--------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
SCHEDULE OF INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
FAIR
PAR VALUE VALUE
- ------------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
SECURITIES BROKER/DEALER - 10.64%+
$ 3,000,000 Credit Suisse (USA), Inc.
5.069%, 08/15/10 (b) ...................... $ 2,968,980
2,000,000 Credit Suisse (USA), Inc.
Senior Notes, Series 1
5.231%, 06/05/09 (b) ...................... 1,999,660
5,000,000 Goldman Sachs Group, Inc.
5.748%, 01/12/15 (b) ...................... 4,809,900
5,000,000 Merrill Lynch & Co., Inc., MTN
5.284%, 07/25/11 (b) ...................... 4,661,840
3,000,000 Morgan Stanley
5.459%, 01/18/11 (b) ...................... 2,905,707
1,000,000 Morgan Stanley
Senior Unsecured Notes
5.493%, 01/09/12 (b) ...................... 967,261
4,000,000 Morgan Stanley, MTN
Senior Unsecured Notes
5.659%, 10/18/16 (b) ...................... 3,738,464
--------------
22,051,812
--------------
VEHICLE/CAR BODY - 1.90%+
4,000,000 Toyota Motor Credit Corp.
2.875%, 08/01/08 .......................... 3,947,816
--------------
TOTAL CORPORATE NOTES AND BONDS
(Cost $154,867,808) ....................... 152,218,214
--------------
SHARES
- -------------
MASTER LIMITED PARTNERSHIPS - 44.85%+
CONSUMER CYCLICALS - 2.43%+
51,000 AmeriGas Partners, LP ........................ 1,838,040
46,000 Global Partners, LP .......................... 1,198,300
46,025 Inergy Holdings, LP .......................... 1,989,661
--------------
5,026,001
--------------
ENERGY - 41.31%+
124,438 Buckeye GP Holdings, LP ...................... 3,507,907
53,727 Buckeye Partners, LP ......................... 2,654,651
79,000 Crosstex Energy, LP .......................... 2,450,580
30,526 DCP Midstream Partners, LP ................... 1,402,670
63,433 Eagle Rock Energy Partners, Ltd. ............. 1,159,555
98,000 Encore Energy Partners, LP ................... 1,764,000
69,700 Energy Transfer Equity, LP ................... 2,455,531
61,994 Energy Transfer Partners, LP ................. 3,340,237
311,400 Enterprise GP Holdings, LP ................... 11,528,028
137,000 Enterprise Products Partners, LP ............. 4,367,560
58,196 EV Energy Partners, LP ....................... 1,891,370
52,459 Hiland Holdings GP, LP ....................... 1,415,869
7,422 Hiland Partners, LP .......................... 375,182
44,500 Holly Energy Partners, LP .................... 1,946,875
471,400 Magellan Midstream Holdings, LP .............. 12,633,520
171,000 Magellan Midstream Partners, LP .............. 7,414,560
34,540 Natural Resource Partners, LP ................ 1,121,169
27,000 Nustar Energy LP ............................. 1,439,100
149,000 NuStar GP Holdings, LLC ...................... 4,253,950
104,935 ONEOK Partners, LP ........................... 6,427,269
24,827 Penn Virginia GP Holdings, LP ................ 711,045
34,900 Penn Virginia Resource Partners, LP .......... 857,493
72,000 Plains All American Pipeline, LP ............. 3,744,000
72,000 Quest Energy Partners LP (d) ................. 1,073,520
3,750 Quicksilver Gas Services, LP ................. 93,825
16,267 Spectra Energy Partners, LP .................. 389,757
FAIR
SHARES VALUE
- ------------- --------------
MASTER LIMITED PARTNERSHIPS (CONTINUED)
ENERGY (CONTINUED)
53,587 Sunoco Logistics Partners, LP ................ $ 2,690,603
40,809 TC Pipelines, LP ............................. 1,477,286
16,000 Transmontaigne Partners, LP .................. 454,240
15,000 Williams Partners, LP ........................ 588,000
--------------
85,629,352
--------------
INDUSTRIAL - 1.11%+
77,457 Teekay LNG Partners, LP ...................... 2,298,149
--------------
TOTAL MASTER LIMITED PARTNERSHIPS
(Cost $87,083,061) ........................ 92,953,502
--------------
COMMON STOCKS - 26.09%+
CONSUMER CYCLICALS - 0.35%+
29,000 Teekay Offshore Partners, LP ................. 733,410
--------------
CONSUMER NON-CYCLICALS - 0.18%+
9,050 Macquarie Infrastucture Co., LLC ............. 366,797
--------------
ENERGY - 20.89%+
133,592 Enbridge Energy Management,
LLC (d) ................................... 6,989,504
89,500 Enbridge, Inc. ............................... 3,618,485
398,821 Kinder Morgan Management,
LLC (d) ................................... 21,113,586
129,000 Macquarie Infrastructure Group ............... 343,203
13,866 MV Oil Trust ................................. 340,410
163,700 ONEOK, Inc. .................................. 7,328,849
17,400 Permian Basin Royalty Trust .................. 278,052
67,000 Spectra Energy Corp. ......................... 1,729,940
22,500 TransCanada Corp. ............................ 920,925
12,500 XTO Energy, Inc. ............................. 642,000
--------------
43,304,954
--------------
FINANCE - 2.91%+
52,929 Kayne Anderson Energy
Development Co. (e) ....................... 1,212,604
164,353 NGP Capital Resources Co. (e) ................ 2,568,838
30,427 Prospect Capital Corp. ....................... 397,072
126,300 Tortoise Capital Resources Corp. ............. 1,547,175
12,620 Tortoise North American
Energy Corp. (e) .......................... 313,607
--------------
6,039,296
--------------
FUND - 0.08%+
4,500 BearLinx Alerian MLP Select
Index, ETN ................................ 155,160
--------------
UTILITIES - 1.68%+
86,000 Atlantic Power Corp. ......................... 933,239
207,000 Babcock & Brown Infrastructure
Group ..................................... 290,809
13,000 ITC Holdings Corp. ........................... 733,460
56,000 UGI Corp. .................................... 1,526,000
--------------
3,483,508
--------------
TOTAL COMMON STOCKS
(Cost $49,217,478) ........................ 54,083,125
--------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
SCHEDULE OF INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
FAIR
SHARES VALUE
- ------------- --------------
CANADIAN INCOME TRUSTS - 11.35%+
CONSUMER CYCLICALS - 0.16%+
23,000 Westshore Terminals Income Fund .............. $ 337,676
--------------
ENERGY - 4.33%+
130,500 AltaGas Income Trust ......................... 3,496,043
109,100 Enbridge Income Fund ......................... 1,133,061
150,000 Peak Energy Services Trust ................... 293,328
78,000 Pembina Pipeline Income Fund ................. 1,386,210
182,000 Phoenix Technology Income Fund ............... 1,646,750
43,900 Precision Drilling Trust ..................... 665,963
34,000 Provident Energy Trust ....................... 343,807
--------------
8,965,162
--------------
INDUSTRIAL - 2.43%+
109,000 Mullen Group Income Fund ..................... 1,943,766
167,400 Newalta Income Fund .......................... 3,095,446
--------------
5,039,212
--------------
UTILITIES - 4.43%+
140,300 Energy Savings Income Fund ................... 2,373,991
278,100 Keyera Facilities Income Fund ................ 5,607,366
96,000 Northland Power Income Fund .................. 1,190,577
--------------
9,171,934
--------------
TOTAL CANADIAN INCOME TRUSTS
(Cost $23,316,691) ........................ 23,513,984
--------------
PAR VALUE
- -------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (a) - 13.56%+
FEDERAL HOME LOAN BANK - 0.48%+
$ 1,000,000 4.400%, 02/15/08 ............................. 999,737
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 6.29%+
7,000,000 5.500%, 01/23/12 ............................. 7,002,793
6,000,000 6.250%, 03/29/22 ............................. 6,028,134
--------------
13,030,927
--------------
FEDERAL HOME LOAN MORTGAGE - 6.79%+
6,000,000 5.550%, 04/17/12 ............................. 6,004,464
8,000,000 5.375%, 01/09/14 ............................. 8,063,256
--------------
14,067,720
--------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
(Cost $27,882,227) ........................ 28,098,384
--------------
SHARES
- -------------
INVESTMENT COMPANY - 8.05%+
16,674,549 PNC Bank Money Market ........................ 16,674,549
--------------
TOTAL INVESTMENT COMPANY
(Cost $16,674,549) ........................ 16,674,549
--------------
TOTAL INVESTMENTS - 177.34%+
(Cost $359,041,814)* ...................................... 367,541,758
--------------
FAIR
PRINCIPAL VALUE
- ------------- --------------
REVERSE REPURCHASE AGREEMENTS (f) - (80.75)%+
$ (957,500) With Credit Suisse for Allstate
Corp., 5.00% dated 12/31/07,
to be repurchased at $957,766
on 01/02/08 ............................... $ (957,500)
(3,040,000) With Credit Suisse for American
Express Centurion Bank,
5.00% dated 12/31/07, to be
repurchased at $3,040,844
on 01/02/08 ............................... (3,040,000)
(776,000) With Credit Suisse for American
Express Centurion Bank,
5.00% dated 12/31/07, to
be repurchased at $776,216
on 01/02/08 ............................... (776,000)
(1,900,000) With Credit Suisse for American
Express Credit, 5.00% dated
12/31/07, to be repurchased at
$1,900,528 on 01/02/08 .................... (1,900,000)
(1,940,000) With Credit Suisse for American
Express Credit, 5.00% dated
12/31/07, to be repurchased at
$1,940,539 on 01/02/08 .................... (1,940,000)
(5,820,000) With Credit Suisse for American
Express Credit, 5.00% dated
12/31/07, to be repurchased at
$5,821,617 on 01/02/08 .................... (5,820,000)
(4,875,000) With Credit Suisse for American
International Group, Inc.,
