Certified Semi-annual Shareholder Report for Management Investment Companies (n-csrs)

Share Name	Share Symbol	Market	Type
Duff and Phelps Select MLP and Midstream Energy Fund Inc	NYSE:DSE	NYSE	Common Stock

Share Name

Share Symbol

Market

Type

Duff and Phelps Select MLP and Midstream Energy Fund Inc

NYSE:DSE

NYSE

Common Stock

	Price Change	% Change	Share Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	9.49				0	00:00:00

Price Change

% Change

Share Price

High Price

Low Price

Open Price

Shares Traded

Last Trade

0.00

0.00%

9.49

00:00:00

Certified Semi-annual Shareholder Report for Management Investment Companies (n-csrs)

05/08/2020 8:58pm

Edgar (US Regulatory)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number 811-22958

Duff & Phelps Select MLP and Midstream Energy Fund Inc.

(Exact name of registrant as specified in charter)

101 Munson Street

Greenfield, MA 01301

(Address of principal executive offices) (Zip code)

Jennifer Fromm, Esq.

Vice President, Chief Legal Officer, Counsel and Secretary for Registrant

One Financial Plaza

Hartford, CT 06103-4506

(Name and address of agent for service)

Registrant’s telephone number, including area code: 866-270-7788

Date of fiscal year end: November 30

Date of reporting period: May 31, 2020

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, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Reports to Stockholders.

The Report to Shareholders is attached herewith.

May 31, 2020

SEMIANNUAL REPORT

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports like this one will no longer be sent by mail, unless specifically requested from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

You may elect at any time to receive not only shareholder reports but also certain other communications from the Fund electronically, or you may elect to receive paper copies of all future shareholder reports free of charge to you. If you own your shares directly with the Fund, you may make such elections by calling the Fund at 1-866-270-7788 or, with respect to requesting electronic delivery, by visiting www.virtus.com. If you own your shares through a financial intermediary, please contact your financial intermediary to make your request and to determine whether your election will apply to all funds in which you own shares through that intermediary.

Not FDIC Insured • No Bank Guarantee • May Lose Value

Table of Contents

Duff & Phelps Select MLP and Midstream Energy Fund Inc.

Message to Shareholders	1
Manager’s Discussion of Fund Performance	2
Our Privacy Commitment	5
Portfolio Holdings Summary Weightings	6
Key Investment Terms	7
Schedule of Investments	9
Statement of Assets and Liabilities	11
Statement of Operations	12
Statements of Changes in Net Assets	13
Statement of Cash Flows	14
Financial Highlights	15
Notes to Financial Statements	17
Results of Annual Meeting of Shareholders	28

Table of Contents

MESSAGE TO SHAREHOLDERS

Dear Duff & Phelps Select MLP and Midstream Energy Fund Inc. Shareholder:

This semiannual report reviews the performance of the Duff & Phelps Select MLP and Midstream Energy Fund Inc. (DSE) for the six months ended May 31, 2020. It contains commentary from the portfolio management team at Duff & Phelps Investment Management concerning the U.S. energy market and the Fund’s performance during a challenging and unprecedented period for the energy sector.

For the six-month period, the Fund’s net asset value (NAV) declined 82.20%, including $0.15 in reinvested distributions, and its market price decreased 82.59%. For the same period, the Alerian MLP Index lost 24.26% and the average NAV performance of the Fund’s peer group, as represented by the Lipper Energy MLP Closed-End Fund Average, was (50.94%),¹ including reinvested dividends.

Given the Fund’s low asset levels, the Board of Directors has recommended to shareholders that the Fund be liquidated. This proposal is subject to a shareholder vote scheduled for July 23, 2020. As of this writing, the Fund is continuing to be managed according to its mandate. Additional information about the proposed liquidation is contained in the “Management’s Discussion of Fund Performance” section of this report, and in proxy materials that have been mailed to shareholders.

On behalf of the Fund and its investment management team, I thank you for your business. If you have any questions about the proposed proxy vote or your account, our customer service team is ready to assist you at 866-270-7788 or through the closed-end fund section of Virtus.com.

Sincerely,

George R. Aylward
President, Chief Executive Officer, and Director

Duff & Phelps Select MLP and Midstream Energy Fund Inc.

July 2020

¹Average NAV performance as calculated for the Lipper Energy MLP Closed-End Fund Average may differ from any constituent fund’s stated performance.

Performance data quoted represents past results. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown above.

Table of Contents

DUFF & PHELPS SELECT MLP AND MIDSTREAM ENERGY FUND INC.

