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Form N-CSR TORTOISE PIPELINE & ENER For: Nov 30

February 8, 2024 3:33 PM EST

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 811-22585

Tortoise Pipeline & Energy Fund, Inc.
(Exact name of registrant as specified in charter)

6363 College Boulevard, Suite 100A, Overland Park, KS 66211
(Address of principal executive offices) (Zip code)

P. Bradley Adams

Diane Bono

6363 College Boulevard, Suite 100A, Overland Park, KS 66211
(Name and address of agent for service)

913-981-1020

Registrant's telephone number, including area code

Date of fiscal year end: November 30

Date of reporting period: November 30, 2023

 

Item 1. Report to Stockholders.

(a) The report to Shareholders is attached herewith.

Annual Report | November 30, 2023

2023 Annual Report

Closed-End Funds


 

 

 

Tortoise

2023 Annual Report to Stockholders

This combined report provides you with a comprehensive review of our funds that span essential assets.

   
Closed-end Fund Comparison 1
Letter to Stockholders 2
TYG: Fund Focus 7
NTG: Fund Focus 10
TTP: Fund Focus 13
NDP: Fund Focus 16
TPZ: Fund Focus 19
TEAF: Fund Focus 22
Financial Statements 28
Notes to Financial Statements 64
Report of Independent Registered Public Accounting Firm 84
Company Officers and Directors 85
Additional Information 87
   

TTP and TPZ distribution policies

Tortoise Pipeline & Energy Fund, Inc. (“TTP”) and Tortoise Power and Energy Infrastructure Fund, Inc. (“TPZ”) are relying on exemptive relief permitting them to make long-term capital gain distributions throughout the year. Each of TTP and TPZ, with approval of its Board of Directors (the “Board”), has adopted a managed distribution policy (the “Policy”). Annual distribution amounts are expected to fall in the range of 7% to 10% of the average week-ending net asset value (“NAV”) per share for the prior fiscal semi-annual period. In accordance with its Policy, TTP distributes a fixed amount per common share, currently $0.59, each quarter to its common shareholders. TPZ distributes a fixed amount per common share, currently $0.105, each month to its common shareholders. These amounts are subject to change from time to time at the discretion of the Board. Although the level of distributions is independent of TTP’s and TPZ’s performance, TTP and TPZ expect such distributions to correlate with its performance over time. Each quarterly and monthly distribution to shareholders is expected to be at the fixed amount established by the Board, except for extraordinary distributions in light of TTP’s and TPZ’s performance for the entire calendar year and to enable TTP and TPZ to comply with the distribution requirements imposed by the Internal Revenue Code. The Board may amend, suspend or terminate the Policy without prior notice to shareholders if it deems such action to be in the best interests of TTP, TPZ and their respective shareholders. For example, the Board might take such action if the Policy had the effect of shrinking TTP’s or TPZ’s assets to a level that was determined to be detrimental to TTP or TPZ shareholders. The suspension or termination of the Policy could have the effect of creating a trading discount (if TTP’s or TPZ’s stock is trading at or above net asset value), widening an existing trading discount, or decreasing an existing premium. You should not draw any conclusions about TTP’s or TPZ’s investment performance from the amount of the distribution or from the terms of TTP’s or TPZ’s distribution policy. Each of TTP and TPZ estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in TTP or TPZ is paid back to you. A return of capital distribution does not necessarily reflect TTP’s or TPZ’s investment performance and should not be confused with “yield” or “income.” The amounts and sources of distributions reported are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon TTP’s and TPZ’s investment experience during their fiscal year and may be subject to changes based on tax regulations. TTP and TPZ will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.

 

 

2023 Annual Report | November 30, 2023

Closed-end Fund Comparison
  Name/Ticker  Primary
focus 
Structure Total
investments
($ millions)(1)
Portfolio mix
by asset type(1)
Portfolio mix
by structure(1)
             
Midstream focused

Tortoise Energy Infrastructure Corp.

NYSE: TYG
Inception: 2/2004

Energy Infrastructure Regulated investment company $491.4

Tortoise Midstream Energy Fund, Inc.

NYSE: NTG
Inception: 7/2010

Natural Gas Infrastructure Regulated investment company $271.9

Tortoise Pipeline
& Energy Fund, Inc.

NYSE: TTP
Inception: 10/2011

North
American
pipeline
companies
Regulated investment company $85.6
Upstream focused

Tortoise Energy Independence
Fund, Inc.

NYSE: NDP
Inception: 7/2012

North
American
oil & gas
producers
Regulated investment company $67.9
Energy value chain

Tortoise Power
and Energy Infrastructure
Fund, Inc.

NYSE: TPZ
Inception: 7/2009

Power
& energy infrastructure companies
(Fixed income
& equity)
Regulated investment company $119.6
Multi strategy focused

Ecofin Sustainable and Social Impact Term Fund

NYSE: TEAF
Inception: 3/2019

Essential
assets
Regulated investment company $223.2
             

(1)  As of 11/30/2023

(unaudited)

Tortoise 1
 

Tortoise

2023 Annual Report to closed-end fund stockholders

Dear stockholder,

The 2023 fiscal year offered energy investors significant opportunity with record levels of production, growing export demand, along with some regulatory clarity. Overall, performance ended the year mixed with midstream higher and both broader energy and utilities lower. Higher interest rates clearly impacted relative performance. And cash flow proved to be king. Notable events influencing performance included geopolitical tensions in Ukraine and Israel and OPEC+ decisions around crude oil supply and demand. Effects of the Inflation Reduction Act also started to surface. Finally, the U.S. energy complex remained ever important to supporting the global economy. Sustainable infrastructure continued to face significant headwinds over the fiscal year due to a variety of factors including inflation, elevated interest rates, and natural gas prices. Despite the difficult market environment in the education sector, there was an increase in both the volume and credit quality of education investment opportunities throughout 2023. The senior living industry experienced a continued rebound in the wake of COVID. Demand for senior living facilities continued to outpace the bed supply which boded well for the sector.

Energy and power infrastructure

The broad energy sector returned -4.3% for the annual fiscal period (as measured by the S&P 500 Energy Index). Energy was generally rangebound during the year, bottoming down 15% in March following the regional banking crisis, and peaking higher by 5% in September following the Organization of Petroleum Exporting Countries plus Russia’s (OPEC+) announcement to curtail crude oil supplies to the global market. The war between Russian and Ukraine remained in focus and geopolitically was magnified when the Israel and Hamas conflict intensified in October. That raised concerns about a broader Middle East conflict. The allocation for free cash flow remained an energy investor focus with lower debt, dividend growth, and share buybacks being a cornerstone of management’s playbook. These policies, along with disciplined mergers & acquisitions (M&A), were favored in the higher interest environment and in front of concerns about a slowing economy in 2024.

Global crude oil supply and demand led energy market sentiment. In the first quarter the Organization for Economic Cooperation and Development (OECD) commercial inventories built up marginally partly due to slower Chinese demand than expected coming out of COVID lockdowns. This resulted in a decision by Saudi Arabia in the summer to voluntarily reduce its oil output by 1 million barrels per day (bpd) for the month of July, with the potential for this cut to be extended. Consequently, oil stocks declined, and crude oil prices rallied in the third quarter. Though Saudi Arabia consistently extended their cuts in the second half, concerns about a global economic slowdown along with growing production in the United States and Guyana weighed on prices late in the year. To better balance the market, in November OPEC+ agreed to 2 million bpd of cuts to start 2024, leaving the oil market in a constructive position on supply and demand.

U.S. crude oil production growth exceeded expectations, growing nearly 1 million bpd in 2023 to 13.2 million bpd. That level eclipsed the previous record high of 13.0 million bpd achieved in November of 2019. The growth resulted despite rig counts and well completions falling as the year progressed. Simply, producers did more with less. Drilling laterals lengthened, completion times shortened and even the application of artificial intelligence positively impacted efficiencies. The Permian basin, the largest U.S. oilfield, remained the primary driver of growth reaching six million bpd. Aiding producer returns, oilfield service and material costs declined, resulting in lower break-even costs. The Energy Information Agency (EIA) forecasts production in 2024 to remain steady, partly due to the lower rig count and completion activity trend transpiring in 2023.

U.S. natural gas production grew as well in 2023 as the U.S. exported more liquefied natural gas (LNG) than any other country in the first half. U.S. LNG production reached nearly 12 billion cubic feet per day (bcf/d). The war in Ukraine continued to present a long-term opportunity for U.S. liquefied natural gas. LNG exports to Europe accelerated in 2022 and remained elevated in 2023. These exports, lower industrial demand, and a relatively warm winter in 2022/23 kept European natural gas storage inventories full throughout 2023 and well positioned to keep Europe adequately supplied for the 2024 winter. U.S. natural gas storage inventories also entered year-end 2023 well supplied at just above the five-year average partly due to a warm winter a year ago. Also helping inventories is growing U.S. production, that improved from 102 bcf/d to 105 bcf/d over the year. That production will help supply LNG export facilities set to come on-line starting in the second half of 2024 through year-end 2027. In that short timeframe U.S. LNG export capacity will nearly double to 25 bcf/d. The EIA forecasts natural gas production to be mostly flat in 2024 due partly to limited visibility to near-term demand improvement and, like the drilling cadence for oil, declining service activity.

Natural gas liquids (NGLs) do not receive as much attention as crude oil or natural gas because they are less visible to consumers. Nonetheless, that does not diminish their importance as NGLs are the key components in making plastics along with being a source of heat. And, at 6.8 million bpd, the U.S. is the world’s largest producer of NGLs. Growth in 2023 surpassed 600 thousand bpd with most marginal production exported to meet growing Asian petrochemical demand. The EIA forecasts NGL production to be stable in 2024.

The midstream energy sector returned 7.6% for the fiscal year (as measured by the Alerian Midstream Energy Index or AMNA), topping broader energy. Growing production volumes and inflation passed through via higher tariff rates benefitted revenues. Further, the sector’s elevated and higher free cash flow, declining leverage, attractive valuation, and share buybacks supported performance. Finally, disciplined M&A activity with synergies largely accruing to buyers offered a favorable environment for those seeking acquisition led growth.