5.00% dated 12/31/07, to
be repurchased at $4,876,354
on 01/02/08 ............................... (4,875,000)
(3,880,000) With Credit Suisse for Bank of
America Corp., 5.00% dated
12/31/07, to be repurchased at
$3,881,078 on 01/02/08 .................... (3,880,000)
(2,467,680) With Credit Suisse for Bank One
Texas, 4.85% dated 12/31/07,
to be repurchased at
$2,468,345 on 01/02/08 .................... (2,467,680)
(1,940,000) With Credit Suisse for Chevron
Texaco Capital Corp., 5.00%
dated 12/31/07, to be
repurchased at $1,940,539 on
01/02/08 .................................. (1,940,000)
(3,880,000) With Credit Suisse for Chevron
Texaco Capital Corp., 5.00%
dated 12/31/07, to be
repurchased at $3,881,078
on 01/02/08 ............................... (3,880,000)
(2,910,000) With Credit Suisse for Citigroup
Global Markets, 5.00% dated
12/31/07, to be repurchased
at $2,910,808 on 01/02/08 ................. (2,910,000)
(4,850,000) With Credit Suisse for Citigroup,
Inc., 5.00% dated 12/31/07,
to be repurchased at
$4,851,347 on 01/02/08 .................... (4,850,000)
(970,000) With Credit Suisse for Citigroup,
Inc., 5.00% dated 12/31/07,
to be repurchased at $970,269
on 01/02/08 ............................... (970,000)
(970,000) With Credit Suisse for Citigroup,
Inc., 5.00% dated 12/31/07,
to be repurchased at $970,269
on 01/02/08 ............................... (970,000)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
SCHEDULE OF INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
FAIR
PRINCIPAL VALUE
- ------------- --------------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
$ (1,940,000) With Credit Suisse for Credit
Suisse (USA), Inc., 5.00%
dated 12/31/07, to be
repurchased at $1,940,539
on 01/02/08 ............................... $ (1,940,000)
(2,910,000) With Credit Suisse for Credit
Suisse (USA), Inc., 5.00%
dated 12/31/07, to be
repurchased at $2,910,808
on 01/02/08 ............................... (2,910,000)
(2,910,000) With Credit Suisse for Credit
Suisse First Boston, NY, 4.85%
dated 12/31/07, to be
repurchased at $2,910,784
on 01/02/08 ............................... (2,910,000)
(970,000) With Credit Suisse for Federal
Home Loan Bank, 4.95% dated
12/31/07, to be repurchased at
$970,267 on 01/02/08 ...................... (970,000)
(3,960,000) With Credit Suisse for Federal
Home Loan Mortgage, 5.00%
dated 12/31/07, to be
repurchased at $3,961,100
on 01/02/08 ............................... (3,960,000)
(3,960,000) With Credit Suisse for Federal
Home Loan Mortgage, 5.00%
dated 12/31/07, to be
repurchased at $3,961,100
on 01/02/08 ............................... (3,960,000)
(6,000,000) With Credit Suisse for Federal
Home Loan Mortgage, 5.00%
dated 12/31/07, to be
repurchased at $6,001,667
on 01/02/08 ............................... (6,000,000)
(3,000,000) With Credit Suisse for Federal
National Mortgage Association,
5.00% dated 12/31/07, to be
repurchased at $3,000,833
on 01/02/08 ............................... (3,000,000)
(4,000,000) With Credit Suisse for Federal
National Mortgage Association,
5.00% dated 12/31/07, to be
repurchased at $4,001,111
on 01/02/08 ............................... (4,000,000)
(6,000,000) With Credit Suisse for Federal
National Mortgage Association,
5.00% dated 12/31/07, to be
repurchased at $6,001,667
on 01/02/08 ............................... (6,000,000)
(2,850,000) With Credit Suisse for Fortis
Bank NY, 5.00% dated
12/31/07, to be repurchased
at $2,850,792 on 01/02/08 ................. (2,850,000)
(1,940,000) With Credit Suisse for General
Electric Capital Corp., 5.00%
dated 12/31/07, to be
repurchased at $1,940,539
on 01/02/08 ............................... (1,940,000)
(2,910,000) With Credit Suisse for General
Electric Capital Corp., 5.00%
dated 12/31/07, to be
repurchased at $2,910,808
on 01/02/08 ............................... (2,910,000)
FAIR
PRINCIPAL VALUE
- ------------- --------------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
$ (4,559,000) With Credit Suisse for General
Electric Capital Corp., 5.00%
dated 12/31/07, to be
repurchased at $4,560,266
on 01/02/08 ............................... $ (4,559,000)
(4,656,000) With Credit Suisse for General
Electric Capital Corp., 5.00%
dated 12/31/07, to be
repurchased at $4,657,293
on 01/02/08 ............................... (4,656,000)
(9,500,000) With Credit Suisse for General
Electric Capital Corp., 5.00%
dated 12/31/07, to be
repurchased at $9,502,639
on 01/02/08 ............................... (9,500,000)
(2,910,000) With Credit Suisse for Home
Depot, Inc., 5.00% dated
12/31/07, to be repurchased
at $2,910,808 on 01/02/08 ................. (2,910,000)
(5,092,500) With Credit Suisse for Home
Depot, Inc., 5.00% dated
12/31/07, to be repurchased
at $5,093,915 on 01/02/08 ................. (5,092,500)
(3,855,000) With Credit Suisse for HSBC
Bank (USA) NY, 5.00% dated
12/31/07, to be repurchased
at $3,856,071 on 01/02/08 ................. (3,855,000)
(2,850,000) With Credit Suisse for HSBC
Finance Corp., 5.00% dated
12/31/07, to be repurchased
at $2,850,792 on 01/02/08 ................. (2,850,000)
(1,940,000) With Credit Suisse for International
Business Machines Corp.,
5.00% dated 12/31/07, to
be repurchased at $1,940,539
on 01/02/08 ............................... (1,940,000)
(1,940,000) With Credit Suisse for International
Business Machines Corp.,
5.00% dated 12/31/07, to
be repurchased at $1,940,539
on 01/02/08 ............................... (1,940,000)
(3,800,000) With Credit Suisse for Jackson
National Life Fund, 5.00%
dated 12/31/07, to be
repurchased at $3,801,056
on 01/02/08 ............................... (3,800,000)
(1,187,500) With Credit Suisse for MassMutual
Global Funding II, 5.00%
dated 12/31/07, to be
repurchased at $1,187,830
on 01/02/08 ............................... (1,187,500)
(1,309,500) With Credit Suisse for MassMutual
Global Funding II, 5.00%
dated 12/31/07, to be
repurchased at $1,309,864
on 01/02/08 ............................... (1,309,500)
(4,474,125) With Credit Suisse for Merrill
Lynch & Co., Inc., 5.00%
dated 12/31/07, to be
repurchased at $4,475,368
on 01/02/08 ............................... (4,474,125)
(2,880,000) With Credit Suisse for Morgan
Stanley, 5.00% dated 12/31/07,
to be repurchased at $2,880,800
on 01/02/08 ............................... (2,880,000)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
SCHEDULE OF INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
FAIR
PRINCIPAL VALUE
- ------------- --------------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
$ (3,800,000) With Credit Suisse for Morgan
Stanley, 5.00% dated
12/31/07, to be repurchased
at $3,801,056 on 01/02/08 ................. $ (3,800,000)
(950,000) With Credit Suisse for Morgan
Stanley, 5.00% dated 12/31/07,
to be repurchased at $950,264
on 01/02/08 ............................... (950,000)
(1,187,500) With Credit Suisse for National
City Bank, 5.00% dated
12/31/07, to be repurchased
at $1,187,830 on 01/02/08 ................. (1,187,500)
(4,850,000) With Credit Suisse for National
City Bank, 5.00% dated
12/31/07, to be repurchased
at $4,851,347 on 01/02/08 ................. (4,850,000)
(3,800,000) With Credit Suisse for Nationwide
Life Global Funding, 5.00%
dated 12/31/07, to be
repurchased at $3,801,056
on 01/02/08 ............................... (3,800,000)
(4,292,250) With Credit Suisse for SLM Corp.,
5.00% dated 12/31/07, to be
repurchased at $4,293,442 on
01/02/08 .................................. (4,292,250)
(3,880,000) With Credit Suisse for Toyota
Motor Credit Corp., 5.00%
dated 12/31/07, to be
repurchased at $3,881,078
on 01/02/08 ............................... (3,880,000)
(6,790,000) With Credit Suisse for Wal-Mart
Stores, Inc., 5.00% dated
12/31/07, to be repurchased at
$6,791,886 on 01/02/08 .................... (6,790,000)
(2,328,000) With Credit Suisse for Wells
Fargo & Co., 5.00% dated
12/31/07, to be repurchased
at $2,328,647 on 01/02/08 ................. (2,328,000)
--------------
TOTAL REVERSE REPURCHASE AGREEMENTS
(Premiums Received
$(167,357,555)) ........................... (167,357,555)
--------------
TOTAL INVESTMENTS AND REVERSE
REPURCHASE AGREEMENTS - 96.59%+
(Cost $191,684,259) ....................................... 200,184,203
--------------
OTHER ASSETS IN EXCESS OF LIABILITIES - 3.41%+ ............... 7,076,838
--------------
NET ASSETS - 100.00%+ ........................................ $ 207,261,041
==============
- ----------
+ Percentages are calculated based on net assets, inclusive of reverse
repurchase agreements.
* Aggregate cost for federal tax purposes is $194,761,198. The aggregate
gross unrealized appreciation and depreciation for all securities and U.S.
Government securities on a tax basis is $15,474,409 and $6,974,465,
respectively.
(a) All Corporate Notes and Bonds and U.S. Government and Agency Obligations
are segregated as collateral for Reverse Repurchase Agreements as of
December 31, 2007.
(b) Floating rate note. The interest rate shown reflects the rate in effect at
December 31, 2007.
(c) Securities that may be resold in transactions exempt from registration
under Rule 144A of the Securities Act of 1933, as amended. These
securities may only be resold to qualified institutional buyers. At
December 31, 2007, total securities amounted to $18,609,666 or 8.98% of
net assets.