MANAGER’S DISCUSSION OF FUND PERFORMANCE (Unaudited)

May 31, 2020

About the Fund:

The Duff & Phelps Select MLP and Midstream Energy Fund Inc. (NYSE: DSE) (the “Fund”) invests at least 80% of its Managed Assets in energy master limited partnerships (“MLPs”) and midstream energy companies that are not organized as MLPs. The Fund’s “Managed Assets” are equal to its net assets plus any outstanding preferred stock and/or borrowings made for the purpose of leverage. The Fund may invest up to 20% of its Managed Assets in securities of issuers either: (i) in the energy sector and that are not midstream energy companies or (ii) that produce products that are primarily for the use of companies in the energy sector (such as sand miners, certain chemical companies, and coking coal processors). The Fund’s investment objective is to seek a high level of total return resulting from a combination of current tax-deferred distributions and capital appreciation. There is no guarantee that the Fund will achieve its investment objective.

As of May 31, 2020, the Fund’s leverage consisted of $3 million of borrowings made pursuant to a line of credit which represented approximately 15% of the Fund’s total assets.

Manager Comments – Duff & Phelps Investment Management Co. (“DPIM”)

The Duff & Phelps Select MLP and Midstream Energy Fund Inc. is subadvised by Duff & Phelps Investment Management Co., and managed by a team of two dedicated MLP investment professionals with average industry experience of more than 23 years: David D. Grumhaus, Jr., Senior Portfolio Manager, and Rodney C. Clayton, CFA, Portfolio Manager. The following commentary is provided by the portfolio management team at DPIM, and covers the period from December 1, 2019 through May 31, 2020.

How did the markets perform during the Fund’s six months ended May 31, 2020?

The -24.3% return (as measured by the Alerian MLP Index) for the midstream energy sector for the first half of the fiscal year seems bad enough, but it does not even do justice to how poorly the sector performed. From January 16 to March 18, the sector fell an astounding 66.8%, driven by the combination of COVID-19, the Saudi-Russia oil price war, and extreme technical selling (which is selling based upon market signals that an asset is likely to decrease in price, rather than based upon an analysis of the asset’s inherent value) by Master Limited Partnership (MLP) closed-end funds. The price drop in March (-47%) was more than 2.5 times worse than the previous worst month since the sector’s inception back in 1996.

After a “Santa Claus” rally in mid-December 2019 and early January 2020, the midstream energy sector started to fade even before headlines about the coronavirus began to emerge from China in the second half of January. The Alerian MLP Index hit its high for the period on January 16, while the broader market did not peak until February 19. A big part of the driver was oil, which peaked at $63 in early January after moving up 13% during the fourth quarter of 2019. While the broader market was slow to understand the broader economic effects of COVID-19, it was quick to worry about the impacts of the coronavirus on Chinese oil demand, especially given the near-immediate curtailment of airline flights. The price of West Texas Intermediate (WTI) crude oil fell about $10 per barrel from its early January peak to the time when the market peaked, but then accelerated downward in late February and early March as the market went into full risk-off mode. Of course, this move was just a prelude to what was coming next. An OPEC meeting in early March was supposed to lead to a further cut in oil production. However, when

For information regarding the indexes and certain key investment terms, see Key Investment Terms starting on page 7.

Table of Contents

DUFF & PHELPS SELECT MLP AND MIDSTREAM ENERGY FUND INC.

MANAGER’S DISCUSSION OF FUND PERFORMANCE (Unaudited) (Continued)

May 31, 2020

Russia refused to join Saudi Arabia in further oil curtailment, the Saudis immediately reversed course and announced a massive increase in production and exports in an effort to force curtailments in production across the world. Oil prices were cut in half, finishing March just above $20, and energy stocks plummeted.

Given their long-term contracts and significantly lower commodity exposure, midstream stocks should have been more insulated from the downfall than their Exploration & Production and Oil Services counterparts. However, once again, the midstream sector was plagued by its weak investor base. It was not just a lack of new buyers but, as the stocks fell, leveraged closed-end funds and hedge funds were forced to sell to meet applicable Investment Company Act restrictions and/or credit facility covenants, and selling begot more selling. Panic selling sent the Alerian MLP Index down 27.4% on March 9, followed by another 17.0% drop on March 12. There was simply nowhere to hide as any stock that started to outperform became the next source of funds for another desperate seller. Even the midstream C-corps, which had been steadily outperforming the MLPs since 2018, were not immune, as the Alerian Midstream Energy Index finished the month down 39.3%.

Finally, in late March, the forced selling started to abate. With the broader market also starting to rally off the bottom, investors were able to pause and see just how oversold the sector had gotten. While the economic recession caused by COVID-19 and stay-at-home orders will pressure midstream earnings, the likely earnings hit for the sector in 2020 and 2021 was more in the 10%-20% range, nowhere close to the 50% or even 80%-plus drop most stocks in the sector experienced. With the extreme technical selling over and even starting to reverse in April and May as closed-end funds started to re-apply leverage, midstream stocks rallied hard. Even the collapse in the price of April oil futures was not enough to stop the upward momentum. Midstream stocks had just become too cheap, leading to the sector more than doubling off the March lows through the end of May.