(unaudited)

2Tortoise
 

2023 Annual Report | November 30, 2023

Cash flow improved for midstream companies in 2023 following volumes and tariff increases and cost and capital expenditure discipline. Management teams targeted cash flow increasingly toward shareholders in the form of debt paydown, dividend and distribution growth, and share repurchases. Leverage targets are now generally between 3.0x – 4.0x earnings before interest, taxes, depreciation and amortization (EBITDA) with leverage being a full “turn” lower versus levels prior to 2020. And in addition to dividend and distribution growth, companies opportunistically repurchased shares, as buybacks topped $4 billion from the fourth quarter of 2022 through the third quarter of 2023. With leverage targets now largely achieved, 2024 sets up for incrementally more cash flow earmarked for dividends and buybacks.

Following hawkish interest rate actions from the Federal Reserve, the prospects of an economic recession weighed on investor psyche during much of the fiscal year. While multiple recessions occurred in the last 40 years, energy demand still increased in 38 out of the last 41 years (2008 and 2020 decreased). Due to actions taken during the recent 2020 recession that reduced capital expenditures and focused on debt paydown, we believe the energy sector, and specifically midstream, is well prepared to deal with another potential recession. With the world remaining undersupplied energy over the long-term and sector balance sheets now less levered than in past recent recessions (2001, 2008 and 2020), we believe energy is well positioned should lower economic growth materialize.

Broader market concerns about higher interest rates boosted midstream’s relative attractiveness. As higher rates due to inflation were passed through, companies generated significant free cash flow that led to little to no debt or equity capital market access requirements even for maturing debt. Additionally, the good economic growth resulted in higher energy demand. Looking at history, good performance in a higher rate environment is not surprising. In the 18 time periods when the 10-year Treasury yield increased by 50 basis points or more since 2001, midstream energy, represented by the Tortoise North American Pipeline Index, returned an average of 7.4%, compared to a S&P 500 Index average return of 5.9%, and bond returns of -2.6% represented by the Bloomberg U.S. Aggregate Bond Index.

With inflation continuing to increase in 2023, midstream provided investors inflation protection. Pipelines typically benefit from long-term contracts with inflation protection from regulated tariff escalators. Additionally, tariffs on regulated liquid pipelines include an inflation escalator aligned with the Producer Price Index (PPI). Federal Energy Regulatory Commission (FERC) indexing allowed for a tariff increase of over 13% beginning on July 1, 2023. In fact, we estimate that the cumulative total allowable tariff increase since 2020 through year-end 2024 will eclipse 26%. This contract feature serves as protection against higher operating costs.

Midstream companies remained active in M&A with many discrete assets changing hands along with a handful of corporate transactions. The commonality among all the transactions was buyer discipline. The buyers only purchased complementary assets to existing footprints where synergies were obvious and paid a price that made the transaction immediately accretive. Even in the corporate transactions, premiums paid were constructive. In the largest corporate transaction, ONEOK acquired Magellan Midstream Partners at a 22% premium. Synergies and diversification drove the rationale as both Tulsa companies transport petroleum products, with ONEOK mostly natural gas liquids and Magellan refined products and crude oil. ONEOK also estimated a tax benefit of $1.5 billion.

One major new pipeline received regulatory help with the signing of the Fiscal Responsibility Act (FRA) that resolved the mid-summer debt ceiling scuffle. That Act approved all construction and operational permits and authorizations required for the Mountain Valley Pipeline (MVP). MVP would transport 2 bcf/d of natural gas from the Marcellus through West Virginia and into Virginia. Equitrans Midstream (ETRN), MVP’s operator, now estimates pipeline completion in the first quarter of 2024. In addition, the FRA reformed the way the National Environmental Policy Act (NEPA) interacts with agencies to approve energy projects so that project developers have more confidence in permitting processes. Now, when two or more agencies are involved in review, one will be designated lead agency to reduce delays. Further, the timeframe for an Environmental Impact Statement is limited to two years and an Environmental Assessment to one year, and there are limits on the number of pages for each. Despite the improved regulatory efficiency, attaining project approvals remained challenging. For example, Navigator CO2 Ventures cancelled its proposed $3.5 billion, 1,300-mile carbon capture pipeline due to an unpredictable regulatory and government process. The pipeline concept involved transporting carbon dioxide emissions from ethanol plants to sites where the greenhouse gas would be sequestered deep underground.

Sustainable infrastructure

From a macro perspective the first half of the period was generally characterised by influences stemming from stubborn inflation, elevated interest rates, and declining energy prices, in particular natural gas. In China, the magnitude of economic recovery following the post-COVID reopening ultimately did not come to fruition.

Elevated borrowing costs were concerning for businesses which ‘borrow to grow,’ as were higher equipment costs, trade issues, permitting and transmission constraints. The period also saw banking turmoil triggered primarily by Silicon Valley Bank in early March. As such, some companies in our investment universe could not escape these varying impulses even if their secular growth remained intact.

The second half of the period opened with continued upward pressure on interest rates across the OECD and declining power prices in Europe. In response, our capital-intensive sector saw challenges amidst these elevated interest rates, notably on existing asset cash flows due to higher costs of capital, and on balance sheets due to the increased total capital needed to finance growth. Amidst such a context, the sector derated while broader market multiples expanded.

(unaudited)

Tortoise 3
 

The third calendar quarter saw a further steady increase in longer-term interest rates, which created a larger headwind to valuations and spreads of capital formation for new projects, and overshadowed other drivers as the market reduced the present value of actual cash flows and questioned the value of growth for companies in the sector. Within that context, purer renewables companies that do not have other businesses have been most impacted. We therefore saw both U.S. and European valuations continue to compress. Amidst such a context the sector struggled during the quarter.

The close of the period saw a welcome improvement in performance, as interest rates began to stabilise and hopeful sentiment on potential future rate cuts for 2024 arose.

Looking Ahead:

In 2024, if interest rates stabilize and then decline, we believe that would be very supportive for the sector in the future. Stability in interest rates should help reduce volatility by offering more consistent net present values of operating cash flows and growth. This is unfortunately an exogenous factor, but equally is not fundamental to operating earnings before interest and taxes (EBIT).

We maintain conviction looking ahead; electrification trends remain robust as fundamentally demand is strong, and we predict strong policy support (from the U.S.’ IRA, across to Europe). Further, valuations for the stocks in the investment universe have come down relative to history and relative to the broader market. We believe doubts surrounding growth are likely overly pessimistic, and that the mean-reverting aspects of utilities and infrastructure have been historically compelling. Over-time, in our sector, share prices will tend to correlate with earnings, and we anticipate these dynamics in 2024.

Notably, through 2023 many companies have reset priorities among growth, credit rating, and dividend. The sector will therefore enter 2024 offering a clearer picture with potentially less volatility and a focus on execution.

Moving into 2024 and considering valuations, strength in demand, attractive renewables development returns and where we are in the inflation and interest rate cycles, we believe that we are approaching an inflection point and are in an attractive spot. This sector captures structural growth in a slowing global economic environment. Companies typically deliver more stable, and more predictable non-cyclical earnings, and are positioned to protect better in falling markets while also participating in rebounds.

Waste Transition

The trend of growth in the number of new facilities being planned or constructed in the United States to transform waste into energy and other beneficial resources continued in Q4 2023. However, the full growth potential of the sector was negatively impacted by certain macro economic and environmental, social and governance (ESG) concerns.

From a macro economic standpoint, persistently high levels of project cost inflation and market interest rates continued to cause higher capital and debt service costs, putting downward pressure on the economic viability of new projects. As uncertainty increased, the availability of capital decreased, and that adversely impacted the funding of new projects. As reported by ImpactAlpha, a new report from Sightline Climate indicated that private capital provided for new first-of-a-kind climate-tech projects, including demonstration units and first-time commercializations, declined by more than 50% in 2023. The marginal abatement of inflation and interest rates during the fourth quarter is expected to provide tailwinds for improved capital inflows into the sector in 2024.

From an ESG standpoint, the rush in recent years to invest in projects and companies that exhibit positive ESG attributes was diminished by significant headwinds in 2023, both politically and in terms of verifying whether ESG claims were being achieved. The relative ESG discomfort was exhibited most prominently within the sustainability-linked bond market, where companies can achieve lower borrowing costs by achieving ESG goals. Per Bloomberg, global sales of sustainably-linked bonds fell by 22% in 2023, the sharpest annual decline on record. Green bond sales, however, without the political or verification concerns of ESG-related bonds, achieved their second-highest issuance year on record in 2023 per Bloomberg, evidencing strong investor demand generally for sustainable bonds.

The fourth calendar quarter also saw significant updates regarding fuel credits and tax credits, which provide substantial economic underpinnings for biogas and biofuel projects in the U.S.

The California Air Resources Board, known as CARB, released its proposed rulemaking changes to its Low Carbon Fuel Standard or “LCFS” program. While subject to public comment and final approval, the CARB proposal significantly increases carbon intensity reduction targets, from a current 20% by 2030 to a new target of 30% by 2030, while adding a 90% reduction target by 2045. Market expectation is that the more stringent targets will lead to higher LCFS credit pricing, which would improve project cash flows on a go-forward basis.

Separately, the Treasury Department and the Internal Revenue Service (IRS) released proposed regulations regarding Section 48 Investment Tax Credits, with emphasis on clarifying what capital costs are eligible under the definition of Biogas Facilities. Market participants view such facilities as consisting of three primary components — gas generation or collection, gas upgrading to natural gas specs, and pipeline interconnect. However, the proposed regs exclude both gas upgrade systems and pipeline interconnections, which would sharply reduce the potential value of related investment tax credits. A significant industry push is underway to encourage a more-broad determination of eligible project costs, prior to final rule-making.