(d) Non-income producing security.
(e) Closed-End Fund
(f) A reverse repurchase agreement, although structured as a sale and
repurchase obligation, acts as a financing transaction under which the
Fund will effectively pledge certain assets as collateral to secure a
short-term loan. Generally the other party to the agreement makes the loan
in an amount equal to a percentage of the market value of the pledged
collateral. At the maturity of the reverse repurchase agreement, the Fund
will be required to repay the loan and correspondingly receive back its
collateral. While used as collateral, the assets continue to pay principal
and interest which are for the benefit of the Fund.
EMTN Euro Medium Term Note
ETN Exchange Traded Note
MTN Medium Term Note
NY New York
The amount of $3,370,226 in cash was segregated with the the broker, Credit
Suisse, to cover margin requirements for the following open futures contracts as
of December 31, 2007:
SHORT FUTURES NUMBER OF NOTIONAL UNREALIZED
OUTSTANDING CONTRACTS AMOUNT DEPRECIATION
- ------------------------------------------------------------------------
Canadian Dollar (03/08) 280 $27,899,000 $(378,000)
The amount of $3,519,670 in cash was segregated with the custodian to cover the
following total return swaps outstanding at December 31, 2007:
UNREALIZED
LONG TOTAL RETURN EXPIRATION NOTIONAL APPRECIATION/
EQUITY SWAPS DATE AMOUNT (DEPRECIATION)
- --------------------------------------------------------------------------
Fort Chicago Class A 9/13/11 $2,186,389 $ 122,922
Inter Pipeline Fund 9/13/11 1,342,395 18,893
Taylor NGL Ltd. 9/13/11 608,563 39,728
SHORT TOTAL RETURN
EQUITY SWAPS
- ------------------
iShares Dow Jones US Oil & Gas
Exploration 10/17/11 325,667 (6,678)
Oil Service Holders Trust 10/17/11 5,020,920 (75,370)
-------------------------
$9,483,934 $ 99,495
=========================
The amount of $1,462,475 in cash was segregated with the custodian to cover call
options written as of December 31, 2007.
NUMBER OF
CONTRACTS PREMIUM
- ------------------------------------------------------------------------
Outstanding, January 1, 2007 -- $ --
Call Options Written 2,310 261,968
Put Options Written 620 49,659
Call Options Closed (230) (24,870)
Put Options Closed -- --
Call Options Expired -- --
Put Options Expired (70) (2,030)
------ ----------
Outstanding, December 31, 2007 2,630 $ 284,727
====== ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
SCHEDULE OF INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
Premiums received and value of written options outstanding as of December 31,
2007.
NUMBER
OF
TYPE CONTRACTS PREMIUM VALUE
- -------------------------------------------------------------------
Call - Enbridge, Inc.
Strike @ $35.00 exp 01/19/08 180 $ 42,660 $ 99,000
Call - Enbridge, Inc.
Strike @ $40.00 exp 01/19/08 270 10,530 28,350
Call - Enbridge, Inc.
Strike @ $40.00 exp 04/19/08 400 38,800 104,000
Call - Spectra Energy Corp.
Strike @ $22.50 exp 03/22/08 100 21,700 36,000
Call - Spectra Energy Corp.
Strike @ $25.00 exp 03/22/08 340 36,379 59,500
Call - Spectra Energy Corp.
Strike @ $22.50 exp 06/21/08 50 15,850 19,500
Call - Spectra Energy Corp.
Strike @ $25.00 exp 06/21/08 130 22,359 28,925
Call - Spectra Energy Corp.
Strike @ $30.00 exp 06/21/08 50 1,475 2,125
Call - UGI Corp.
Strike @ $25.00 exp 01/19/08 110 14,520 25,850
Call - UGI Corp.
Strike @ $30.00 exp 01/19/08 140 560 1,400
Call - UGI Corp.
Strike @ $25.00 exp 04/19/08 170 29,240 47,175
Call - UGI Corp.
Strike @ $30.00 exp 04/19/08 140 3,025 3,850
---------------------------------
2,080 237,098 455,675
---------------------------------
Put - Spectra Energy Corp.
Strike @ $20.00 exp 03/22/08 130 7,670 650
Put - Spectra Energy Corp.
Strike @ $22.50 exp 03/22/08 140 18,679 2,800
Put - UGI Corp.
Strike @ $22.50 exp 01/19/08 70 2,030 700
Put - UGI Corp.
Strike @ $25.00 exp 01/19/08 70 6,580 875
Put - UGI Corp.
Strike @ $22.50 exp 04/19/08 70 3,430 875
Put - UGI Corp.
Strike @ $25.00 exp 04/19/08 70 9,240 2,625
---------------------------------
550 47,629 8,525
---------------------------------
2,630 $ 284,727 $ 464,200
=================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $359,041,814) .......................................................... $367,541,758
Restricted cash .................................................................................... 8,352,371
Foreign currency (Cost $11,329) .................................................................... 11,062
Receivables:
Dividends and interest ....................................................................... 2,236,544
Investments sold ............................................................................. 1,143,782
Fund shares sold ............................................................................. 224,300
Swaps (premium paid $31,451) ....................................................................... 212,994
Prepaid expenses ................................................................................... 85,154
------------
Total assets .............................................................................. 379,807,965
------------
LIABILITIES:
Reverse repurchase agreements ...................................................................... 167,357,555
Interest expense payable ........................................................................... 3,261,820
Investments purchased .............................................................................. 538,830
Outstanding options written, at value (premiums received $284,727) ................................. 464,200
Due to broker - variation margin on future contracts ............................................... 378,000
Swaps (premium received $233) ...................................................................... 82,281
Payables:
Professional fees ............................................................................ 189,988
Advisory fees (Note 3) ....................................................................... 171,787
Administration fees (Note 3) ................................................................. 46,043
Custodian fees ............................................................................... 12,622
Printing expense ............................................................................. 9,944
Trustees fees and related expenses (Note 3) .................................................. 5,255
Transfer agent fees .......................................................................... 4,270
Other payables ............................................................................... 24,329
------------
Total liabilities ......................................................................... 172,546,924
------------
NET ASSETS ......................................................................................... $207,261,041
============
NET ASSETS CONSIST OF:
Par value ....................................................................................... $ 184,650
Paid in capital ................................................................................. 195,617,102
Accumulated undistributed net investment income ................................................. 1,081,467
Accumulated net realized gain on investments, swap transactions,
futures contracts, written options and foreign currency transactions .......................... 2,333,713
Net unrealized appreciation on investments, swap transactions,
futures contracts, written options and foreign currency transactions .......................... 8,044,109
------------
$207,261,041
============
Shares outstanding (unlimited number of shares authorized) ......................................... 18,465,040
============
Net Asset Value, offering and redemption price per share
(net assets/shares outstanding), par value $0.01 per share ...................................... $ 11.22
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
EIP Growth and Income Fund
- --------------------------
FOR THE YEAR ENDED DECEMBER 31, 2007
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ................................................... $ 2,869,717
Less: foreign taxes withheld ................................ (309,573)
Interest .................................................... 10,238,300
------------
Total investment income .................................. 12,798,444
------------
EXPENSES:
Interest expense (Note 2) ................................... 7,912,349
Investment advisory fees (Note 3) ........................... 1,873,102
Administration fees (Note 3) ................................ 352,336
Professional fees ........................................... 350,578
Offering costs .............................................. 157,566
Custodian fees .............................................. 68,446
Transfer agent fees (Note 3) ................................ 49,519
Trustees fees and related expenses (Note 3) ................. 47,188
Printing expenses ........................................... 18,533
Registration expenses ....................................... 6,452
Other expenses .............................................. 99,469
------------
Total expenses ........................................... 10,935,538
------------
NET INVESTMENT INCOME .................................... 1,862,906
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
NET REALIZED GAIN/(LOSS) ON:
Investments ................................................. 12,133,478
Futures contracts ........................................... (2,825,973)
Swap transactions ........................................... (599,404)
Written options ............................................. 2,030
Foreign currency transactions ............................... (25,604)
------------
Net realized gain (loss) ................................. 8,684,527
------------
NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments ................................................. 4,117,048
Futures contracts ........................................... (613,000)
Swap transactions ........................................... (27,210)
Written options ............................................. (179,473)
Foreign currency transactions ............................... 4,902
------------
Net change in unrealized appreciation .................... 3,302,267
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ................ 11,986,794
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ..................... $ 13,849,700
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
EIP Growth and Income Fund
- --------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
2007 2006*
------------- -------------
OPERATIONS:
Net investment income .................................................................. $ 1,862,906 $ 543,018
Net realized gain on investments, swaps, futures, options and foreign currency
transactions ......................................................................... 8,684,527 69,772
Net change in unrealized appreciation on investments, swaps, futures, options and
foreign currency transactions ........................................................ 3,302,267 4,741,842
------------- -------------
Net increase in net assets from operations .......................................... 13,849,700 5,354,632
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................................................. -- (699,952)
Net realized gain on investments: ...................................................... (6,247,828) --
------------- -------------
Total distributions .............................................................. (6,247,828) (699,952)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Sales of shares ........................................................................ 88,480,262 139,748,000
Reinvestment of distributions .......................................................... 6,247,828 693,399
Shares redeemed: ....................................................................... (14,965,000) (25,200,000)
------------- -------------
Net increase in net assets from capital share transactions ....................... 79,763,090 115,241,399
------------- -------------
Total increase in net assets ..................................................... 87,364,962 119,896,079
------------- -------------
NET ASSETS:
BEGINNING OF PERIOD .......................................................................... 119,896,079 --
END OF PERIOD (INCLUDING LINE A) ............................................................. $ 207,261,041 $ 119,896,079
============= =============
(A) Undistributed net investment income/(loss) ............................................ $ 1,081,467 $ (142,401)
============= =============
- --------------------------------------------------------------------------------
* The Fund commenced operations on August 22, 2006.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
EIP Growth and Income Fund
- --------------------------
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net increase in net assets from operations ........................... $ 13,849,700
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Purchase of investment securities .................................... (262,378,380)
Proceeds from disposition of investment securities ................... 126,746,276
Net purchases of short-term investment securities .................... (997,452)
Net realized gain on investments ..................................... (12,133,478)
Net change in unrealized appreciation on investments ................. (4,117,048)
Net amortization of premium .......................................... (362,479)
Net increase in due to broker-variation margin on futures contracts .. 612,500
Net premiums received from options ................................... 284,727
Depreciation on written options ...................................... 179,473
Increase in interest expense payable ................................. 2,198,241
Increase in prepaid expenses ......................................... (23,892)
Decrease in prepaid offering ......................................... 161,411
Increase in advisory fee payable ..................................... 74,268
Net change in swap appreciation/depreciation ......................... 27,210
Increase in professional fees payable ................................ 44,488
Increase in administration fees payable .............................. 32,443
Increase in other payables ........................................... 11,653
Increase in printing expense payable ................................. 6,737
Increase in custodian fees payable ................................... 5,390
Increase in trustees fees and related expenses payable ............... 5,255
Increase in restricted cash .......................................... (6,617,941)
Increase in investments sold receivable .............................. (1,143,782)
Decrease in investments purchased payable ............................ (1,125,706)
Increase in dividends and interest receivable ........................ (1,009,619)
Premiums paid on swaps ............................................... (19,404)
Net change in unrealized depreciation on foreign currency
transactions ....................................................... (4,902)
Decrease in transfer agent fees payable .............................. (2,506)
-------------
Net cash used in operating activities ................................... (145,696,817)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in reverse repurchase agreements ........................ 72,406,917
Proceeds from shares sold (net of receivable for fund shares sold) ... 88,265,962
Payment of shares redeemed ........................................... (14,965,000)
-------------
Net cash flow provided by financing activities .......................... 145,707,879
Net increase in unrestricted cash and foreign currency ............... 11,062
BEGINNING OF YEAR ....................................................... $ --
-------------
END OF YEAR ............................................................. $ 11,062
=============
Cash paid for interest expense .......................................... $ 5,714,108
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
EIP Growth and Income Fund
- --------------------------
FINANCIAL HIGHLIGHTS DECEMBER 31, 2007
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING DURING THE PERIOD SHOWN.