What factors affected the performance of the Fund during its fiscal six-month period?

The combination of the extreme sector sell-down and the Fund’s leverage caused the Fund to significantly underperform during the first half of the fiscal year. The Fund was down over 82% on both a net asset value (NAV) and market basis for the six months through May 31, 2020. The Alerian MLP Index, which serves as the Fund’s benchmark, declined 24.26% for the same period. Similar to its peers, the unprecedented drop in the stock prices of the Fund’s midstream energy holdings in March caused the Fund’s coverage under applicable Investment Company Act restrictions and credit facility covenants to drop significantly below the required levels. The sector’s 13.9% drop in February had already left the Fund’s balance sheet stretched, and the subsequent 59% sector drop over the next two and a half weeks simply overwhelmed the Fund. To get back into compliance with its covenants, the Fund paid back both its bank debt and preferred shares in March.

As discussed above, all of the stocks in the Fund’s portfolio were impacted by the poor sector performance. Every stock in the portfolio was down more than 50% from January 16 to March 18, with the more commodity-sensitive gathering and processing names down more than 80%. These stocks experienced big jumps in their stock prices by the end of the period as companies took steps to drastically increase their free cash flow by cutting capital expenditures and, in many cases, their distributions, and oil prices moved back into the mid-$30s as the U.S.

For information regarding the indexes and certain key investment terms, see Key Investment Terms starting on page 7.

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DUFF & PHELPS SELECT MLP AND MIDSTREAM ENERGY FUND INC.

MANAGER’S DISCUSSION OF FUND PERFORMANCE (Unaudited) (Continued)

May 31, 2020

economy began to reopen. Nevertheless, even with the big bounce, as of the end of the period the sector was still down significantly on the year because of the magnitude of the March drop.

Given the losses experienced and the Fund’s very low asset levels, the Fund’s Board of Directors recommended to shareholders that the Fund be liquidated. This proposal is subject to an ongoing shareholder vote, and it remains unclear whether the vote will pass. In the meantime, the Fund is continuing to be run according to its mandate. The Fund has re-applied leverage through bank borrowing, although due to the Fund’s low asset levels, the amount of leverage available to the Fund is limited. The Fund also has pushed more heavily into the big, integrated C-corp midstream energy companies, as we believe that these companies will be the long-term winners in the sector. At the same time, the Fund has made sure to stay invested in some more commodity-sensitive midstream companies that we believe were unfairly punished during the selldown.

The preceding information is the opinion of portfolio management only through the end of the period of the report as stated on the cover. Any such opinions are subject to change at any time based upon market conditions and should not be relied upon as investment advice.

The Fund’s portfolio holdings are subject to change and may not be representative of the portfolio managers’ current or future investment decisions. The mention of individual securities held by the Fund is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional.

Risk Considerations

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

MLPs: Investments in Master Limited Partnerships may be adversely impacted by tax law changes, regulation, or factors affecting underlying assets.

Energy Sector Concentration: The Fund’s investments are concentrated in the energy sector and may present more risks than if the Fund were broadly diversified over numerous sectors of the economy.

Closed-End Funds: Closed-end funds may trade at a discount or premium from their net asset values, which may affect whether an investor will realize gains or losses. They may also employ leverage, which may increase volatility.

For information regarding the indexes and certain key investment terms, see Key Investment Terms starting on page 7.

Table of Contents

^{OUR PRIVACY COMMITMENT}

Duff & Phelps Select MLP and Midstream Energy Fund Inc. recognizes that protecting the privacy and security of the confidential personal information we collect about you is an important responsibility. The following information will help you understand our privacy policy and how we will handle and maintain confidential personal information as we fulfill our obligations to protect your privacy. “Personal information” refers to the nonpublic financial information obtained by us in connection with providing you a financial product or service.

Information We Collect

We collect personal information to help us serve your financial needs, offer new products or services, provide customer service and fulfill legal and regulatory requirements. The type of information that we collect varies according to the products or services involved, and may include:

• Information we receive from you on applications and related forms (such as name, address, social security number, assets and income); and

• Information about your transactions and relationships with us, our affiliates, or others (such as products or services purchased, account balances and payment history).

Information Disclosed in Administering Products and Services

We will not disclose personal information about current or former customers to non-affiliated third parties except as permitted or required by law. We do not sell any personal information about you to any third party. In the normal course of business, personal information may be shared with persons or entities involved in servicing and administering products and services on our behalf, including your broker, financial advisor or financial planner and other service providers and affiliates assisting us.