Finally, a growing voluntary market for biogas and biofuels continues to lessen the sector’s reliance on fuel and tax credits, which is a net positive for sector fundamentals. Of note, the

(unaudited)

4Tortoise
 

2023 Annual Report | November 30, 2023

largest voluntary renewable natural gas agreement on record was established between Vanguard Renewables and AstraZeneca. As publicly announced, Vanguard will supply renewable natural gas (RNG) from three of its dairy manure anaerobic digester facilities over a 15-year term, and AstraZeneca will purchase at least 650,000 million British thermal units of RNG annually, which is the equivalent energy necessary to heat approximately 18,000 homes per year. Similarly, Anaergia announced a voluntary agreement to sell RNG to Toyota. Although these direct, voluntary purchases reduce cashflow upside for projects that would otherwise rely on volatile spot-market pricing, they do provide enhanced cash flow stability and enable a more bankable sector.

Social impact

Education

The public market for issuance of new K-12 charter school and private school revenue bonds in Q4 2023 saw a significant rebound with 32 new issues at a par value of $1,650,427,114, an 85% increase over the same period in 2022. For all of 2023 however, there were only 98 total issues with par value totaling $3,376,240,114, a 26.67% decrease in par value from 2022.1 In 2023, the specialty investor portion of the K-12 market totaled 28 new issues with a par value of $755,350,114, of which our firm accounted for 14.6%.

It is our continued assessment that outflows from municipal bond funds played a major role in 2023’s reduced K-12 charter and private school bond issuance. Q4 outflows were $7,420,010,000 and cumulative outflows for 2023 totaled more than $11 billion.2 The interest rate roller coaster that defined 2023 was also a significant factor. The 30-year municipal market data (MMD) daily rate, benchmark for K-12 bond offerings, began the year at 3.50% and dropped to its low of 3.13% by early February. It then went on a steady climb through October, reaching a high of 4.57% (an increase of 144 bps) before dropping to 3.40% to end the year.3 This volatility forced may schools to put plans to finance or refinance facilities on hold.

A highlight for Q4 2023 was the National Alliance for Public Charter Schools’ (NAPCS) Charter School Data Digest report. For the 2021-2022 school year (the most recent for which data was available), public charter schools served approximately 3.7 million students in 7,996 schools throughout the nation. Charter school enrollment accounted for 7.4% of all public school students, up from 6.8% in 2019-2020. Across the nation, charter schools continued to serve a higher proportion of low-income students (59%) and students of color (70.1%) when compared to their district public school counterparts (50.3% and 53.8% respectively). Additionally, with Montana’s passage of new legislation in 2023, charter school laws were on the books in 46 states, Washington DC, Puerto Rico and Guam. This is a significant milestone in the hard-fought battle to make more education opportunities available to all children that began 32 years ago with Minnesota’s first in the nation charter school law.4

The NAPCS report also provided a snapshot as to the management structures employed in charter schools throughout the nation. While all charter schools are governed by a not-for-profit board, they are divided into one of three categories, depending upon their structure for day-to-day management of the school. The first, and most common (57.4% of all charter schools), were “independent,” charter schools that are run by a de novo management team, unique to that individual school. The second are those operating under the network of a not-for-profit charter management organization (CMO) that establish common goals, educational models and curriculum. CMO’s accounted for 31.7% of all charter schools, and are often amongst the most well-known and successful (e.g. KIPP, Success Academy, IDEA Schools). Finally, 10.9% of charter schools were led by a for-profit education management organization (EMO).4 Charter school boards contract with an EMO to run the day-to-day operations of the schools and often additional services such as back-office support, hosting web platforms, or staffing assistance. While EMOs are often the target of those opposed to charter schools, there are many high performing EMO-run charter schools, including the several in the Top 25 high schools in America.5 While Ecofin has primarily worked with independent charter schools, our team has significant past experience working with CMO and EMO led schools as well.

Despite market headwinds, we saw increases in both the volume and credit quality of education investment opportunities throughout 2023. While it is too early to know whether the Q4 bond market rebound is a sign of things to come, there should continue to be a robust number of private credit financing opportunities for K-12 charter school and private schools that offer solid returns for investors.

Senior Living

This past year was a year of continued rebound for the senior living industry. Occupancy continued to improve in the wake of COVID, and our senior population was one step closer to outpacing the current bed supply. In fact, we are just one year away from the first baby boomer turning 80 years old. Given the current pace of new senior living development, our country will only supply 40% of the projected demand by 2030. That is an extraordinary shortfall, and catching up to the projected demand will require more than $400 billion of investment over the next few years.6

As of this printing, Q4 2023 occupancy statistics were not yet available. The for-profit senior living sector recorded its ninth quarter in a row of occupancy gains in Q3 2023. Statistically, nationwide occupancy for independent living and assisted living is 86.1% and 82.6%, respectively. Recovery has been stronger in the higher acuity and needs based assisted living setting; however, independent living is not far behind. As of the third quarter, assisted living occupancy had recovered 8.7%, while independent living had recovered almost half as much, up 4.6% since the pandemic lows of 2021. Based on the past two years of absorption, senior living occupancy is projected to reach pre-pandemic levels in 2024.6

(unaudited)

Tortoise 5
 

Non-profit senior living has fared better than their for-profit brethren since the pandemic hit. As of Q3 2023, non-profit continuing care retirement communities (CCRC’s) were 90.5% occupied. Additionally, asking rents have increased more in non-profit communities, up 5.3% and 5.8% in the assisted and memory care spaces, respectively.6 Based on conversations with our operating partners, communities continue to pass along outsized rent increases to catch up with inflation but are nearing a point of equilibrium.

Occupancy recovery has been fueled by almost four years of slowing construction starts. In fact, 2023 recorded the lowest primary market inventory growth since 2005, when National Investment Center for Seniors Housing & Care (NIC) started recording the data. Rising interest rates, elevated construction costs and tight lending conditions will continue to propel occupancy in the months to come. Given the incredibly low number of units under construction, the market is setting up for a severe supply and demand imbalance just as the baby boomer population is knocking on the doorstep.

From now until 2030, an average of 10,000 baby boomers will turn 65 every day.8 With the combination of increased population and a slower pace of new senior living inventory supply, we remain confident in the senior living industry’s resilience and ability to prepare for the upcoming “Silver Tsunami” as our population continues to age.

Concluding thoughts

Energy infrastructure remains essential for the U.S. to continue as the leading global energy producer and to meet the energy demands of consumers, both domestically and abroad. Geopolitical events further highlighted this reality. We believe that indispensable nature offers compelling opportunities for 2024 and beyond. We hope for improved performance of sustainable infrastructure and climate action investments. With strong demand for renewable energy sources, we believe the sector is well positioned heading into 2024. Opportunities for investing in social impact education and senior living projects have continued to expand. The projects help broaden educational options for families and strive to meet the increasing housing demand for the U.S. aging demographic.

The S&P Energy Select Sector® Index is a capitalization-weighted index of S&P 500® Index companies in the energy sector involved in the development or production of energy products. The Tortoise North American Pipeline IndexSM is a float adjusted, capitalization-weighted index of energy pipeline companies domiciled in the United States and Canada. The Tortoise MLP Index® is a float-adjusted, capitalization-weighted index of energy master limited partnerships.

The Tortoise indices are the exclusive property of Tortoise Index Solutions, LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Tortoise MLP Index® and Tortoise North American Pipeline IndexSM (the “Indices”). The Indices are not sponsored by S&P Dow Jones Indices or its affiliates or its third party licensors (collectively, “S&P Dow Jones Indices LLC”). S&P Dow Jones Indices will not be liable for any errors or omission in calculating the Indices. “Calculated by S&P Dow Jones Indices” and its related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by Tortoise Index Solutions, LLC and its affiliates. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”), and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).

It is not possible to invest directly in an index.

Performance data quoted represent past performance; past performance does not guarantee future results. Like any other stock, total return and market value will fluctuate so that an investment, when sold, may be worth more or less than its original cost.

1Electronic Municipal Market Access https://emma.msrb.org/ & MuniOS https://www.munios.com/
2Refinitiv Lipper US Fund Flows https://www.lipperusfundflows.com/
3Bloomberg
4https://data.publiccharters.org/digest/charter-school-data-digest/how-many-charter-schools-and-students-are-there/
5https://www.usnews.com/education/best-high-schools/national-rankings
6NIC
7norc.org
8census.gov
6Tortoise
 

2023 Annual Report | November 30, 2023

Tortoise

Energy Infrastructure Corp. (TYG)

 

Fund description

Tortoise Energy Infrastructure Corp. (TYG) seeks a high level of total return with an emphasis on current distributions paid to stockholders. TYG invests primarily in equity securities in energy infrastructure companies. The fund is positioned to benefit from growing energy demand and accelerated efforts to reduce global CO2 emissions in energy production. Energy infrastructure companies generate, transport and distribute electricity, as well as process, store, distribute and market natural gas, natural gas liquids, refined products and crude oil.

Fund performance

The midstream energy sector returned 7.6% for the fiscal year (as measured by the Alerian Midstream Energy Index or AMNA), topping broader energy. Growing production volumes and inflation passed through via higher tariff rates benefitted revenues. Further, the sector’s elevated and higher free cash flow, declining leverage, attractive valuation, and share buybacks supported performance. Finally, disciplined M&A activity with synergies largely accruing to buyers offered a favorable environment for those seeking acquisition led growth. The fund’s market-based and NAV-based returns (including the reinvestment of distributions) for the fiscal year were -7.8% and -1.3%, respectively. The Tortoise MLP Index® returned 20.8% during the same period.