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
12/31/07 12/31/06(a)
----------- ------------
Net asset value, beginning of period ...................... $ 10.50 $ 10.00
----------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.11 0.05
Net realized and unrealized gain on investments ........ 0.96 0.51
----------- ------------
Total from investment operations ....................... 1.07 0.56
----------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income .................................. -- (0.06)
Net realized gain on investments ....................... (0.35) --
----------- ------------
Total from distributions ............................... (0.35) (0.06)
----------- ------------
Net increase in net asset value ........................... 0.72 0.50
----------- ------------
Net asset value, end of period ............................ $ 11.22 $ 10.50
----------- ------------
TOTAL RETURN .............................................. 10.29% 5.62%*
=========== ============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $ 207,261 $ 119,896
Ratios of expenses to average net assets:
Operating expenses excluding interest expense .......... 1.61% 2.90%**
Operating expenses including interest expense .......... 5.84% 6.23%**
Ratios of net investment income to average net assets ..... 0.99% 1.69%**
Portfolio turnover rate ................................... 24% 6%*
- --------------------------------------------------------------------------------
(a) The Fund commenced operations on August 22, 2006.
* Not annualized
** Annualized
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
EIP Growth and Income Fund (the "Fund") is a diversified, open-end management
company. The Fund commenced operations on August 22, 2006. The Fund is currently
the sole series of EIP Investment Trust (the "Trust"), a Delaware statutory
trust. The Fund is managed by Energy Income Partners, LLC (the "Manager"). At
this time, the Fund does not intend to publicly offer its shares. Fund shares
are available only to certain unregistered investment companies through a
"master/feeder" arrangement pursuant to Section 12(d)(1)(E) of the Investment
Company Act of 1940, as amended (the "1940 Act") and certain other accredited
investors.
The Fund's primary investment objective is to seek a high level of total
shareholder return that is balanced between current income and growth. As a
secondary objective, the Fund will seek low volatility. Under normal market
conditions, the Fund's investments will be concentrated in the securities of one
or more issuers conducting their principal business activities in the Energy
Industry. Energy Industry is defined as enterprises connected to the
exploration, development, production, gathering, transportation, processing,
storing, refining, distribution, mining or marketing of natural gas, natural gas
liquids (including propane), crude oil, refined petroleum products, electricity,
coal or other energy sources.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements and which are in conformity
with accounting principles generally accepted in the United States of America
("U.S. GAAP") for investment companies. The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
SECURITY VALUATION: For purposes of valuing investment securities, readily
marketable portfolio securities listed on any exchange or the NASDAQ Global
Market are valued, except as indicated below, at the last sale price or the
NASDAQ official closing price as determined by NASDAQ on the business day as of
which such value is being determined. If there has been no sale on such day, the
securities are valued at either the last quoted bid price or the mean between
the most recent bid and asked priced on such day. Portfolio securities traded on
more than one securities exchange are valued at the last sale price on the
business day of which such value is being determined at the close of the
exchange representing the principal market for such securities. Investments
initially valued in currencies other than the U.S. dollar are converted to U.S.
dollars using exchange rates obtained from independent pricing services.
Equity securities traded in the over-the-counter market, but excluding
securities admitted to trading on the NAS-DAQ Global Market, are valued at the
closing bid prices or at the mean between the closing bid price and the closing
asked price by a third party. Fixed income securities will be valued by the Fund
using an independent pricing service. If reliable market quotations are not
readily available with respect to a portfolio security held by the Fund,
including any illiquid securities, or if a valuation is deemed inappropriate,
the fair value of such security will be determined in good faith under
procedures adopted by the Board of Trustees (the "Board").
The use of fair value pricing by the Fund indicates that a market price is
generally unavailable (such as when the exchange on which a security trades does
not open for the day due to extraordinary circumstances and no other market
prices are available or when events occur after the close of a relevant market
and prior to the close of the NYSE that materially affect the value of an asset)
and in such situations the Board (or a person or committee acting at the Board's
direction) will estimate the value of a security using available information. In
such situations, the values assigned to such securities may not necessarily
represent the amounts which might be realized upon their sale. The use of fair
value pricing by the Fund will be governed by valuation procedures adopted by
the Fund's Board of Trustees, and in accordance with the provisions of the 1940
Act. At December 31, 2007, there are no fair valued securities.
MLP COMMON UNITS: Master Limited Partnership ("MLP") common units represent
limited partnership interests in the MLP. Common units are generally listed and
traded on U.S. securities exchanges or over-the-counter with their value
fluctuating predominantly based on the success of the MLP. Unlike owners of
common stock of a corporation, owners of MLP common units have limited voting
rights and have no ability to annually elect directors. MLPs generally
distribute all available cash flow (cash flow from operations less maintenance
capital expenditures) in the form of quarterly distributions. Common unit
holders have first priority to receive quarterly cash distributions up to the
minimum quarterly distribution and have arrearage
15
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
rights. In the event of liquidation, common unit holders have preference over
subordinated units, but not debt holders or preferred unit holders, to the
remaining assets of the MLP.
REVERSE REPURCHASE AGREEMENTS: The Fund currently incurs leverage through the
use of reverse repurchase agreements and through the use of derivatives
contracts. In a reverse repurchase agreement, the Fund sells securities to a
bank, securities dealer or one of their respective affiliates and agrees to
repurchase such securities on demand or on a specified future date and at a
specified price. Reverse repurchase agreements involve the risk that the buyer
of the securities sold by the Fund might be unable to deliver them when the Fund
seeks to repurchase such securities. If the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent, the
buyer or a trustee or receiver may receive an extension of time to determine
whether to enforce the Fund's obligation to repurchase the securities, and the
Fund's use of the proceeds of the reverse repurchase agreement may effectively
be restricted pending that decision. The Fund will segregate assets in an amount
at least equal in amount to its obligations, marked to market daily, under any
reverse repurchase agreement or take other permissible actions to cover its
obligations. The use of leverage involves risks of increased volatility of the
Fund's investment portfolio.
Maximum amount outstanding
during the year $ 172,922,430
Average amount outstanding
during the year* $ 148,391,044
Average monthly shares outstanding
during the year 16,272,535
Average debt per share outstanding
during the year $ 9.12
* The average amount outstanding during the year was calculated by adding the
borrowings at the end of each day and dividing the sum by the number of days in
the year ended December 31, 2007.
Interest rates ranged from 4.74% to 5.61% during the year ended December 31,
2007, on borrowings by the Fund under reverse repurchased agreements. Interest
expense for the year ended December 31, 2007 aggregated $7,912,349, which is
included in the Statement of Operations under "Interest Expense".
SHORT SALES OF SECURITIES: The Fund may enter into short sale transactions. A
short sale is a transaction in which the Fund sells securities it does not own
(but has borrowed) in anticipation of a decline in the market price of the
securities. To complete a short sale, the Fund may arrange through a broker to
borrow the securities to be delivered to the buyer. The proceeds received by the
Fund for the short sale are retained by the broker until the Fund replaces the
borrowed securities. In borrowing the securities to be delivered to the buyer,
the Fund becomes obligated to replace the securities borrowed at their market
price at the time of replacement, whatever that price may be. The Fund did not
enter into any short sale transactions during the year ended December 31, 2007.
FUTURES CONTRACTS: The Fund may purchase or sell futures contracts to gain
exposure to market changes or for any other purpose permitted by applicable law.
The purchase of futures contracts may be more efficient or cost effective than
actually buying the securities. A futures contract is an agreement between two
parties to buy and sell an instrument at a set price on a future date and is
exchange traded. Upon entering into a futures contract, the Fund is required to
pledge to the broker an amount of cash, U.S. Government securities or other
high-quality debt securities equal to the minimum "initial margin" requirements
of the exchange. Pursuant to a contract entered into with a futures commission
merchant, the Fund agrees to receive from or pay to the broker an amount of cash
equal to the cumulative daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin" and is recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund records a
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. Pursuant to
regulations and/or published positions of the Securities and Exchange
Commission, the Fund may be required to segregate cash, U.S. Government
obligations or other liquid securities in connection with futures transactions
as required by law. The risks of entering into futures contracts include the
possibility that there may be an illiquid market and that a change in the value
of the contracts may not correlate with changes in the value of the underlying
securities.