Procedures to Protect Confidentiality and Security of Your Personal Information

We have procedures in place that limit access to personal information to those employees and service providers who need to know such information in order to perform business services on our behalf. We educate our employees on the importance of protecting the privacy and security of confidential personal information. We also maintain physical, electronic and procedural safeguards that comply with federal and state regulations to guard your personal information.

We will update our policy and procedures where necessary to ensure that your privacy is maintained and that we conduct our business in a way that fulfills our commitment to you. If we make any material changes in our privacy policy, we will make that information available to customers through our website and/or other communications.

Table of Contents

DUFF & PHELPS SELECT MLP AND MIDSTREAM ENERGY FUND INC.

PORTFOLIO HOLDINGS SUMMARY WEIGHTINGS (Unaudited)

May 31, 2020

The following tables present the portfolio holdings within certain

sectors or countries as a percentage of total investments as of May 31, 2020.

Country Weightings

United States	93%
Canada	6
Marshall Islands	1
Total	100%

Sector Weightings

Traditional Midstream		87%
Downstream/Other		12
Marine/Shipping		1
Total		100%

	Shares	Value
Common Stocks—38.1%
Diversified—5.3%
Kinder Morgan, Inc.	35,500	$ 561
ONEOK, Inc.	8,000	293
		854


Downstream/Other—5.4%
Cheniere Energy, Inc.⁽¹⁾	13,200	586
Marathon Petroleum Corp.	8,000	281
		867


Gathering/Processing—14.4%
Antero Midstream Corp.	131,564	629
Equitrans Midstream Corp.	52,000	420
Targa Resources Corp.	71,375	1,277
		2,326


Natural Gas Pipelines—10.5%
TC Energy Corp.	14,700	662
Williams Cos., Inc. (The)	50,617	1,034
		1,696


Petroleum Transportation & Storage—2.5%
Enbridge, Inc.	12,500	406
Total Common Stocks (Identified Cost $8,627)		6,149


Master Limited Partnerships and Related Companies—76.3%
Diversified—30.6%
Energy Transfer LP	218,092	1,780
Enterprise Products Partners LP	85,500	1,633
MPLX LP	59,395	1,128
NGL Energy Partners LP	80,171	409
		4,950

	Shares	Value

Downstream/Other—8.5%
Cheniere Energy Partners LP	10,000	$ 337
Sunoco LP	20,500	529
USA Compression Partners LP	42,000	506
		1,372


Gathering/Processing—9.0%
Hess Midstream LP Class A	41,361	803
Rattler Midstream LP	77,000	648
		1,451


Marine/Shipping—0.7%
Golar LNG Partners LP	45,000	109
Petroleum Transportation & Storage—27.5%
Genesis Energy LP	115,000	922
Magellan Midstream Partners LP	16,000	725
NuStar Energy LP	40,000	695
Phillips 66 Partners LP	12,500	559
Plains All American Pipeline LP	120,000	1,164
Shell Midstream Partners LP	29,000	391
		4,456


Total Master Limited Partnerships and Related Companies (Identified Cost $18,068)		12,338


Total Long-Term Investments—114.4% (Identified Cost $26,695)		18,487

		Value


TOTAL INVESTMENTS—114.4% (Identified Cost $26,695)		$18,487 ⁽²⁾
Other assets and liabilities, net—(14.4)%		(2,327 )
NET ASSETS—100.0%		$16,160

Footnote Legend:
⁽¹⁾	Non-income producing.
⁽²⁾	All or a portion of the portfolio segregated as collateral for borrowings.

	Total Value at May 31, 2020	Level 1 Quoted Prices
Assets:
Equity Securities:
Common Stocks	$ 6,149	$ 6,149
Master Limited Partnerships and Related Companies	12,338	12,338
Total Investments	$18,487	$18,487

Assets
Investment in securities at value (Identified cost $26,695)	$ 18,487
Cash	827
Receivables
Dividends	15
Refundable alternative minimum tax credit	25
Prepaid Directors’ retainer	22
Prepaid expenses	16
Total assets	19,392
Liabilities
Borrowings (Note 7)	3,000
Payables
Investment securities purchased	143
Professional fees	72
Interest on borrowings (Note 7)	2
Other accrued expenses	15
Total liabilities	3,232
Net Assets	$ 16,160
Net Assets Consist of:
Common stock ($0.001 par value 100,000,000 shares authorized)	$ 26
Capital paid in on shares of beneficial interest, net of taxes	364,032
Total distributable earnings (accumulated losses)	(347,898)
Net Assets	$ 16,160
Net Asset Value Per Share
(Net assets/shares outstanding) Shares outstanding 26,233,544	$ 0.62