2023 fiscal year summary  
Quarterly distributions paid per share $0.7100
Distribution rate (as of 11/30/2023) 10.1%
Year-over-year distribution increase (decrease) 0.0%
Cumulative distributions paid per share to stockholders since inception in February 2004 $43.8475
Market-based total return (7.77)%
NAV-based total return (1.29)%
Premium (discount) to NAV (as of 11/30/2023) (20.5)%

Key asset performance drivers

Top five contributors Company type
Targa Resources Corp. Natural gas pipeline
The Williams Companies, Inc. Natural gas pipeline
Energy Transfer LP Natural gas pipeline
Magellan Midstream Partners, LP Refined products pipeline
Enterprise Products Partners LP Natural gas pipeline
Bottom five contributors Company type
NextEra Energy Partners LP Diversified infrastructure
AES Corp. Power
Clearway Energy, Inc. Diversified infrastructure
NextEra Energy, Inc. Diversified infrastructure
Atlantica Sustainable Infrastructure PLC Power

Unlike the fund return, index return is pre-expenses and taxes..

Performance data quoted represent past performance; past performance does not guarantee future results. Like any other stock, total return and market value will fluctuate so that an investment, when sold, may be worth more or less than its original cost. Portfolio composition is subject to change due to ongoing management of the fund. References to specific securities or sectors should not be construed as a recommendation by the fund or its adviser. See Schedule of Investments for portfolio weighting at the end of the fiscal quarter.

(unaudited)

Tortoise 7
 

Tortoise

Energy Infrastructure Corp. (TYG) (continued)

 

Value of $10,000 vs. Tortoise Energy Infrastructure Fund – Market (unaudited)

From November 30, 2013 through November 30, 2023

The chart assumes an initial investment of $10,000. Performance reflects waivers of fee and operating expenses in effect. In the absence of such waivers, total return would be reduced. Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 866-362-9331. Performance assumes the reinvestment of capital gains and income distributions. The performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Annualized Rates of Return as of November 30, 2023

  1-Year 3-Year 5-Year 10-Year Since Inception(1)
Tortoise Energy Infrastructure Fund - NAV -1.29% 21.35% -10.50% -7.31% 2.49%
Tortoise Energy Infrastructure Fund - Market -7.77% 22.86% -13.83% -10.64% 1.08%
Tortoise MLP Index® 20.76% 33.85% 11.27% 3.58% 9.17%
Tortoise Decarbonization Infrastructure IndexSM (2) -4.35% N/A N/A N/A N/A
(1)Inception date of the Fund was Feburary 25, 2004.
(2)The Tortoise Decarbonization Infrastructure Index was added to reflect the inclusion of a broader scope of energy infrastructure equities including midstream, utilities, and renewables in TYG effective November 30, 2021.

Fund structure and distribution policy

The fund is structured to qualify as a Regulated Investment Company (RIC) allowing it to pass-through to shareholders income and capital gains earned, thus avoiding double-taxation. To qualify as a RIC, the fund must meet specific income, diversification and distribution requirements. Regarding income, at least 90 percent of the fund’s gross income must be from dividends, interest and capital gains. The fund must meet quarterly diversification requirements including the requirement that at least 50 percent of the assets be in cash, cash equivalents or other securities with each single issuer of other securities not greater than 5 percent of total assets. No more than 25 percent of total assets can be invested in any one issuer other than government securities or other RIC’s. The fund must also distribute at least 90 percent of its investment company income. RIC’s are also subject to excise tax rules which require RIC’s to distribute approximately 98 percent of net income and net capital gains to avoid a 4 percent excise tax.

The fund has adopted a managed distribution policy (“MDP”). Annual distribution amounts are expected to fall in the range of 7% to 10% of the average week-ending net asset value (“NAV”) per share for the prior fiscal semi-annual period. Distribution amounts will be reset both up and down to provide a consistent return on trailing NAV. Under the MDP, distribution amounts will normally be reset in February and August, with no changes in distribution amounts in May and November.

Leverage

The fund’s leverage utilization decreased $6.9 million during the six months ended Q4 2023, compared to the six months ended Q2 2023, and represented 21.9% of total assets at November 30, 2023. At year-end, the fund was in compliance with applicable coverage ratios, 93.2% of the leverage cost was fixed, the weighted-average maturity was 2.1 years and the weighted-average annual rate on leverage was 3.69%. These rates will vary in the future as a result of changing floating rates, utilization of the fund’s credit facility and as leverage matures or is redeemed. During the six month period ended November 30, 2023, $7.1 million of Senior Notes were paid in full upon maturity.

Please see the Financial Statements and Notes to Financial Statements for additional detail regarding critical accounting policies, results of operations, leverage, taxes and other important fund information.

For further information regarding the fund’s leverage and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseecofin.com.

(unaudited)

8Tortoise
 

2023 Annual Report | November 30, 2023

TYG Key Financial Data (supplemental unaudited information)

(dollar amounts in thousands unless otherwise indicated)

 

The information presented below is supplemental non-GAAP financial information, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

    2022     2023  
    Q3(1)     Q4(1)     Q1(1)     Q2(1)     Q3(1)     Q4(1)  
Selected Financial Information                                                
Distributions paid on common stock   $ 8,469     $ 8,045     $ 8,045     $  8,046     $  8,045     $ 7,643  
Distributions paid on common stock per share(2)     0.7100       0.7100       0.7100       0.7100       0.7100       0.7100  
Total assets, end of period(3)     638,068       623,319       577,524       504,066       527,003       492,651  
Average total assets during period(3)(4)     621,364       607,430       595,508       547,380       526,517       503,464  
Leverage(5)     144,587       147,993       146,213       114,713       120,413       107,814  
Leverage as a percent of total assets     22.7 %     23.7 %     25.3 %     22.8 %     22.8 %     21.9 %
Operating expenses before leverage costs and current taxes(6)     1.05 %     1.16 %     1.13 %     1.22 %     1.26 %     1.73 %
Net unrealized depreciation, end of period     (270,982 )     9,330       (34,286 )     (65,512 )     (34,940 )     (58,511 )
Net assets, end of period     467,109       446,618       416,799       380,323       403,510       380,497  
Average net assets during period(7)     442,939       435,678       429,315       409,946       406,929       384,850  
Net asset value per common share(2)     39.16       39.41       36.78       33.56       35.61       35.35  
Market value per share(2)     34.14       33.54       30.89       26.95       30.13       28.11  
Shares outstanding (000’s)     11,928       11,332       11,332       11,332       11,332       10,765  
(1)Q1 is the period from December through February. Q2 is the period from March through May. Q3 is the period from June through August. Q4 is the period from September through November.
(2)Adjusted to reflect 1 for 4 reverse stock split effective May 1, 2020.
(3)Includes deferred issuance and offering costs on senior notes and preferred stock.
(4)Computed by averaging month-end values within each period.
(5)Leverage consists of senior notes, preferred stock and outstanding borrowings under credit facilities.
(6)As a percent of total assets
(7) Computed by averaging daily net assets within each period.
Tortoise 9
 

Tortoise

Midstream Energy Fund, Inc. (NTG)

 

Fund description

The Tortoise Midstream Energy Fund (NTG) seeks to provide stockholders with a high level of total return with an emphasis on current distributions. NTG invests primarily in midstream energy equities that own and operate a network of pipeline and energy related logistical infrastructure assets with an emphasis on those that transport, gather, process and store natural gas and natural gas liquids (NGLs). NTG targets midstream energy equities, including MLPs benefiting from U.S. natural gas production and consumption expansion, with minimal direct commodity exposure.

Fund performance

The midstream energy sector returned 7.6% for the fiscal year (as measured by the Alerian Midstream Energy Index or AMNA), topping broader energy. Growing production volumes and inflation passed through via higher tariff rates benefitted revenues. Further, the sector’s elevated and higher free cash flow, declining leverage, attractive valuation, and share buybacks supported performance. Finally, disciplined M&A activity with synergies largely accruing to buyers offered a favorable environment for those seeking acquisition led growth. The fund’s market-based and NAV-based returns (including the reinvestment of distributions) for the fiscal year were -0.8% and 5.3%, respectively. The Tortoise MLP Index® returned 20.8% during the same period.

2023 fiscal year summary  
Quarterly distributions paid per share $0.7700
Distribution rate (as of 11/30/2023) 9.0%
Year-over-year distribution increase (decrease) 0.0%
Cumulative distributions paid per share to stockholders since inception in July 2010 $24.1200
Market-based total return (0.83)%
NAV-based total return 5.30%
Premium (discount) to NAV (as of 11/30/2023) (19.7)%

Key asset performance drivers

Top five contributors Company type
Targa Resources Corp. Natural gas pipeline
Plains GP Holdings, L.P. Crude oil pipeline
The Williams Companies, Inc. Natural gas pipeline
Energy Transfer LP Natural gas pipeline
Magellan Midstream Partners, LP Refined products pipeline
Bottom five contributors Company type
NextEra Energy Partners Diversified infrastructure
Clearway Energy, Inc. Diversified infrastructure
Atlantica Sustainable Infrastructure PLC Power
Enbridge Inc. Crude oil pipeline
Kinder Morgan Inc. Natural gas pipeline

Unlike the fund return, index return is pre-expenses and taxes.

Performance data quoted represent past performance; past performance does not guarantee future results. Like any other stock, total return and market value will fluctuate so that an investment, when sold, may be worth more or less than its original cost. Portfolio composition is subject to change due to ongoing management of the fund. References to specific securities or sectors should not be construed as a recommendation by the fund or its adviser. See Schedule of Investments for portfolio weighting at the end of the fiscal quarter.

(unaudited)

10Tortoise
 

2023 Annual Report | November 30, 2023

Tortoise

Midstream Energy Fund, Inc. (NTG) (continued)

 

Value of $10,000 vs. Tortoise Midstream Energy Fund – Market (unaudited)

From November 30, 2013 through November 30, 2023

 
 

The chart assumes an initial investment of $10,000. Performance reflects waivers of fee and operating expenses in effect. In the absence of such waivers, total return would be reduced. Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 866-362-9331. Performance assumes the reinvestment of capital gains and income distributions. The performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Annualized Rates of Return as of November 30, 2023

  1-Year 3-Year 5-Year 10-Year Since Inception(1)
Tortoise Midstream Energy Fund – NAV 5.30% 27.84% -14.56% -9.63% -4.72%
Tortoise Midstream Energy Fund – Market -0.83% 30.20% -17.34% -11.34% -6.59%
Tortoise MLP Index® 20.76% 33.85% 11.27% 3.58% 7.05%
           
(1)Inception date of the Fund was July 27, 2010.