CURRENCY HEDGING TRANSACTIONS: The Fund may engage in certain transactions
intended to hedge the Fund's exposure to currency risks, including without
limitations buying or selling options or futures, entering into forward foreign
currency contracts, currency swaps or options on currency and currency futures
and other derivative transactions. Hedging transactions can have risks,
including the
16
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
imperfect correlation between the value of such instruments and the underlying
assets, the possible default of the other party to the transaction or
illiquidity of the derivatives instruments.
FOREIGN CURRENCY TRANSLATIONS: The accounting records of the Fund are maintained
in U.S. dollars. The Fund may purchase securities that are denominated in
foreign currencies. Investment securities and other assets and liabilities
denominated in foreign currency are translated into U.S. dollars at the current
exchange rates. Purchases and sales of securities, income and expenses are
translated into U.S. dollars at the exchange rates on the dates of the
respective transactions.
Although the net assets of the Fund are calculated using the foreign exchange
rates and market values at the close of the period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of long-term securities held at the end of the period. Similarly, the
Fund does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term portfolio
securities sold during the period. Accordingly, foreign currency gains or losses
are included in the reported net realized and unrealized gain or loss on
investments.
Net realized gains or losses on foreign currency transactions represent net
foreign exchange gains or losses from the holding of foreign currencies,
currency gains or losses realized between the trade date and settlement date on
securities transactions, and the difference between the amounts of dividends,
interest and foreign withholding taxes recorded on the Funds' books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized currency
gains or losses from valuing foreign currency denominated assets and liabilities
(other than investments) at period end exchange rates are reflected as a
component of net unrealized appreciation (depreciation) on foreign currency
transactions.
SWAP AGREEMENTS: The Fund may enter into swap agreements as a substitute for
purchasing equity securities of issuers in the Energy Industry as defined in
Note 1 above, to achieve the same exposure as it would by engaging in short
sales transactions of energy securities, to hedge its currency exposure or for
any other purpose permitted by applicable law. A swap is a financial instrument
that typically involves the exchange of cash flows between two parties on
specified dates where the cash flows are based on agreed-upon prices, rates,
etc. In a typical equity swap agreement, one party agrees to pay another party
the return on a security or basket of securities in return for a specified
interest rate. By entering into swaps, the Fund can gain exposure to a security
without actually purchasing the underlying asset. Swap agreements involve both
the risk associated with the investment in the security as well as the risk that
the performance of the security, including any dividends, will not exceed the
interest that the Fund will be committed to pay under the swap. Swaps are
individually negotiated. Swap agreements may increase or decrease the overall
volatility of the investments of the Fund. The performance of swap agreements
may be affected by a change in the specific interest rate, security, currency,
or other factors that determine the amounts of payments due to and from the
Fund.
The Fund will maintain adequate cash reserves to meet its current obligations
under swap agreements. The Fund will only enter into swap agreements with
counterparties that have a long-term unsecured credit rating of at least A by
S&P or Aa3 by Moody's and a market capitalization of at least $10 billion or if
unrated are determined by the Fund's investment manager, Energy Income Partners,
LLC, to be of similar quality.
OPTIONS CONTRACTS: An option contract is a contract in which the writer of the
option grants the buyer of the option the right to purchase from (call option),
or sell to (put option), the writer a designated instrument at a specified price
within a specified period of time. Certain options, including options on
indices, will require cash settlement by the Fund if the option is exercised.
The Fund may enter into option contracts in order to hedge against potential
adverse price movements in the value of portfolio assets; as a temporary
substitute for selling selected investments; to lock in the purchase price of a
security or currency which it expects to purchase in the near future; as a
temporary substitute for purchasing selected investments; and to enhance
potential gain.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale on such day, the mean between the closing bid
and asked prices on such day or at the most recent asked price (bid for
purchased options) if no bid and asked prices are available. Over-the-counter
written or purchased options are valued using dealer supplied quotations. Gain
or loss is recognized when the option contract expires or is closed.
17
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
If the Fund writes a covered call option, the Fund foregoes, in exchange for the
premium, the opportunity to profit during the option period from an increase in
the market value of the underlying security above the exercise price. If the
Fund writes a put option it accepts the risk of a decline in the market value of
the underlying security below the exercise price. Over-the-counter options have
the risk of the potential inability of counterparties to meet the terms of their
contracts. The Fund's maximum exposure to purchased options is limited to the
premium initially paid. In addition, certain risks may arise upon entering into
option contracts including the risk that an illiquid secondary market will limit
the Fund's ability to close out an option contract prior to the expiration date
and that a change in the value of the option contract may not correlate exactly
with changes in the value of the securities or currencies hedged.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the specific identified cost basis. Dividend income
is recognized on the ex-dividend date. Dividend income on foreign securities is
recognized as soon as the Fund is informed of the ex-dividend date.
Distributions received in excess of income are recorded as a reduction of cost
of investments and/or as a realized gain. Interest income is recognized on the
accrual basis. All discounts/premiums are accreted/amortized using the effective
yield method.
DIVIDENDS AND DISTRIBUTIONS: At least annually, the Fund intends to distribute
all or substantially all of its investment company taxable income and net
capital gain. The tax treatment and characterization of the Fund's distributions
may vary significantly from time to time because of the varied nature of the
Fund's investments. The Fund will reinvest distributions in additional shares of
the Fund unless a shareholder has written to request distributions, in whole or
in part, in cash.
The Fund will be considered a nonpublicly offered Registered Investment Company
("RIC") under the Internal Revenue Code of 1986 (the "Code"). Thus, certain
expenses of the Fund, including the management fee, that generally would not be
deductible by certain shareholders (including individuals and entities that
compute their taxable income in the same manner as an individual) if incurred
directly by such shareholders are subject to special rules. In particular, such
a shareholder's pro rata portion of the affected expenses, including the
management fee payable to the Manager, will be taxable to such shareholders as
an additional dividend, but the deductibility of such expenses by such
shareholders will be subject to the 2% "floor" on miscellaneous itemized
deductions and other significant limitations on itemized deductions set forth in
the Code and will not be deductible for the purposes of calculating alternative
minimum tax.
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund. Permanent book and tax accounting differences relating to the
tax year ended June 30, 2007 and recorded in the year ended December 31, 2007
have been reclassified to reflect a decrease in undistributed net investment
income of $639,038, a decrease in accumulated net realized gain on investments
sold of $269,358 and an increase in paid-in capital of $908,396. Net assets were
not affected by this reclassification.
The tax character of distributions paid during the year ended December 31, 2007,
was as follows:
Distributions paid from:
Ordinary Income $ 6,247,828
As of December 31, 2007, the components
of distributable earnings on a tax basis
were as follows:
Undistributed Ordinary Income $ 3,610,082
Undistributed Long-Term Capital Gains $ --
Net Unrealized Appreciation $ 8,044,109
POST OCTOBER LOSSES: Under current laws, certain capital losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following tax year. For the tax year ended June 30, 2007, the Fund elected to
defer net long term realized capital losses on investments sold of $682,322 and
net realized currency losses of $16,473, incurred from November 1, 2006 through
June 30, 2007.
FEDERAL INCOME TAX: The Fund intends to qualify each year for taxation as a RIC
eligible for treatment under the provisions of Subchapter M of the Code. If the
Fund so qualifies and satisfies certain distribution requirements, the Fund will
not be subject to federal income tax on
18
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
income and gains distributed in a timely manner to its shareholders in the form
of dividends or capital gain dividends. The Fund has a tax year end of June 30.
Effective June 29, 2007, the Fund implemented Financial Accounting Standards
Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including investment companies, before being
measured and recognized in the financial statements. Management has evaluated
the application of FIN 48 to the Fund, and has determined that the adoption of
FIN 48 does not have a material impact on the Fund's financial statements.
The Fund files U.S. federal and Connecticut state tax returns. No income tax
returns are currently under examination. The Fund's U.S. federal tax return
remains open for examination for the year ended June 30, 2007. The Fund's
Connecticut state tax return remains open for examination for the year ended
June 30, 2007.
EXPENSES: The Fund will pay all of its own expenses incurred in its operations.
RECENTLY ISSUED ACCOUNTING STANDARDS: In September 2006, the FASB issued SFAS
No. 157, Fair Value Measurements, which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value
measurements. The provisions of SFAS No. 157 are effective for fiscal years
beginning after November 15, 2007. As of December 31, 2007, management has
evaluated the impact of adopting SFAS No. 157 and has determined there to be no
material impact to the financial statements.
3. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS
Pursuant to an investment advisory agreement dated August 17, 2006, Energy
Income Partners, LLC, serves as the Fund's investment manager with
responsibility for the management of the Fund's investment portfolio, subject to
the supervision of the Board of Trustees of the Fund. For providing such
services, the Fund will pay to the Manager a fee, computed and paid monthly at
the annual rate of 1% of the average daily net assets of the Fund.
PFPC Trust Company serves as custodian for the Fund and has custody of all
securities and cash of the Fund and attends to the collection of principal and
income and payment for and collection of proceeds of securities bought and sold
by the Fund.
PFPC Inc. serves as the transfer agent, registrar, dividend disbursing agent and
shareholder servicing agent for the Fund and provides certain clerical,
bookkeeping, shareholder servicing and administrative services necessary for the
operation of the Fund and maintenance of shareholder accounts.
PFPC Inc. also provides certain accounting and administrative services to the
Fund pursuant to an Administration and Accounting Services Agreement. For
administrative and accounting services, the Fund pays PFPC a fee equal to 0.07%
of the Fund's first $250 million of average gross assets, 0.05% of the Fund's
next $200 million of average gross assets and 0.03% of the Fund's average gross
assets in excess of $450 million, on a monthly basis, in addition to certain
out-of-pocket expenses. For regulatory administration services, the Fund pays
PFPC Inc. a fee equal to 0.03% of the Fund's first $250 million of average gross
assets and 0.02% of the Fund's average gross assets in excess of $250 million,
on a monthly basis, in addition to certain other fees and expenses.