Investment Income
Dividends and distributions	$ 4,497
Less return of capital distributions (Note 2C)	(3,557)
Total investment income	940
Expenses
Investment advisory fees	489
Administration and accounting fees	89
Amortization of offering costs on mandatory redeemable preferred shares (Note 8)	364
Professional fees	66
Printing fees and expenses	44
Directors’ fees and expenses	25
Transfer agent fees and expenses	5
Miscellaneous expenses	97
Total expenses before interest expense	1,179
Interest expense on mandatory redeemable preferred shares (Note 8)	523
Interest expense on borrowings (Note 7)	206
Total expenses after interest expense	1,908
Less expenses reimbursed and/or waived by investment adviser and administrator	(96)
Net expenses	1,812
Net investment income (loss) before income taxes	(872)
Net tax benefit (expense)	—
Net investment income (loss)	(872)
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on Investments before income taxes	(100,937)
Net tax benefit (expense)	—
Net realized gain (loss) on investments	(100,937)
Net change in unrealized appreciation (depreciation) on Investments before income taxes	26,222
Net tax benefit (expense)	—
Net change in unrealized appreciation (depreciation) on investments	26,222
Net realized and unrealized gain (loss) on investments after income taxes	(74,715)
Net increase (decrease) in net assets resulting from operations	$ (75,587)

	Six Months Ended May 31, 2020 (Unaudited)	Year Ended November 30, 2019
INCREASE (DECREASE) IN NET ASSETS From Operations
Net investment income (loss)	$ (872)	$ (3,970)
Net realized gain (loss)	(100,937)	(19,739)
Net change in unrealized appreciation (depreciation)	26,222	(1,317)
Increase (decrease) in net assets resulting from operations	(75,587)	(25,026)
From Distributions to Shareholders
Return of capital	(3,935) ⁽¹⁾	(15,729)
Decrease in net assets from distributions to shareholders	(3,935)	(15,729)
From Capital Share Transactions
Reinvestment of distributions resulting in the issuance of common stock (0 and 24,937 shares, respectively)	—	111
Increase (decrease) in net assets from capital transactions	—	111
Net increase (decrease) in net assets	(79,522)	(40,644)
Net Assets
Beginning of period	95,682	136,326
End of period	$ 16,160	$ 95,682

Increase (Decrease) in cash
Cash Flows provided by (Used for) Operating Activities:
Net increase (decrease) in net assets resulting from operations	$ (75,587)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used for) operating activities:
Proceeds from sales of long-term investments	74,653
Purchases of long-term investments	(16,370)
Increase (Decrease) in investment securities purchased payable	143
Net (purchases) or sales of money market mutual funds	1,350
Net change in unrealized (appreciation)/depreciation on investments	(26,222)
Net realized (gain)/loss on investments	100,937
Return of capital distributions on investments	3,557
(Increase) Decrease in dividends receivable	(8)
(Increase) Decrease in prepaid expenses	6
Amortization of deferred offering costs on mandatory redeemable preferred shares	364
(Increase) Decrease in prepaid Directors’ retainer	(8)
Increase (Decrease) in interest payable on borrowings	(2)
Increase (Decrease) in interest payable on fixed rate mandatory redeemable preferred shares	(259)
Increase (Decrease) in affiliated expenses payable	(154)
Increase (Decrease) in non-affiliated expenses payable	(189)
Cash provided by (used for) operating activities	62,211
Cash provided by (used for) financing activites:
Cash proceeds from borrowings	3,000
Cash payments to reduce borrowings	(30,000)
Floating rate mandatory redeemable preferred shares redemption	(35,000)
Cash distributions paid to shareholders	(3,935)
Cash provided by (used for) financing activites:	(65,935)
Net increase (decrease) in cash	(3,724)
Cash:
Cash at beginning of period	4,551
Cash at end of period	$ 827
Supplemental cash flow information:
Cash paid during the period for interest expense on borrowings	$ 206
Cash paid during the period for interest expense on fixed rate mandatory redeemable preferred shares	782