Fund structure and distribution policy

The fund is structured to qualify as a Regulated Investment Company (RIC) allowing it to pass-through to shareholders income and capital gains earned, thus avoiding double-taxation. To qualify as a RIC, the fund must meet specific income, diversification and distribution requirements. Regarding income, at least 90 percent of the fund’s gross income must be from dividends, interest and capital gains. The fund must meet quarterly diversification requirements including the requirement that at least 50 percent of the assets be in cash, cash equivalents or other securities with each single issuer of other securities not greater than 5 percent of total assets. No more than 25 percent of total assets can be invested in any one issuer other than government securities or other RIC’s. The fund must also distribute at least 90 percent of its investment company income. RIC’s are also subject to excise tax rules which require RIC’s to distribute approximately 98 percent of net income and net capital gains to avoid a 4 percent excise tax.

The fund has adopted a managed distribution policy (“MDP”). Annual distribution amounts are expected to fall in the range of 7% to 10% of the average week-ending net asset value (“NAV”) per share for the prior fiscal semi-annual period. Distribution amounts will be reset both up and down to provide a consistent return on trailing NAV. Under the MDP, distribution amounts will normally be reset in February and August, with no changes in distribution amounts in May and November.

Leverage

The fund’s leverage utilization decreased $3.4 million during the six months ended Q4 2023 compared to the six months ended Q2 2023, and represented 19.6% of total assets at November 30, 2023. At year-end, the fund was in compliance with applicable coverage ratios, 80.2% of the leverage cost was fixed, the weighted-average maturity was 3.7 years and the weighted-average annual rate on leverage was 3.78%. These rates will vary in the future as a result of changing floating rates, utilization of the fund’s credit facility and as leverage matures or is redeemed. During the six month period ended November 30, 2023, $2.1 million of MRP shares and $3.0 million of Senior Notes were paid in full upon maturity.

Please see the Financial Statements and Notes to Financial Statements for additional detail regarding critical accounting policies, results of operations, leverage, taxes and other important fund information.

For further information regarding the fund’s leverage and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseecofin.com.

(unaudited)

Tortoise 11
 

NTG Key Financial Data (supplemental unaudited information)

(dollar amounts in thousands unless otherwise indicated)

 

The information presented below is supplemental non-GAAP financial information, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

    2022     2023  
    Q3(1)     Q4(1)     Q1(1)     Q2(1)     Q3(1)     Q4(1)  
Selected Financial Information                                                
Distributions paid on common stock   $ 4,345     $ 4,128     $ 4,128     $ 4,128     $ 4,128     $ 3,921  
Distributions paid on common stock per share(2)     0.7700       0.7700       0.7700       0.7700       0.7700       0.7700  
Total assets, end of period(3)     316,411       323,122       296,682       261,858       287,287       272,818  
Average total assets during period(3)(4)     312,932       308,008       304,884       281,520       280,548       276,916  
Leverage(5)     64,169       62,369       66,120       56,920       60,720       53,524  
Leverage as a percent of total assets     20.3 %     19.3 %     22.3 %     21.7 %     21.1 %     19.6 %
Operating expenses before leverage costs and current taxes(6)     1.11 %     1.29 %     1.19 %     1.36 %     1.43 %     2.15 %
Net unrealized appreciation (depreciation), end of period     145,148       27,611       6,856       (11,572)       17,267       5,003  
Net assets, end of period     240,864       237,022       221,555       200,046       225,096       217,066  
Average net assets during period(7)     231,908       230,297       226,098       215,743       220,209       217,415  
Net asset value per common share(2)     42.68       44.21       41.33       37.32       41.99       42.62  
Market value per common share(2)     36.79       37.69       35.28       31.53       35.40       34.22  
Shares outstanding (000’s)     5,643       5,361       5,361       5,361       5,361       5,093  
(1)Q1 is the period from December through February. Q2 is the period from March through May. Q3 is the period from June through August. Q4 is the period from September through November.
(2)Adjusted to reflect 1 for 10 reverse stock split effective May 1, 2020.
(3)Includes deferred issuance and offering costs on senior notes and preferred stock.
(4)Computed by averaging month-end values within each period.
(5)Leverage consists of senior notes, preferred stock and outstanding borrowings under the credit facility.
(6)Computed as a percent of total assets.
(7)Computed by averaging daily net assets within each period.
12Tortoise
 

2023 Annual Report | November 30, 2023

Tortoise

Pipeline & Energy Fund, Inc. (TTP)

 

Fund description

The Tortoise Pipeline & Energy Fund (TTP) seeks a high level of total return with an emphasis on current distributions paid to stockholders. TTP invests primarily in equity securities of North American pipeline companies that transport natural gas, natural gas liquids (NGLs), crude oil and refined products and, to a lesser extent, in other energy infrastructure companies.

Fund performance

The midstream energy sector returned 7.6% for the fiscal year (as measured by the Alerian Midstream Energy Index or AMNA), topping broader energy. Growing production volumes and inflation passed through via higher tariff rates benefitted revenues. Further, the sector’s elevated and higher free cash flow, declining leverage, attractive valuation, and share buybacks supported performance. Finally, disciplined M&A activity with synergies largely accruing to buyers offered a favorable environment for those seeking acquisition led growth. The fund’s market-based and NAV-based returns (including the reinvestment of distributions) for the fiscal year were 6.7% and 8.4%, respectively. The Tortoise North American Pipeline IndexSM returned 4.9% for the same period.

2023 fiscal year summary  
Quarterly distributions paid per share $0.5900
Distribution rate (as of 11/30/2023) 8.4%
Year-over-year distribution increase (decrease) 0.0%
Cumulative distributions paid per share to stockholders since inception in October 2011 $19.6575
Market-based total return 6.72%
NAV-based total return 8.38%
Premium (discount) to NAV (as of 11/30/2023) (19.0)%

Please refer to the inside front cover of the report for important information about the fund’s distribution policy.

Key asset performance drivers

Top five contributors Company type
Plains GP Holdings, L.P. Crude oil pipeline
Magellan Midstream Partners, LP Refined products pipeline
The Williams Companies, Inc. Natural gas pipeline
Targa Resources Corp. Natural gas pipeline
Energy Transfer LP Natural gas pipeline
Bottom five contributors Company type
NextEra Energy Partners LP Diversified Infrastructure
Enbridge Inc. Crude oil pipeline
TC Energy Corp. Natural gas pipeline
Sempra Energy Diversified Infrastructure
Clearway Energy, Inc. Diversified Infrastructure

Unlike the fund return, index return is pre-expenses.

Performance data quoted represent past performance; past performance does not guarantee future results. Like any other stock, total return and market value will fluctuate so that an investment, when sold, may be worth more or less than its original cost. Portfolio composition is subject to change due to ongoing management of the fund. References to specific securities or sectors should not be construed as a recommendation by the fund or its adviser. See Schedule of Investments for portfolio weighting at the end of the fiscal quarter.

(unaudited)

Tortoise 13
 

Tortoise

Pipeline & Energy Fund, Inc. (TTP) (continued)

 

Value of $10,000 vs. Tortoise Pipeline and Energy Fund – Market (unaudited)

From November 30, 2013 through November 30, 2023

 
 

The chart assumes an initial investment of $10,000. Performance reflects waivers of fee and operating expenses in effect. In the absence of such waivers, total return would be reduced. Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 866-362-9331. Performance assumes the reinvestment of capital gains and income distributions. The performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Annualized Rates of Return as of November 30, 2023

  1-Year 3-Year 5-Year 10-Year Since Inception(1)
Tortoise Pipeline and Energy Fund NAV 8.38% 28.87% -4.86% -4.48% -0.77%
Tortoise Pipeline and Energy Fund Market 6.72% 31.75% -6.42% -5.76% -2.86%
Tortoise North American Pipeline Index 4.92% 21.01% 9.57% 6.20% 7.86%

(1) Inception date of the Fund was October 26, 2011.

Fund structure and distribution policy

The fund is structured to qualify as a Regulated Investment Company (RIC) allowing it to pass-through to shareholders income and capital gains earned, thus avoiding double-taxation. To qualify as a RIC, the fund must meet specific income, diversification and distribution requirements. Regarding income, at least 90 percent of the fund’s gross income must be from dividends, interest and capital gains. The fund must meet quarterly diversification requirements including the requirement that at least 50 percent of the assets be in cash, cash equivalents or other securities with each single issuer of other securities not greater than 5 percent of total assets. No more than 25 percent of total assets can be invested in any one issuer other than government securities or other RIC’s. The fund must also distribute at least 90 percent of its investment company income. RIC’s are also subject to excise tax rules which require RIC’s to distribute approximately 98 percent of net income and net capital gains to avoid a 4 percent excise tax.

The fund has adopted a distribution policy which is included on the inside front cover of this report. To summarize, the fund has adopted a managed distribution policy (“MDP”). Annual distribution amounts are expected to fall in the range of 7% to 10% of the average week-ending net asset value (“NAV”) per share for the prior fiscal semi-annual period. Distribution amounts will be reset both up and down to provide a consistent return on trailing NAV. Under the MDP, distribution amounts will normally be reset in February and August, with no changes in distribution amounts in May and November. The fund may designate a portion of its distributions as capital gains and may also distribute additional capital gains in the last quarter of the year to meet annual excise distribution requirements. Distribution amounts are subject to change from time to time at the discretion of the Board.

Leverage

The fund’s leverage utilization decreased $1.5 million during the six months ended Q4 2023, compared to the six months ended Q2 2023, and represented 18.5% of total assets at November 30, 2023. At year-end, the fund was in compliance with applicable coverage ratios, 63.0% of the leverage cost was fixed, the weighted-average maturity was 0.7 years and the weighted-average annual rate on leverage was 5.31%. These rates will vary in the future as a result of changing floating rates, utilization of the fund’s credit facility and as leverage matures or is redeemed.