The Fund does not charge any sales load or Rule 12b-1 fees. Currently, the Fund
offers only a single class of shares. The Fund is self-distributed and does not
have a principal underwriter or private placement agent.
The Fund pays each member of the Board of Trustees who is not an "interested
person" as defined in Section 2(a)(19) of the 1940 Act ("Disinterested
Trustees") an annual retainer fee of $20,000 which includes compensation for all
regular quarterly board meetings and regular committee meetings. Additional fees
of $1,250 and $400 are paid to Disinterested Trustees for special in-person
board or non-regular committee meetings and telephonic board or non-regular
committee meetings, respectively.
4. PURCHASES AND SALES
The aggregate amounts of purchases and sales of the Fund's investment
securities, other than short-term securities and U.S. Government securities, for
the year ended December 31, 2007 were $262,378,380 and $126,746,276,
respectively.
19
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
As of December 31, 2007, the aggregate gross unrealized appreciation and
depreciation for all securities and U.S. Government securities in which there
was an excess of value over tax cost was $15,474,409 and $6,974,465,
respectively.
5. SHARES OF BENEFICIAL INTEREST
The Trust has authorized capital of unlimited shares of beneficial interest with
a par value of $0.01 which may be issued in more than one class or series.
Currently, the Fund is the only series of the Trust and the Fund currently
offers one class of shares.
Share transactions were as follows:
YEAR ENDED
DECEMBER 31, 2007
----------------------------
SHARES AMOUNT
---------- --------------
Shares sold 7,797,106 $ 88,480,262
Shares issued as reinvestment of distribution 570,578 6,247,828
Shares redeemed (1,319,010) (14,965,000)
---------- ---------------
Total net increase from Fund share transactions 7,048,674 $ 79,763,090
========== ==============
PERIOD ENDED
DECEMBER 31, 2006*
----------------------------
SHARES AMOUNT
---------- --------------
Shares sold 13,763,932 $ 139,748,000
Shares issued as reinvestment of distribution 66,227 693,399
Shares redeemed (2,413,793) (25,200,000)
---------- --------------
Total net increase from Fund Share transactions 11,416,366 $ 115,241,399
========== ==============
* The Fund commenced operations on August 22, 2006.
6. INDUSTRY CONCENTRATION AND OTHER RISK FACTORS
The Fund's investments are concentrated in the Energy Industry and are likely to
present more risks than a fund that is broadly invested in a number of different
industries.
The Fund may invest in securities denominated or quoted in foreign currencies
and therefore changes in the exchange rate between the U.S. dollar and such
foreign currencies will affect the U.S. dollar value of these securities and the
unrealized appreciation or depreciation of these investments. The Fund intends
to hedge against certain currency risk by, among other techniques, buying or
selling options or futures or entering into other foreign currency transactions
including forward foreign currency contracts, currency swaps or options on
currency and currency futures and other derivatives transactions. The use of
hedging transactions have risks and may result in losses greater than if they
had not been used, may require the Fund to sell or purchase portfolio securities
at inopportune times or for prices other than current market values, may limit
the amount of appreciation the Fund can realize on an investment, or may cause
the Fund to hold a security that it might otherwise sell.
The Fund may transact in various financial instruments including futures
contracts, swap contracts and options. With these financial instruments, the
Fund is exposed to market risk in excess of the amounts recorded in the
statement of assets and liabilities. Further, the Fund is exposed to credit risk
from potential counterparty non-performance. At the statement of assets and
liabilities date, credit risk is limited to amounts recorded in the statement of
assets and liabilities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability or
the level of governmental supervision and regulation of foreign securities
markets.
20
EIP Growth and Income Fund
- --------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF EIP GROWTH AND INCOME FUND:
We have audited the accompanying statement of assets and liabilities of EIP
Growth and Income Fund (the "Fund"), the sole series of EIP Investment Trust
(the "Trust"), including the schedule of investments, as of December 31, 2007,
and the related statements of operations and cash flows for the year then ended,
the statements of changes in net assets and the financial highlights for the
year then ended and for the period from August 22, 2006 (commencement of
operations) through December 31, 2006. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits 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 and financial highlights are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
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, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2007, by correspondence with the
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of EIP
Growth and Income Fund of the EIP Investment Trust as of December 31, 2007, 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 then ended
and the period from August 22, 2006 (commencement of operations) through
December 31, 2006, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 26, 2008
21
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
FORM N-Q: The Trust files complete Portfolio of Investments for the Fund with
the U.S. Securities and Exchange Commission (the "SEC") for the Trust's first
and third quarters of each fiscal year on Form N-Q. The Trust's Forms N-Q are
available on the SEC's website at www.sec.gov and are available for review and
copying at the SEC's Public Reference Room in Washington, D.C. Information on
the operations of the Public Reference Room may be obtained by calling the SEC
at 1-800-SEC-0330.
PROXY VOTING: The Fund's Proxy Voting Policies and Procedures, used to determine
how to vote proxies relating to portfolio securities, are included in the
Trust's Statement of Additional Information, and are also available (i) upon
request, without charge, by calling collect 1-203-349-8323 or (ii) on the SEC's
website at www.sec.gov.
The Fund's Proxy Voting Record for the most recent twelve month period ended
June 30 is available (i) upon request, without charge, by calling collect
1-203-349-8323 or (ii) on the SEC's website at www.sec.gov.
TAX INFORMATION: Of the ordinary income distributions (including short-term
capital gain) made by the Fund during the year ended December 31, 2007, 6.75%
qualify for the corporate dividends received deduction available to corporate
shareholders.
The Fund hereby designates as qualified dividend income distributions 43.69% of
the ordinary income (including-short-term capital gain), for the year ended
December 31, 2007.
The Fund hereby designates as qualifying interest related dividends 100.00% of
the ordinary income distributions (including short-term capital gains), for the
year ended December 31, 2007.
DISCLOSURE OF FUND EXPENSES
We believe it is important for you to understand the impact of fees regarding
your investment. All mutual funds have operating expenses. As a shareholder of a
mutual fund, you incur ongoing costs, which include costs for portfolio
management, administrative services, and shareholder reports (like this one),
among others. Operating expenses, which are deducted from a fund's gross income,
directly reduce the investment return of the fund. A fund's expenses are
expressed as a percentage of its average net assets. This figure is known as the
expense ratio. The following examples are intended to help you understand the
ongoing fees (in dollars) of investing in the Fund and to compare these costs
with those of other mutual funds. The examples are based on an investment of
$1,000 made at the beginning of the period shown and held for the entire period.
This table illustrates the Fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses,
after any applicable fee waivers, which you paid over the period. The "Ending
Account Value" shown is derived from the Fund's actual return for the past six
month period, the "Expense Ratio" column shows the period's annualized expense
ratio, and the "Expenses Incurred During Period" column shows the dollar amount
that would have been paid by an investor who started with $1,000 in the Fund at
the beginning of the period.
You may use the information here, together with your account value, to estimate
the expenses that you paid over the period. To do so, simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number given in the first line under the heading
entitled "Expenses Incurred During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your Fund's
costs with those of other mutual funds. It assumes that the Fund had an annual
return of 5% before expenses, but that the expense ratio is unchanged. In this
case, because the return used is not the Fund's actual return, the results do
not apply to your investment. This example is useful in making comparisons to
other mutual funds because the SEC requires all mutual funds to calculate
expenses based on an assumed 5% annual return. You can assess your Fund's costs
by comparing this hypothetical example with the hypothetical examples that
appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight and help
you compare your ongoing costs only and do not reflect any transactional costs
such as sales charges (loads) and redemption fees. The Fund does not charge any
sales loads or redemption fees but these may be present in other funds to which
you compare this data. Therefore, the hypothetical portions of the table are
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds.
22
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
ADDITIONAL INFORMATION (UNAUDITED) - CONTINUED
EXPENSE
BEGINNING ENDING RATIO(1)(2) EXPENSES
ACCOUNT ACCOUNT INCLUDING INCURRED
VALUE VALUE INTEREST DURING
07/01/07 12/31/07 EXPENSE PERIOD(3)
---------- ---------- ----------- ---------
Actual Fund Return $ 1,000.00 $ 947.70 5.85% $ 28.72
Hypothetical 5% Return $ 1,000.00 $ 995.72 5.85% $ 29.43
(1) Annualized, based on the Fund's most recent fiscal half-year expenses.
(2) Expense ratio includes interest expense. If interest expense were not
included, the Fund's expense ratio would be 1.57%, and would result in the
following expenses:
EXPENSE
BEGINNING ENDING RATIO(1) EXPENSES
ACCOUNT ACCOUNT EXCLUDING INCURRED
VALUE VALUE INTEREST DURING
07/01/07 12/31/07 EXPENSE PERIOD(3)
---------- ---------- ----------- ---------
Actual Fund Return $ 1,000.00 $ 947.70 1.57% $ 7.71
Hypothetical 5% Return $ 1,000.00 $ 1,017.29 1.57% $ 7.98
(3) Expenses are equal to the Fund's annualized expense ratio, as indicated,
multiplied by the average account value over the period, multiplied by the
number of days in the most recent fiscal half-year or applicable period,
then divided by 365.
23
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
ADDITIONAL INFORMATION (UNAUDITED) - CONTINUED
TRUSTEES AND OFFICERS OF THE TRUST
Under Delaware law, the business and affairs of the Trust are managed under the
direction of the Board of Trustees. Information pertaining to the Trustees and
Executive Officers of the Trust is set forth below. The term "officer" means the
president, vice president, secretary, treasurer, controller or any other officer
who performs a policy making function.