	Six Months Ended May 31, 2020 (Unaudited)	Year Ended November 30,
	Six Months Ended May 31, 2020 (Unaudited)	2019	2018	2017	2016
PER SHARE DATA:
Net asset value, beginning of period	$ 3.65	$ 5.20	$ 5.54	$ 7.40	$ 7.47
Income (loss) from investment operations:
Net investment income (loss)⁽¹⁾	(0.03)	(0.15)	(0.22)	(0.20)	(0.10)
Net realized and unrealized gain (loss)	(2.85)	(0.80)	0.55	(0.78)	0.91
Total from investment operations	(2.88)	(0.95)	0.33	(0.98)	0.81
Dividends and Distributions to Shareholders:
Return of capital	(0.15)	(0.60)	(0.67)	(0.88)	(0.88)
Total dividends and distributions to shareholders	(0.15)	(0.60)	(0.67)	(0.88)	(0.88)
Net asset value, end of period	$ 0.62	$ 3.65	$ 5.20	$ 5.54	$ 7.40
Market value, end of period⁽²⁾	$ 0.57	$ 3.43	$ 4.89	$ 5.37	$ 7.47
Total return, net asset value^(3), (4)	(82.20)%	(19.75)%	5.51%	(14.36)%	13.58%
Total return, market value^(3), (4)	(82.59)%	(19.81)%	2.36%	(17.77)%	17.48%
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets^(5), (6)	4.55% ⁽⁷⁾	4.52%	4.07%	3.40%	2.52%
Ratio of total expenses after interest expense to average net assets⁽⁵⁾	4.87% ⁽⁷⁾	4.52%	4.07%	3.40%	2.52%
Ratio of net investment income (loss) to average net assets⁽⁵⁾	(2.91)%	(3.05)%	(3.69)%	(2.86)%	(1.59)%
Portfolio turnover rate⁽³⁾	18%	23%	33%	20%	28%
Net assets, end of period (000’s)	$16,160	$95,682	$136,326	$144,955	$192,860
Borrowings, end of period (000’s)	$ 3,000	$30,000	$ 50,000	$ 50,000	$ 78,000
Mandatory redeemable preferred shares, end of period (000’s)	$ —	$35,000	$ 35,000	$ 35,000	$ —
Asset coverage, per $1,000 principal amount of borrowings⁽⁸⁾	$ 6,387	$ 5,356	$ 4,427	$ 4,599	$ 3,473
Asset coverage ratio on total leverage (borrowings and mandatory redeemable preferred shares)⁽⁹⁾	N/A	247%	260%	271%	N/A
Asset coverage, per $25 liquidation preference per share of mandatory redeemable preferred shares⁽¹⁰⁾	N/A	$ 62	$ 65	$ 68	N/A

⁽¹⁾	Calculated using average shares outstanding.
⁽²⁾	Closing Price – New York Stock Exchange.
⁽³⁾	Not annualized for periods less than one year.
⁽⁴⁾	Total return on market value is calculated assuming a purchase of common shares on the opening of the first day and sale on the closing of the last day of each period reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s Automatic Reinvestment and Cash Purchase Plan. Total return on market value is not annualized for periods of less than one year. Brokerage commissions that a shareholder may pay are not reflected. Total return on market value does not reflect the deduction of taxes that a shareholder may pay on fund distributions or the sale of fund shares. Total return on net asset value uses the same methodology, but with use of net asset value for the beginning and ending values.
⁽⁵⁾	Annualized for periods less than one year.

	Year Ended November 30, 2015
	Year Ended November 30, 2015
PER SHARE DATA:
Net asset value, beginning of period	$ 17.35
Income (loss) from investment operations:
Net investment income (loss)⁽¹⁾	(0.15)
Net realized and unrealized gain (loss)	(8.15)
Total from investment operations	(8.30)
Dividends and Distributions to Shareholders:
Return of capital	(1.58)
Total dividends and distributions to shareholders	(1.58)
Net asset value, end of period	$ 7.47
Market value, end of period⁽²⁾	$ 7.29
Total return, net asset value^(3), (4)	(50.79)%
Total return, market value^(3), (4)	(47.24)%
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets^(5), (6)	2.28%
Ratio of total expenses after interest expense to average net assets⁽⁵⁾	2.28%
Ratio of net investment income (loss) to average net assets⁽⁵⁾	(1.20)%
Portfolio turnover rate⁽³⁾	20%
Net assets, end of period (000’s)	$194,066
Borrowings, end of period (000’s)	$ 94,500
Asset coverage, per $1,000 principal amount of borrowings⁽⁸⁾	$ 3,054

⁽⁶⁾	Ratio of net expenses to average net assets, before interest expense and before tax benefit (expense) was 2.98%, 2.33%, 2.17%, 2.09%, 1.97%, and 1.84% for the periods ended May 31, 2020, November 30, 2019, November 30, 2018, November 30, 2017, November 30, 2016, and November 30, 2015, respectively.
⁽⁷⁾	Annualized except for non-recurring expenses.
⁽⁸⁾	Represents value of net assets applicable to common stock plus the borrowings and mandatory redeemable preferred shares at the end of the period divided by the borrowings at the end of the period multiplied by $1,000.
⁽⁹⁾	Represents value of net assets applicable to common stock plus the borrowings and mandatory redeemable preferred shares at the end of the period divided by the borrowings and mandatory redeemable preferred shares at the end of the period.
⁽¹⁰⁾	Represents value of net assets applicable to common stock plus the borrowings and mandatory redeemable preferred shares at the end of the period divided by the borrowings and mandatory redeemable preferred shares at the end of the period multiplied by $25.

A.	Security Valuation
	The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The Fund’s policy is to recognize transfers into and out of Level 3 at the end of the reporting period.