Please see the Financial Statements and Notes to Financial Statements for additional detail regarding critical accounting policies, results of operations, leverage and other important fund information.

For further information regarding the fund’s leverage and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseecofin.com.

(unaudited)

14Tortoise
 

2023 Annual Report | November 30, 2023

TTP Key Financial Data (supplemental unaudited information)

(dollar amounts in thousands unless otherwise indicated)

 

The information presented below is supplemental non-GAAP financial information, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

    2022     2023  
    Q3(1)     Q4(1)     Q1(1)     Q2(1)     Q3(1)     Q4(1)  
Selected Financial Information                                                
Distributions paid on common stock   $ 1,314     $ 1,249     $ 1,248     $ 1,249     $ 1,249     $ 1,186  
Distributions paid on common stock per share(2)     0.5900       0.5900       0.5900       0.5900       0.5900       0.5900  
Total assets, end of period(3)     97,010       93,907       87,895       81,736       88,301       86,167  
Average total assets during period(3)(4)     96,086       93,079       90,503       86,135       86,853       86,272  
Leverage(5)     21,343       19,843       20,143       17,443       17,343       15,943  
Leverage as a percent of total assets     22.0 %     21.1 %     22.9 %     21.3 %     19.6 %     18.5 %
Operating expenses before leverage costs(6)     1.05 %     1.32 %     1.31 %     1.37 %     1.39 %     1.30 %
Net unrealized depreciation, end of period     17,286       19,117       13,950       9,483       17,306       17,779  
Net assets, end of period     75,181       73,509       67,264       63,730       70,447       69,525  
Average net assets during period(7)     73,287       71,609       69,939       66,399       69,717       69,161  
Net asset value per common share(2)     33.75       34.73       31.78       30.11       33.29       34.58  
Market value per common share(2)     29.18       28.58       27.09       24.81       28.36       28.02  
Shares outstanding (000s)     2,228       2,116       2,116       2,116       2,116       2,011  
(1)Q1 is the period from December through February. Q2 is the period from March through May. Q3 is the period from June through August. Q4 is the period from September through November.
(2)Adjusted to reflect 1 for 4 reverse stock split effective May 1, 2020.
(3)Includes deferred issuance and offering costs on senior notes and preferred stock.
(4)Computed by averaging month-end values within each period.
(5)Leverage consists of senior notes, preferred stock and outstanding borrowings under the revolving credit facility.
(6)Computed as a percent of total assets.
(7)Computed by averaging daily net assets within each period.
Tortoise 15
 

Tortoise

Energy Independence Fund, Inc. (NDP)

 

Fund description

The Tortoise Energy Independence Fund (NDP) seeks a high level of total return with an emphasis on current distributions paid to stockholders. NDP invests primarily in equity securities of upstream North American energy companies that engage in the exploration and production of crude oil, condensate, natural gas and natural gas liquids that generally have a significant presence in North American oil and gas fields, including shale reservoirs.

Fund performance

The broad energy sector returned -4.3% for the annual fiscal period (as measured by the S&P 500 Energy Index). Energy was generally rangebound during the year, bottoming down 15% in March following the regional banking crisis, and peaking higher by 5% in September following the Organization of Petroleum Exporting Countries plus Russia’s (OPEC+) announcement to curtail crude oil supplies to the global market. The war between Russian and Ukraine remained in focus and geopolitically was magnified when the Israel and Hamas conflict intensified in October. That raised concerns about a broader Middle East conflict. The allocation for free cash flow remained an energy investor focus with lower debt, dividend growth, and share buybacks being a cornerstone of management’s playbook. These policies, along with disciplined mergers & acquisitions (M&A), were favored in the higher interest environment and in front of concerns about a slowing economy in 2024. The fund’s market-based and NAV-based returns (including the reinvestment of distributions) for the fiscal year were -2.8 and 0.9%, respectively.

2023 fiscal year summary  
Quarterly distributions paid per share $0.6300
Distribution rate (as of 11/30/2023) 8.7%
Year-over-year distribution increase (decrease) 12.5%
Cumulative distributions paid per share to stockholders since inception in July 2012 $17.3325
Market-based total return (2.80)%
NAV-based total return 0.87%
Premium (discount) to NAV (as of 11/30/2023) (18.3)%

Key asset performance drivers

Top five contributors Company type
Plain All American Pipeline, L.P. Crude oil pipeline
Energy Transfer LP Natural gas pipeline
Targa Resources Corp. Natural gas pipeline
Diamondback Energy, Inc. Oil & gas production
Pioneer Natural Resources Co. Oil & gas production
   
Bottom five contributors Company type
Devon Energy Corp. Oil & gas production
Chevron Corp. Oil & gas production
Occidental Petroleum Corp. Oil & gas production
Marathon Oil Corp. Oil & gas production
EOG Resources, Inc. Oil & gas production

Unlike the fund return, index return is pre-expenses.

Performance data quoted represent past performance: past performance does not guarantee future results. Like any other stock, total return and market value will fluctuate so that an investment, when sold, may be worth more or less than its original cost. Portfolio composition is subject to change due to ongoing management of the fund. References to specific securities or sectors should not be construed as a recommendation by the fund or its adviser. See Schedule of Investments for portfolio weighting at the end of the fiscal quarter.

(unaudited)

16Tortoise
 

2023 Annual Report | November 30, 2023

Tortoise

Energy Independence Fund, Inc. (NDP) (continued)

 

Value of $10,000 vs. Tortoise Energy Independence Fund – Market (unaudited)

From November 30, 2013 through November 30, 2023

 
 

The chart assumes an initial investment of $10,000. Performance reflects waivers of fee and operating expenses in effect. In the absence of such waivers, total return would be reduced. Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 866-362-9331. Performance assumes the reinvestment of capital gains and income distributions. The performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Annualized Rates of Return as of November 30, 2023

  1-Year 3-Year 5-Year 10-Year Since Inception(1)
Tortoise Energy Independence Fund − NAV 0.87% 37.27% -6.33% -7.84% -5.32%
Tortoise Energy Independence Fund − Market -2.80% 40.01% -10.01% -8.82% -7.38%
S&P 500 Energy Select Sector Index -3.70% 37.85% 10.55% 3.79% 5.57%

(1) Inception date of the Fund was July 26, 2012.

Fund structure and distribution policy

The fund is structured to qualify as a Regulated Investment Company (RIC) allowing it to pass-through to shareholders income and capital gains earned, thus avoiding double-taxation. To qualify as a RIC, the fund must meet specific income, diversification and distribution requirements. Regarding income, at least 90 percent of the fund’s gross income must be from dividends, interest and capital gains. The fund must meet quarterly diversification requirements including the requirement that at least 50 percent of the assets be in cash, cash equivalents or other securities with each single issuer of other securities not greater than 5 percent of total assets. No more than 25 percent of total assets can be invested in any one issuer other than government securities or other RIC’s. The fund must also distribute at least 90 percent of its investment company income. RIC’s are also subject to excise tax rules which require RIC’s to distribute approximately 98 percent of net income and net capital gains to avoid a 4 percent excise tax.

The fund has adopted a distribution policy which is included on the inside front cover of this report. To summarize, the fund has adopted a managed distribution policy (“MDP”). Annual distribution amounts are expected to fall in the range of 7% to 10% of the average week-ending net asset value (“NAV”) per share for the prior fiscal semi-annual period. Distribution amounts will be reset both up and down to provide a consistent return on trailing NAV. Under the MDP, distribution amounts will normally be reset in February and August, with no changes in distribution amounts in May and November. The fund may designate a portion of its distributions as capital gains and may also distribute additional capital gains in the last quarter of the year to meet annual excise distribution requirements. Distribution amounts are subject to change from time to time at the discretion of the Board.

Leverage

The fund’s leverage utilization has remained flat, at $8.8 million, during the six months ended Q4 2023 as compared to the six months ended Q2 2023. The fund utilizes all floating rate leverage that had an interest rate of 6.69% and represented 12.9% of total assets at year-end. During the period, the fund maintained compliance with its applicable coverage ratios. The interest rate on the fund’s leverage will vary in the future along with changing floating rates.

Please see the Financial Statements and Notes to Financial Statements for additional detail regarding critical accounting policies, results of operations, leverage and other important fund information.

For further information regarding the fund’s leverage and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseecofin.com.

(unaudited)

Tortoise 17
 

NDP Key Financial Data (supplemental unaudited information)

(dollar amounts in thousands unless otherwise indicated)

 

The information presented below is supplemental non-GAAP financial information, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

    2022     2023  
    Q3(1)     Q4(1)     Q1(1)     Q2(1)     Q3(1)     Q4(1)  
Selected Financial Information                                                
Distributions paid on common stock   $ 1,034     $ 982     $ 1,105     $ 1,105     $ 1,105     $ 1,049  
Distributions paid on common stock per share(2)     0.5600       0.5600       0.6300       0.6300       0.6300       0.6300  
Total assets, end of period     72,928       71,059       68,060       64,422       72,535       68,156  
Average total assets during period(3)     69,811       71,651       69,055       67,241       69,136       71,088  
Leverage(4)     4,000       3,700       8,400       8,800       8,600       8,800  
Leverage as a percent of total assets     5.5 %     5.2 %     12.3 %     13.7 %     11.9 %     12.9 %
Operating expenses before leverage costs as a percent of total assets     1.24 %     1.34 %     1.31 %     1.35 %     1.34 %     1.35 %
Net unrealized depreciation, end of period     29,531       30,806       23,977       20,571       29,184       24,611  
Net assets, end of period     67,884       67,067       59,361       55,288       63,590       59,053  
Average net assets during period(5)     63,623       67,687       62,487       58,619       60,016       62,520  
Net asset value per common share(2)     36.77       38.24       33.85       31.53       36.26       35.45  
Market value per common share(2)     32.37       32.41       29.46       27.08       31.15       28.95  
Shares outstanding (000’s)     1,846       1,754       1,754       1,754       1,754       1,666  
(1)Q1 is the period from December through February. Q2 is the period from March through May. Q3 is the period from June through August. Q4 is the period from September through November.
(2)Adjusted to reflect 1 for 8 reverse stock split effective May 1, 2020.
(3)Computed by averaging month-end values within each period.
(4)Leverage consists of outstanding borrowings under the revolving credit facility.
(5)Computed by averaging daily net assets within each period.
18Tortoise
 

2023 Annual Report | November 30, 2023

Tortoise

Power and Energy Infrastructure Fund, Inc. (TPZ)

 

Fund description

The Tortoise Power and Energy Infrastructure Fund (TPZ) seeks to provide a high level of current income to stockholders, with a secondary objective of capital appreciation. TPZ seeks to invest primarily in fixed income and dividend-paying equity securities of power and energy infrastructure companies that provide stable and defensive characteristics throughout economic cycles.