NUMBER OF
TERM OF PORTFOLIOS IN
OFFICE(1) AND FUND COMPLEX OTHER TRUSTEESHIPS/
NAME, ADDRESS, AGE AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
POSITION(S) WITH TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
- ------------------------- -------------- ------------------------------------ ------------- --------------------
DISINTERESTED TRUSTEES
Kenneth I. Rosenblum Since Independent Consultant (since One Trustee of McMorgan
DOB: 04/27/41 December January 1990); Independent Director Funds (6 funds);
c/o EIP Investment Trust 2005 and Audit Committee Chairman, United Independent Director
49 Riverside Avenue Labor Bank, F.S.B. and First ULB of San Luis Trust
Westport, CT 06880 Corp. (1997-2003). Bank, San Luis
Trustee Obispo, CA
Salvatore Faia Since President, Vigilant Compliance One None
DOB: 12/25/62 December Services, (mutual fund and
c/o EIP Investment Trust 2005 investment adviser compliance
49 Riverside Avenue company) (since August 2004); Senior
Westport, CT 06880 Legal Counsel, PFPC Inc.
Trustee (2002-2004), Partner, Pepper
Hamilton LLP (law firm) (1997-2001).
INTERESTED TRUSTEES
James J. Murchie(2) Since July Principal, Energy Income Partners, One None
DOB: 11/14/57 2006 LLC (2003-2004, since 2006);
c/o EIP Investment Trust Principal, Pequot Capital, Inc.
49 Riverside Avenue (investment adviser) (2004-2006);
Westport, CT 06880 Principal, Lawhill Capital Partners,
President LLC (investment adviser)
(1997-2003).
OFFICERS WHO ARE NOT TRUSTEES
Linda Longville Since July Principal, Energy Income Partners, N/A N/A
DOB: 07/26/58 2006 LLC (2003-2004, since 2006);
c/o EIP Investment Trust Research Analyst, Pequot Capital,
49 Riverside Avenue Inc. (investment adviser)
Westport, CT 06880 (2004-2006); Research Analyst,
Treasurer and Principal Lawhill Capital Partners, LLC
Financial (investment adviser) (2001-2003).
and Accounting Officer
Eva Pao Since July Principal, Energy Income Partners, N/A N/A
DOB: 04/18/746 2006 LLC (2003-2004, since 2006); Co-
c/o EIP Investment Trust Portfolio Manager, Pequot Capital,
49 Riverside Avenue Inc. (investment adviser)
Westport, CT 06880 (2004-2006).
Chief Legal Officer,
Chief Compliance Officer
and Anti-Money Laundering
Compliance Officer
24
EIP Growth and Income Fund
- --------------------------
DECEMBER 31, 2007
ADDITIONAL INFORMATION (UNAUDITED) - CONTINUED
NUMBER OF
TERM OF PORTFOLIOS IN
OFFICE(1) AND FUND COMPLEX OTHER TRUSTEESHIPS/
NAME, ADDRESS, AGE AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
POSITION(S) WITH TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
- ------------------------- -------------- ------------------------------------ ------------- --------------------
OFFICERS WHO ARE NOT TRUSTEES
David Lebisky Since Vice President and Director, PFPC N/A N/A
DOB: 05/19/72 December Inc. (since 1996); Assistant
C/o PFPC Inc. 2005 Secretary, Wilshire Mutual Funds,
760 Moore Road Inc. (since 2002); Secretary,
King of Prussia, PA 19406 Harris Insight FundsTrust (mutual
Secretary fund) (1999-2006).
- ----------
(1) Each Trustee serves during the continued lifetime of the Trust until he or
she dies, resigns or is removed, or, if sooner, until the next meeting of
shareholders called for the purpose of electing Trustees and until the
election and qualification of his or her successor. Except as otherwise
provided by law, the Trust's Declaration of Trust or Bylaws, the President
and the Treasurer hold office until his or her resignation has been
accepted by the Trustees or until his or her respective successor has been
duly elected and qualified, or in each case until he or she sooner dies,
resigns, is removed or becomes disqualified. All other officers hold office
at the pleasure of the Trustees.
(2) Mr. Murchie is deemed an "interested person" of the Fund due to his
position of Principal of the Manager and President of the Fund.
The Fund's Statement of Additional Information includes additional information
about the Fund's trustees and is available, without charge, upon request by
calling collect 1-203-349-8232.
25
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EIP Growth and Income Fund
ADVISER
Energy Income Partners, LLC
49 Riverside Avenue
Westport, CT 06880
SHAREHOLDER SERVICES
PFPC Inc.
760 Moore Road
King of Prussia, PA 19406
OFFICERS
James J. Murchie, President
Linda Longville, Treasurer and Principal
Financial and Accounting Officer
Eva Pao, Chief Legal Officer, Chief
Compliance Officer and Anti-Money
Laundering Compliance Officer
David Lebisky, Secretary
CUSTODIAN
PFPC Trust Company
8800 Tinicum Boulevard, 3rd Floor
Philadelphia, PA 19153
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02110
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
1700 Market Street
Philadelphia, PA 19103
[EIP LOGO]
EIP Growth and Income Fund
----------------------------
49 Riverside Avenue
Westport, CT 06880
203.349.8232
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.
(b) Omitted
(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.
(e) Not applicable.
(f) Omitted
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The board of trustees of the registrant has determined that Mr. Salvatore Faia
qualifies as an "audit committee financial expert" (as such term has been
defined by the Regulations) based on its review of his pertinent experience,
knowledge and education. Mr. Faia is "independent," as defined by this Item 3.
The SEC has stated that the designation or identification of a person as an
audit committee financial expert pursuant to this Item 3 of Form N-CSR does not
impose on such person any duties, obligations or liability that are greater than
the duties, obligations and liability imposed on such person as a member of the
audit committee and the board of trustees in absence of such designation or
identification.
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 $50,000 for the fiscal year ended December 31, 2006 and
$53,000 for the fiscal year ended December 31, 2007.
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 $0 for the fiscal year ended December
31, 2006 and $0 for the fiscal year ended December 31, 2007.
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 $25,000 for the fiscal
year ended December 31, 2006 and $26,000 for the fiscal year ended
December 31, 2007. The nature of these services was to prepare Form
1120-RIC, along with applicable state income/franchise tax returns
as well as Form 8613, Return of Excise Tax on Undistributed Income
of Regulated Investment companies.
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 the fiscal year ended December 31, 2006 and $25,000
for the fiscal year ended December 31, 2007. The nature of these
services was to study state tax filing requirements as they relate
to FIN48 (Accounting for Uncertainty in Income Taxes).
(e)(1) The audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X are as
follows:
EIP INVESTMENT TRUST 1
AUDIT COMMITTEE POLICY: PRE-APPROVAL OF SERVICES PROVIDED BY
INDEPENDENT ACCOUNTANTS
I. INTRODUCTION
The Funds are required to prepare and file audited financial
statements. 2 Audited financial statements must be examined by an
"independent" accountant. 3 Rule 2-01(b) of Regulation S-X
- ----------
1 These policies and procedures apply to EIP Investment Trust (the "Trust") as
well as to its currently outstanding series (each, a "Fund," and such series
collectively with the Trust, the "Funds").
2 SEE, E.G., Rule 3-18 of Regulation S-X.
3 SEE, E.G., Rule 1-02(d) of Regulation S-X.
provides that the Securities and Exchange Commission ("SEC") will
"not recognize an accountant as independent, with respect to an
audit client, if the accountant is not . . . capable of exercising
objective and impartial judgment on all issues encompassed within
the accountant's engagement." Rule 2-01(c) elaborates on this
general standard by providing specific circumstances in which an
accountant will not be considered independent. Recently adopted
rules and amendments to existing rules operate by providing that an
accountant will not be considered independent with respect to a
client if the accountant and the client (including certain of the
client's affiliates) do not comply with the restrictions on
prohibited services and the rules requiring audit committee
pre-approval of services. Therefore, the Audit Committee
("Committee") of the Funds has adopted the following policies and
procedures in order to ensure that the Funds comply with the above
requirements.
Each Fund's Committee is charged with the oversight of the Fund's
financial reporting policies and practices and their internal
controls. As part of this responsibility, a Fund's Committee must
pre-approve any engagement of the Fund's auditors to render audit
and/or permissible non-audit services to the Fund as well as to the
Fund's investment adviser (Energy Income Partners, LLC, "EIP") or
any entity controlling, controlled by or under common control with
EIP that provides ongoing services to the Fund ("Applicable Service
Providers"), if the engagement relates directly to the operations
and financial reporting of the Fund. 4
In evaluating a proposed engagement by the independent accountants,
the Committee will assess the effect that the engagement might
reasonably be expected to have on the accountants' independence. The
Committee's evaluation will be based on:
o a review of the nature of the professional services expected
to be provided;
o the fees to be charged in connection with the services
expected to be provided;
o a review of the safeguards put into place by the accounting
firm to safeguard independence; and
o periodic meetings with the accounting firm.
The Committee need not evaluate all four factors each time they
pre-approve a service; they may rely on previous evaluations to the
extent they consider appropriate.
A FUND AND ITS APPLICABLE SERVICE PROVIDERS ARE PROHIBITED FROM
ENGAGING THE FUND'S INDEPENDENT ACCOUNTANTS TO PROVIDE SERVICES
EXCEPT IN ACCORDANCE WITH THESE PROCEDURES. SIMILARLY, A FUND'S
INDEPENDENT ACCOUNTANTS ARE PROHIBITED FROM PROVIDING SERVICES TO A
FUND, ITS APPLICABLE SERVICE PROVIDERS OR OTHER ENTITIES COMPRISING
THE "CLIENT" FOR PURPOSES OF THE ENGAGEMENT (SEE SECTION III BELOW)
EXCEPT IN ACCORDANCE WITH THESE PROCEDURES.