B.	Security Transactions and Investment Income
	Security transactions are recorded on the trade date. Realized gains and losses from the sale of securities are determined on the identified cost basis. Dividend income is recognized on the ex-dividend date or, in the case of certain foreign securities, as soon as the Fund is notified.

Purchases		Sales
$16,370		$74,653

	Current Tax Expense (benefit)	Deferred Tax Expense (benefit)	Valuation Allowance Expense (benefit)	Total Tax Expense (benefit)
Federal tax expense (benefit)	$—	$(4,712)	$4,712	$—
State tax expense (benefit)	—	(591)	591	—
Total tax expense (benefit)	$—	$(5,303)	$5,303	$—

	Amount	Rate
Application of statutory income tax rate	$(15,873)	21.00%
State income taxes, net of federal benefit	(1,533)	2.03
Permanent differences, net	153	(0.20)
Other	(20)	0.03
Expiration of prior year capital losses	11,970	(15.84)
Effect of valuation allowance	5,303	(7.02)
Total income tax expense (benefit)	$ —	0.00%

Deferred tax asset:
Capital loss carryforward (tax basis)	$ 59,375
Net operating loss carryforward (tax basis)	6,333
Unrealized loss	952
Other	402
Net deferred tax asset before valuation allowance	67,062
Less: Valuation allowance	(67,062)
Net deferred tax asset (liability)	$ —

	Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.
C.	Investment Income and Return of Capital Estimates
	The Fund invests a portion of its assets in master limited partnerships (“MLPs”) which make distributions that are primarily attributable to return of capital. The Fund records investment income and return of capital in the Statement of Operations using management’s estimate of the percentage of income included in the distributions received from each MLP based on historical information from the MLPs and other industry sources. These estimates may be adjusted based on information received from the MLPs after the tax and fiscal year ends.
	The return of capital portion of the MLP distributions is a reduction to investment income and a reduction in the cost basis of each investment which increases net realized gain (loss) and net change in unrealized appreciation (depreciation). If the return of capital distributions exceed their cost basis, the distributions are treated as realized gains. The actual amounts of income and return of capital are only determined by each MLP after its fiscal year-end and may differ from the estimated amounts. For the period ended May 31, 2020, the Fund estimates that 100% of the MLP distributions received will be treated as a return of capital.
D.	Federal and State Income Taxes
	Due to the fact that the Fund invests primarily in MLPs, it cannot qualify as a Regulated Investment Company under current tax laws. Thus, the Fund is treated as a regular corporation, or “C” corporation, for U.S. income tax purposes. Accordingly, the Fund generally is subject to U.S. federal income tax on its taxable income at statutory rates applicable to “C” corporations at a flat rate of 21%. In addition, as a “C” corporation, the Fund is subject to various state income taxes due to its investments in MLPs (state effective rate currently estimated at 2.0287%, net of federal tax benefit). As a limited partner in the MLPs, the Fund includes its distributable share of each MLP’s taxable income in computing its own taxable income.
	In prior years, the Fund was subject to alternative minimum tax (“AMT”) on its federal AMT income to the extent that AMT exceeded it regular federal income tax. The Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated AMT for corporations and allowed them to claim a refundable minimum tax credit for previous AMT paid over an extended period of time. However, the Coronavirus Aid, Relief, and Economic Stability Act (“CARES Act”), signed into law in March 2020, accelerated taxpayers’ ability to claim the fully refundable amount of minimum tax credits. As a result, the Fund’s AMT credit of $25, as disclosed in the Statement of Assets and Liabilities, will be requested to be fully refunded on the November 30, 2019 tax return to be filed later this year.
E.	Income Tax Accounting Policy
	The Fund applies ASC 740 (Income Taxes) in computing the income tax provision. The Fund records deferred income taxes to reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Such temporary differences are principally: (i) taxes on unrealized gains (losses), which are attributable to the temporary difference between fair market value and tax basis, and (ii) the net tax benefit of accumulated net operating losses and capital loss carryforwards. Deferred tax assets