Fund performance

The midstream energy sector returned 7.6% for the fiscal year (as measured by the Alerian Midstream Energy Index or AMNA), topping broader energy. Growing production volumes and inflation passed through via higher tariff rates benefitted revenues. Further, the sector’s elevated and higher free cash flow, declining leverage, attractive valuation, and share buybacks supported performance. Finally, disciplined M&A activity with synergies largely accruing to buyers offered a favorable environment for those seeking acquisition led growth. The utilities sector underperformed the broader market. The fund’s market-based and NAV-based returns (including the reinvestment of distributions) for the fiscal year were 9.4% and 12.7%, respectively. Comparatively, the TPZ Benchmark Composite* returned 8.6% for the same period. The fund’s equity holdings outperformed its fixed income holdings for the fiscal year on a total return basis.

2023 fiscal year summary  
Monthly distributions paid per share $0.105
Distribution rate (as of 11/30/2023) 9.3%
Year-over-year distribution increase (decrease) 0.0%
Cumulative distribution to stockholders since inception in July 2009 $20.8950
Market-based total return 9.43%
NAV-based total return 12.69%
Premium (discount) to NAV (as of 11/30/2023) (16.5)%

*

The TPZ Benchmark Composite includes the BofA Merrill Lynch U.S. Energy Index (CIEN), the BofA Merrill Lynch U.S. Electricity Index (CUEL) and the Tortoise MLP Index® (TMLP). It is comprised of a blend of 70% fixed income and 30% equity securities issued by companies in the power and energy infrastructure sectors.

Please refer to the inside front cover of the report for important information about the fund’s distribution policy.

Key asset performance drivers
Top five contributors Company type
Plains GP Holdings, L.P. Crude oil pipeline
Magellan Midstream Partners, LP Refined products pipeline
Targa Resources Corp. Natural gas pipeline
MPLX LP Refined products pipeline
Energy Transfer LP Natural gas pipeline
   
Bottom five contributors Company type
NextEra Energy Partners LP Diversified Infrastructure
PBF Logistics LP Crude oil pipeline
Sempra Energy Diversified Infrastructure
Enbridge, Inc. Crude oil pipeline
TC Energy Corp. Natural gas pipeline

Unlike the fund return, index return is pre-expenses.

Performance data quoted represent past performance; past performance does not guarantee future results. Like any other stock, total return and market value will fluctuate so that an investment, when sold, may be worth more or less than its original cost. Portfolio composition is subject to change due to ongoing management of the fund. References to specific securities or sectors should not be construed as a recommendation by the fund or its adviser. See Schedule of Investments for portfolio weighting at the end of the fiscal quarter.

(unaudited)

Tortoise 19
 

Tortoise

Power and Energy Infrastructure Fund, Inc. (TPZ) (continued)

 

Value of $10,000 vs. Tortoise Power and Energy Infrastructure Fund – Market (unaudited)
From November 30, 2013 through November 30, 2023

The chart assumes an initial investment of $10,000. Performance reflects waivers of fee and operating expenses in effect. In the absence of such waivers, total return would be reduced. Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 866-362-9331. Performance assumes the reinvestment of capital gains and income distributions. The performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Annualized Rates of Return as of November 30, 2023
  1-Year 3-Year 5-Year 10-Year Since Inception(1)
Tortoise Power and Energy Infrastructure Fund – NAV 12.69% 16.27% 4.42% 2.70% 6.29%
Tortoise Power and Energy Infrastructure Fund – Market 9.43% 19.57% 3.59% 2.17% 4.96%
TPZ Benchmark Composite(1) 8.58% 6.09% 5.80% 3.52% 6.00%

(1) Inception date of the Fund was July 29, 2009.

Fund structure and distribution policy

The fund is structured to qualify as a Regulated Investment Company (RIC) allowing it to pass-through to shareholders income and capital gains earned, thus avoiding double-taxation. To qualify as a RIC, the fund must meet specific income, diversification and distribution requirements. Regarding income, at least 90 percent of the fund gross income must be from dividends, interest and capital gains. The fund must meet quarterly diversification requirements including the requirement that at least 50 percent of the assets be in cash, cash equivalents or other securities with each single issuer of other securities not greater than 5 percent of total assets. No more than 25 percent of total assets can be invested in any one issuer other than government securities or other RIC’s. The fund must also distribute at least 90 percent of its investment company income. RIC’s are also subject to excise tax rules which require RIC’s to distribute approximately 98 percent of net income and net capital gains to avoid a 4 percent excise tax.

The fund has adopted a distribution policy which is included on the inside front cover of this report. To summarize, the fund has adopted a managed distribution policy (“MDP”). Annual distribution amounts are expected to fall in the range of 7% to 10% of the average week-ending net asset value (“NAV”) per share for the prior fiscal semi-annual period. Distribution amounts will be reset both up and down to provide a consistent return on trailing NAV. Under the MDP, distribution amounts will normally be reset in February and August, with no changes in distribution amounts in May and November. The fund may designate a portion of its distributions as capital gains and may also distribute additional capital gains in the last quarter of the year to meet annual excise distribution requirements. Distribution amounts are subject to change from time to time at the discretion of the Board.

Leverage

The fund’s leverage utilization decreased $0.7 million during the six months ended Q4 2023 as compared to the six months ended Q2 2023, and represented 20.4% of total assets at November 30, 2023. During the period, the fund maintained compliance with its applicable coverage ratios. At year-end, 61.0% of the leverage cost was fixed, the weighted-average maturity was 0.4 years and the weighted-average annual rate on leverage was 4.64%. These rates will vary in the future as a result of changing floating rates.

Please see the Financial Statements and Notes to Financial Statements for additional detail regarding critical accounting policies, results of operations, leverage and other important fund information.

For further information regarding the fund’s leverage and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseecofin.com.

(unaudited)

20Tortoise
 

2023 Annual Report | November 30, 2023

TPZ Key Financial Data (supplemental unaudited information)
(dollar amounts in thousands unless otherwise indicated)

 

The information presented below is supplemental non-GAAP financial information, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

   2022   2023 
   Q3(1)   Q4(1)   Q1(1)   Q2(1)   Q3(1)   Q4(1) 
Selected Financial Information                              
Distributions paid on common stock  $2,056   $2,021   $1,953   $1,953   $1,953   $1,921 
Distributions paid on common stock per share   0.3150    0.3150    0.3150    0.3150    0.3150    0.3150 
Total assets, end of period   128,405    124,715    120,791    118,705    124,656    120,802 
Average total assets during period(2)   127,458    125,149    122,422    120,322    122,556    122,039 
Leverage(3)   25,800    25,900    24,900    25,300    25,400    24,600 
Leverage as a percent of total assets   20.1%   20.8%   20.6%   21.3%   20.4%   20.4%
Operating expenses before leverage costs as a percent of total assets   1.37%   1.65%   1.45%   1.42%   1.40%   0.93%
Net unrealized depreciation, end of period   11,392    12,878    10,915    9,116    15,511    14,867 
Net assets, end of period   102,077    98,245    95,368    92,800    98,570    95,724 
Average net assets during period(4)   99,912    98,208    96,730    94,512    97,132    96,174 
Net asset value per common share   15.64    15.85    15.38    14.97    15.90    16.25 
Market value per common share   13.66    13.63    13.00    12.47    13.76    13.57 
Shares outstanding (000’s)   6,526    6,200    6,200    6,200    6,200    5,890 
(1)Q1 is the period from December through February. Q2 is the period from March through May. Q3 is the period from June through August. Q4 is the period from September through November.
(2)Computed by averaging month-end values within each period.
(3)Leverage consists of outstanding borrowings under the revolving credit facility.
(4)Computed by averaging daily net assets within each period.
Tortoise 21
 

Ecofin

Sustainable and Social Impact Term Fund (TEAF)

 

Fund description

The Ecofin Sustainable and Social Impact Term Fund (TEAF) seeks to provide a high level of total return with an emphasis on current distributions. TEAF provides investors access to a combination of public and direct investments in essential assets that are making an impact on clients and communities.

Fund performance

TEAF generated negative NAV performance in fiscal year 2023.

Listed sustainable infrastructure underperformed the S&P Global Infrastructure Index, with companies facing some headwinds with interest rates continuing to move higher, sometimes very quickly.
Listed energy infrastructure companies performed well during the period, driven by an increased transport volumes and constructive commodity pricing.
Private social infrastructure investments performed in line with expectations, and we continue to see momentum in our deal backlog to increase our allocation to senior living, waste transition, and education projects in the near-term.
Private sustainable infrastructure investments have had mixed performance with some assets suffering from age related and interconnection issues which are all being worked on to reenergize. Other private sustainable assets continued to perform well and as expected during the quarter.