II. POLICY FOR PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES TO BE
PROVIDED TO THE FUNDS
- ----------
4 Rule 2-01(c)(7) of Regulation S-X
On an annual basis, a Fund's Committee will review and, if the
Committee so determines, pre-approve the scope of the audits of the
Fund and proposed audit fees and permitted non-audit (including
audit-related) services that are proposed to be performed by the
Fund's independent accountants for the Fund and its Applicable
Service Providers (to the extent the services to be provided to the
Applicable Service Providers relate directly to the operations and
financial reporting of the Fund). The Committee may also pre-approve
services at any other in-person or telephonic Committee meeting. At
least annually, the Committee will receive a report of all audit and
non-audit services that were rendered in the previous calendar year
by the independent accountants for the Fund and its Applicable
Service Providers.
In addition to the Committee's pre-approval of services pursuant to
this Policy, the engagement of the independent accounting firm for
any permitted non-audit service provided to the Fund will also
require the separate pre-approval of the President, Treasurer or
Assistant Treasurer of the Fund, who may only grant such approval if
he or she believes that the accounting firm's engagement will not
adversely affect the firm's independence. All non-audit services
performed by the independent accounting firm will be disclosed, to
the extent required, in filings with the Securities and Exchange
Commission ("SEC").
A. AUDIT SERVICES
The categories of audit services and related fees to be reviewed and
pre-approved annually by the Committee in connection with the audit
of the Fund are:
o Annual Fund financial statement audits
o Seed audits (related to new product filings, as required)
o SEC and regulatory filings and consents
o Semiannual financial statement reviews
Individual audit services that fall within one of these categories
and are not presented to the Committee as part of the annual
pre-approval process described above, may be pre-approved, if deemed
consistent with the accounting firm's independence, by the Committee
at any regular or special meeting. Such services may also be
pre-approved by the Committee Chair (or any other Committee member
who is a disinterested trustee under the Investment Company Act to
whom this responsibility has been delegated) so long as the
estimated fee for the particular service for which pre-approval is
sought does not exceed $75,000. Any pre-approval by a Committee
member shall be reported to the full Committee at its next regularly
scheduled meeting.
B. AUDIT-RELATED SERVICES
The following categories of audit-related services are generally
considered to be consistent with the role of the Fund's independent
accountants and services falling under one of these categories will
be pre-approved by the Committee on an annual basis if the Committee
deems those services to be consistent with the accounting firm's
independence:
o Accounting consultations
o Fund merger support services
o Agreed upon procedure reports (inclusive of quarterly review
of Basic Maintenance testing associated with issuance of
Preferred Shares and semiannual report review)
o Other attestation reports
o Comfort letters
o Other internal control reports
Individual audit-related services that fall within one of these
categories and are not presented to the Committee as part of the
annual pre-approval process described above, may be pre-approved, if
deemed consistent with the accounting firm's independence, by the
Committee at any regular or special meeting or by the Committee
Chair (or any other Committee member who is a disinterested trustee
under the Investment Company Act to whom this responsibility has
been delegated) so long as the estimated fee for the particular
service for which pre-approval is sought does not exceed $100,000.
Any pre-approval by a Committee Member shall be reported to the full
Committee at its next regularly scheduled meeting.
C. TAX SERVICES
The following categories of tax services are generally considered to
be consistent with the role of a Fund's independent accountants and
services falling under one of these categories will be pre-approved
by the Committee on an annual basis if the Committee deems those
services to be consistent with the accounting firm's independence:
o Federal, state and local income tax compliance and sales and
use tax compliance, including required filings and amendments
o Timely RIC qualification reviews
o Tax distribution analysis and planning
o Tax authority examination services
o Tax appeals support services
o Accounting methods studies
o Fund merger support services
o Other tax consulting services and related projects
Individual tax services that fall within one of these categories and
are not presented to the Committee as part of the annual
pre-approval process described above, may be pre-approved, if deemed
consistent with the accounting firm's independence, by the Committee
at any regular or special meeting. Such services may also be
pre-approved by the Committee Chairman (or any other Committee
member who is a disinterested trustee under the Investment Company
Act to whom this responsibility has been delegated) so long as the
estimated fee for the particular service for which pre-approval is
sought does not exceed $100,000. Any pre-approval by a Committee
Member shall be reported to the full Committee at its next regularly
scheduled meeting.
D. OTHER SERVICES
Services that are proposed to be provided to a Fund which are not
audit, audit-related or tax services may be pre-approved, if deemed
consistent with the accounting firm's independence, by the Committee
at any regular or special meeting. Such services may also be
pre-approved by the Committee Chair (or any other Committee member
who is a disinterested trustee under the Investment Company Act to
whom this responsibility has been delegated) so long as the
estimated fee for the particular service for which pre-approval is
sought does not exceed
$100,000. Any pre-approval by a Committee member shall be reported
to the full Committee at its next regularly scheduled meeting.
III. PROHIBITED SERVICES
A Fund's independent accountants will not render to the Funds or any
"audit client" 5 those services set forth in Rule 2-01(c)(4) of
Regulation S-X. Those services consist of:
o Bookkeeping or other services related to the accounting
records or financial statements of the audit client*
o Financial information systems design and implementation*
o Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports*
o Actuarial services*
o Internal audit outsourcing services*
o Management functions or human resources
o Broker or dealer, investment adviser or investment banking
services
o Legal services and expert services unrelated to the audit
o Any other service that the Public Company Accounting Oversight
Board determines, by regulation, is impermissible
----------
* Such services are not prohibited under Rule 2-01(c)(4) of
Regulation S-X if it is reasonable to conclude that the results of
these services will not be subject to audit procedures during the
audit of the audit client's financial statements.
IV. PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO OTHER ENTITIES
WITHIN THE FUND COMPLEX
- ----------
5 For purposes of Rule 2-01, the "audit client" includes, with respect to
all Funds, all of the following entities:
(i) the Fund [whose financial statements are] being audited, reviewed or
attested;
(ii) EIP (not including sub-advisers whose role is primarily portfolio
management and who are subcontracted with or overseen by another
investment adviser, although affiliated sub-advisers will be
included through the operation of clause (iii) below) or the Fund's
sponsor (defined as an entity that establishes a unit investment
trust);
(iii) any entity controlling, controlled by or under common control with
EIP or the Fund's sponsor if the entity (A) is an investment adviser
or sponsor, or (B) is engaged in the business of providing
administrative, custodian, underwriting or transfer agent services
to any investment company, investment adviser, or sponsor; and
(iv) any fund or entity excluded from the definition of investment
company by Section 3(c) of the Investment Company Act of 1940 that
has an investment adviser or sponsor referred to in clauses (ii) or
(iii) above.
Rule 2-01(c)(7) of Regulation S-X provides that an accountant is not
independent of a Fund unless the Fund's Committee approves any
permitted non-audit services to be provided to the Fund's Applicable
Service Providers, provided, in each case, that the engagement
relates directly to the operations and financial reporting of the
Fund.
Services to be provided to Applicable Service Providers that are
required to be pre-approved, may be pre-approved, if deemed
consistent with the accounting firm's independence, by the Committee
at a regular or special meeting or by the Committee Chairman (or any
other Committee member who is a disinterested trustee under the
Investment Company Act to whom this responsibility has been
delegated) so long as the estimated fee does not exceed $100,000 per
service. If a service is approved by a Committee member, the full
Committee is notified of such pre-approval at its next regularly
scheduled meeting.
Although the Committee will not be required to pre-approve all
services provided to Applicable Service Providers and their
affiliates, the Committee will receive an annual report from the
Fund's independent accounting firm showing the aggregate fees for
all services provided to Applicable Service Providers and their
affiliates.
V. DE MINIMIS EXCEPTION TO REQUIREMENT OF PRE-APPROVAL OF
NON-AUDIT SERVICES
Rule 2-01(c)(7)(i)(c) of Regulation S-X provides a relatively narrow
exceptions (sometimes referred to as the "DE MINIMIS" exception to
the pre-approval requirements. The exception appears limited in
practice to situations in which a Fund believes at the time of the
engagement that a service will be provided as part of the audit of a
Fund, but which upon reflection turns out to be a non-audit service.
Because of the limited application of this exception, it should
never be relied upon without first obtaining the Fund's Chief
Compliance Officer's ("CCO") approval.
VI. OVERSIGHT AND MONITORING
A Fund's CCO will be responsible for determining that a Fund's
Applicable Service Providers and independent accountants have
adopted and implemented policies and procedures reasonably designed
to prevent violations of these Procedures. If the CCO determines
that the Applicable Service Providers' or the independent auditor's
policies and procedures do not meet such standard, the CCO shall
notify the Applicable Service Provider or the independent auditors
of the deficiency and request that the Applicable Service Provider
or the independent auditors indicate how it intends to address the
deficiency. If the deficiency is not addressed to the CCO's
satisfaction within a reasonable time after such notification (as
determined by the CCO), then the CCO shall promptly notify the
Fund's Board of Directors/Trustees of the deficiency and shall
discuss with the Board possible responses.
* * * * *
(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) N/A
(c) 0%
(d) 0%
(f) Not applicable.
(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 $66,000 for the fiscal year ended
December 31, 2006 and $67,000 for the fiscal year ended December 31,
2007.
(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.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
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.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
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) EIP Investment Trust's (the "Registrant") principal executive and
principal financial officers have concluded, based on their
evaluation of the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days of the filing
date of this report, that the Registrant's disclosure controls and
procedures are reasonably designed to provide reasonable assurance
that information required to be disclosed by the Registrant on Form
N-CSR is recorded, processed, summarized and reported within the
required time periods and that information required to be disclosed
by the Registrant in the reports that it files or submits on Form
N-CSR is accumulated and communicated to the Registrant's
management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the Registrant's internal control over
financial reporting during the Registrant's last fiscal quarter that
have materially affected, or are reasonably likely to materially
affect, the internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is 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.
(a)(3) Not applicable.
(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.
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) EIP Investment Trust
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By (Signature and Title) /s/ James Murchie
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James Murchie, President
(principal executive officer)
Date 2/25/08
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ James Murchie
-------------------------------------------------------
James Murchie, President
(principal executive officer)
Date 2/25/08
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By (Signature and Title) /s/ Linda Longville
-------------------------------------------------------
Linda Longville, Treasurer and Principal Financial
and Accounting Officer
(principal financial officer)
Date 2/25/08
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