	and liabilities are measured using effective tax rates expected to apply to taxable income in the years such temporary differences are realized or otherwise settled. To the extent the Fund has a deferred tax asset, consideration is given to whether or not a valuation allowance is required. The determination of whether a valuation allowance is required is based upon whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Fund considers all positive and negative evidence in assessing any valuation allowance including the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods and the associated risk that operating loss carryforwards may expire unused. The Fund also accrues additional tax expense relating to uncertain tax positions and includes interest and penalties on such positions as a component of tax expense.
F.	Distributions to Shareholders
	Distributions to shareholders generally are declared and paid on a quarterly basis and are recorded on the ex-dividend date. The Fund uses a cash flow-based distribution approach in amounts based on the Fund’s net cash flow received from portfolio investments, i.e., cash distributions received from the Fund’s investments in MLPs less expenses.
	Given the liquidation proposal discussed in the section “Management’s Discussion of Fund Performance” the Fund did not declare or pay a distribution to shareholders for the second quarter. The Board will consider whether to declare and pay distributions to shareholders for the third quarter and thereafter in light of the outcome of the shareholder vote on the liquidation proposal.
	The estimated character of the distributions paid will either be dividends (ordinary income eligible to be treated as qualified dividend income) or returns of capital. Distributions made from current or accumulated earnings and profits of the Fund will be taxable to shareholders as dividend income. Distributions that are in amounts greater than the Fund’s current and accumulated earnings and profits will represent returns of capital to the extent of a shareholder’s basis in their common shares, and such distributions will correspondingly increase the realized gain upon the sale of their common shares (or decrease the realized loss). Additionally, distributions not paid from current or accumulated earnings and profits that exceed a shareholder’s tax basis in their common shares will generally be taxed as a capital gain. This estimate is based on the Fund’s operating results during the period. The Fund is unable to make a final determination as to the tax character of distributions until after the end of the calendar year when the Fund can determine earnings and profits for federal income tax purposes.
	The Fund will inform shareholders of the final tax character of its distributions on Form 1099-DIV in February 2021. For the period ended May 31, 2020, we currently estimate that 100% of the distributions will be considered returns of capital for federal income tax purposes.
G.	Foreign Currency Transactions
	Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio

	transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and the date it is paid is treated as a gain or loss on foreign currency. The Fund does not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
H.	Expenses
	Expenses incurred together by the Fund and other affiliated open- and closed-end funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expenses to each fund or an alternative allocation method can be more appropriately used.
	In addition to the net annual operating expenses that the Fund bears directly, the shareholders of the Fund indirectly bear the Fund’s pro-rata expenses of any underlying mutual funds in which the Fund invests.

A.	Adviser
	Virtus Alternative Investment Advisers, Inc. (the “Adviser”), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the investment adviser of the Fund. The Adviser supervises the Fund’s investment program and general operations of the Fund, including the Fund’s subadviser.
	As compensation for its services to the Fund, the Adviser receives a monthly fee at an annual rate of 1.00% of the Fund’s average daily Managed Assets, which is calculated daily and paid monthly. “Managed Assets” is defined as the value of the total assets of the Fund minus the sum of all accrued liabilities of the Fund (other than the aggregate amount of any outstanding borrowings or other indebtedness entered into for the purpose of leverage, which includes issuance of preferred stock). From March 1, 2020 through July 31, 2020, the Adviser is waiving advisory fees on a voluntary basis. The voluntary waiver will expire on July 31, 2020. From the period of March 1, 2020 through May 31, 2020, the Adviser waived $88 in advisory fees.
B.	Subadviser
	Duff & Phelps Investment Management Co. (“DPIM”), an indirect, wholly-owned subsidiary of Virtus, is the subadviser of the Fund. The subadviser is responsible for the day-to-day portfolio management of the Fund for which it is paid a fee by the Adviser.
C.	Administration Services
	Virtus Fund Services, LLC (“VFS”), an indirect, wholly-owned subsidiary of Virtus, serves as the administrator to the Fund. For the services provided by the administrator under the Administration Agreement, the Fund pays the administrator an asset-based fee calculated on the Fund’s average daily managed assets. This fee is calculated daily and paid monthly.
	For the period ended May 31, 2020, the Fund incurred administration fees totaling $49 which are included in the Statement of Operations within the line item “Administration

	and accounting fees.” From March 1, 2020 through July 31, 2020, the Administrator is waiving administration fees on a voluntary basis. The voluntary waiver will expire on July 31, 2020. From the period of March 1, 2020 through May 31, 2020, the Administrator waived $8 in administration fees.
D.	Directors’ Fees
	For the period ended May 31, 2020, the Fund incurred Directors’ fees totaling $20 which are included in the Statement of Operations within the line item “Directors’ fees and expenses.”
E.	Director Compensation
	The Fund provides a deferred compensation plan for its Directors who receive compensation from the Fund. Under the deferred compensation plan, Directors may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund, and then, to the extent permitted by the 1940 Act, in turn, may be invested in the shares of affiliated or unaffiliated mutual funds selected by the participating Directors.

	Federal Tax Cost		Unrealized Appreciation		Unrealized (Depreciation)		Net Unrealized Appreciation (Depreciation)
	$22,611		$2,169		$(6,293)		$(4,124)

Election of Directors	Votes For	Votes Withheld
Donald C. Burke	17,767,566	5,933,640
Sidney E. Harris	17,722,162	5,979,044
John R. Mallin	17,710,446	5,990,760
James M. Oates	17,722,598	5,978,608


	(a)(1)			Not applicable.

	(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.

(a)(4)		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.

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