Looking ahead to 2024, we continue to have a constructive outlook for the underlying assets in the TEAF portfolio. We expect that listed sustainable infrastructure equities, TEAF’s largest allocation, may continue to navigate a difficult environment caused by interest rate policy as well as global growth uncertainty. Nevertheless, decarbonization and electrification trends have strong momentum with key drivers such as increasing renewables, manufacturing re-shoring and energy efficiency driving investment. Corporates and consumers will continue to replace carbon-emitting energy sources with renewables, ensuring renewables growth at a reasonable rate of return. We maintain a positive outlook for energy infrastructure equities in 2024 driven by favorable fundamentals and a focus on capital return to equity owners. TEAF’s social infrastructure assets have performed well and we expect that performance to continue as new investment opportunities accelerate in key segments such as education and healthcare. We continue to progress on transitioning the portfolio to the targeted allocation of 60% direct investments. As of November 30, 2023, TEAF’s total direct investment commitments were approximately $118 million or approximately 53% of the portfolio.

Listed sustainable infrastructure

From a macro perspective, the first half of the period was generally characterized by stubborn inflation, elevated interest rates, and declining energy prices, in particular natural gas. We saw a mean-reversion with last year’s underperformers rallying. Similarly, pan-European utility and other infrastructure stocks provided positive returns whereas U.S. utilities declined, lagging significantly. TEAF’s sustainable listed sleeve responded similarly with the top contributors largely comprised of European names, while the bottom contributors generally were North American domiciled names during the first half of the period. As the period progressed August and September proved especially challenging. A 50 basis points (bps) increase in longer term bond yields placed severe pressure on renewables (higher interest rates reduce the present value of growth and, for some developers, re-orders the amount of equity they may require) and utility share prices, above all in the U.S. Orsted (not held) warnings about supply chain pressures and the lack of inflation indexation in the U.S. (unlike in Europe) causing impairment on U.S. offshore wind projects hit its share price hard and brought fears of read-across to others. A steepening of yield curves (with a further 50 bps move higher in longer term bond yields) accelerated in late September at the same time as NextEra Energy Partners (NEP) shocked the market by halving its target dividend growth rate from 12-15% to 5-8% p.a. over the next few years to eliminate the need to raise equity and reduce the need for debt. This set off a sharp slide in its own shares and those of its parent NextEra Energy (NextEra), well beyond the direct mechanical impact, and reverberated around the sector into October. October saw a stabilization in nerves and the NAV; bond yields held their recent highs but a first sight of Q3 earnings was reassuring. November’s strong rally in global bonds (further to evidence of lower rates of inflation) and equities included listed infrastructure where a stream of strong earnings reports from U.S. and pan-European portfolio holdings with, in many cases, raised guidance, growth rates and capex plans, drew attention.

Decarbonization and electrification trends have strong momentum with key drivers such as increasing renewables, manufacturing re-shoring and energy efficiency driving investment. Corporates and consumers will continue to replace carbon-emitting energy sources with renewables, ensuring renewables growth at a reasonable rate of return. Power purchase agreement (PPA) prices have been increasing to reflect, and more than offset, higher capital expenditure and financing costs. This implies better pricing power and higher internal rates of return today than in 2020. In summary, we continue to look to identify high quality companies with growth prospects and to keep a balance in the portfolio in terms of risk profiles and are positive about the underlying drivers for the space moving into 2024.

(unaudited)

22Tortoise
 

2023 Annual Report | November 30, 2023

Ecofin

Sustainable and Social Impact Term Fund (TEAF) (continued)

 

Listed energy infrastructure

Listed energy infrastructure equities were strong drivers of performance in the TEAF portfolio in fiscal year 2023. We saw higher equity performance during the period that was driven by a strong free cash flow generation that was increasingly allocated toward debt paydown and dividend growth, along with opportunistic share repurchases. The energy infrastructure equities also benefitted from increased hydrocarbon production in the U.S. across all of crude oil, natural gas, and natural gas liquids. In particular, the ability to export these energy products led to outsized performance. Mergers & acquisitions activity remained elevated in Q3. Oneok closed their acquisition of Magellan which has created one of the largest pro-forma energy infrastructure entities. Additionally, Energy Transfer announced a deal to acquire Crestwood and Enbridge announced a $14B deal to acquire Dominion’s U.S. gas utilities. The ramifications of these transactions are wide-ranging, as exemplified through the diversion of market cap between MLPs and C-Corps that continues to widen through simplifications and consolidations of MLPs. Overall, disciplined allocation of capital toward shareholders, increased transport volumes, and constructive commodity pricing has built confidence in energy infrastructure company growth, and we expect this environment to continue to be supportive of valuation into 2024.

Social infrastructure

TEAF completed ten direct investments in the social impact portfolio during the period.
  
In December, the team completed a debt investment in a to-be-constructed senior living community located in Albuquerque, New Mexico, an area that has a demonstrated need for additional senior housing with existing occupancy levels exceeding 90%. The facility will offer 142 market rate units consisting of 45 independent living units, 75 assisted living units and 22 memory care units. Four of the memory care units will be shared, thus there will be 148 beds in the facility. Construction is scheduled to begin in January 2023 and be completed in the Fall of 2024.
  
The team completed another debt investment in December, this one for a waste-to-energy project located in Bethel, Pennsylvania, that will gasify wastewater biosolids and poultry waste, while using energy produced through the gasification process to help circularly power the facility. These waste products would have otherwise been dumped in landfills or land applied, both of which are known to have negative effects on the environment due to the generation of methane gas as well as the leeching of other contaminants into surrounding areas and farm fields. The project will also produce biochar, which can be sold for various uses—including environmental remediation.
  
In January, the team completed a debt investment in an existing classical charter school in Toledo, Ohio that currently has students in grades K-11. This expansion will allow the charter school to grow from its current capacity of 500 students to 750, and to expand its program offerings, including adding 12th grade.
  
In February, the team completed a debt investment in an existing private school located near Fort Lauderdale, Florida that allowed the school to execute on a succession plan to continue its operations under new management while expanding its capacity. The school currently serves 526 students in grades PK-12, with over 90% of its students using State scholarships for underserved and marginalized students to attend the school at minimal cost. With the investment, the school expects to serve up to 750 students within a few years.
  
In March, the team completed a debt investment in an existing charter school in Maryland (Washington, DC area) that offers an International Baccalaureate program to an economically disadvantaged population in grades K-8. The school currently serves 348 students, but with this investment providing funds for a new facility, the school expects to be able to educate up to 600 students within 3 years.
  
The team completed another debt investment in March, this one for a waste-to-energy project located in North Carolina that uses anaerobic digestion to convert animal byproducts and food waste into renewable natural gas. The State of North Carolina has mandated that a portion of all energy in the State come from swine and poultry processing waste to help reduce soil and water contamination. The company has a contract with the regional utility to sell all the gas that is produced.
  
In April, the team completed a debt investment in a new charter school near Spartanburg, South Carolina. The school will open with temporary modulars on the site next door in the fall of 2023, serving 600 children in grades K-6. The school will move next door to its permanent facility in the following school year serving the same grades, and is expected to eventually expand to its full capacity of 900 students in grades K-8 by the 2024-2025 school year. There are no other charter schools within five miles of the school’s site, and the district schools are at or near capacity in this growing area. This will be the third school in South Carolina for this successful operator and developer partnering together.
  
The team completed another debt investment in April to an existing charter school in Belton, South Carolina, that has been operating since 2018 in a temporary location while it seeks its permanent home. The school offers a classical education curriculum to an underserved population, with great success — as it was recognized as the top academic Title 1 school in the state of South Carolina. The school currently serves approximately 250 students in grades K-6 and is expected to expand to serve K-8 while increasing enrollment over the next 4 years to reach nearly 700 students enrolled.

(unaudited)

Tortoise 23
 

Ecofin

Sustainable and Social Impact Term Fund (TEAF) (continued)

 
In September, the last of three scheduled investments was completed in a new charter school in Boiling Springs, South Carolina, a suburb 15 minutes outside of Spartanburg. The school opened with temporary modulars classrooms on the site next door in the fall of 2023, serving 600 children in grades K-6. The school will move next door to its permanent facility in the following school year serving the same grades, and is expected to expand to its full capacity of 900 students in grades K-8 by the 2024-2025 school year. There are no other charter schools within five miles of the school’s site, and the district schools are at or near capacity in this growing area. This will be is the third school in South Carolina for this successful operator and developer partnering together. The investment is being used for senior secured bond financing which will allow the school to continue constructing and equipping a new 65,000 square foot school building.
  
The last debt investment of this period also occurred in September to an existing charter school in Belton, South Carolina, that has been operating since 2018 in a temporary location while it seeks its permanent home. The school offers a classical education curriculum to an underserved population, with great success — as it was recognized as the top academic Title 1 school in the state of South Carolina. The school currently serves approximately 250 students in grades K-6 and is expected to expand to serve K-8 while increasing enrollment over the next 4 years to reach nearly 700 students enrolled. The investment is being used to continue construction and equipping of the building. This was the second of three scheduled investments.

Finally, the fund had three realizations in Fiscal Year 2023.

The first was in January from a school that was able to successfully refinance into a new debt transaction with a third party under more favorable terms. The original investment was made in October 2019 to allow the school to acquire a larger campus with significantly better amenities than its previous facility. The school was able to grow and, as a result, found less expensive financing. The investment was eligible to be called at par starting October 1, 2022.
  
The second realization was in April from a waste-to-energy project that was able to attract additional equity investment to support and grow the project, but a condition of that equity injection was the retirement of all subordinated debt. Although this investment was made in April 2021 and was not eligible to be called until 2026, the team negotiated a $108 price in exchange for the ability to retire this debt.
  
The third realization was in November from a senior living project that raised additional equity to pay off a tranche of subordinated debt. The original investment was made in September 2020 to acquire an existing senior living facility as part of a capital stack that included senior bank debt and two tranches of subordinated bonds. The sponsor determined that the property would be better served with additional equity rather than the Series B subordinated debt which had a 16% coupon. In return for allowing the Series B debt to be paid off, the fund received all accrued and capitalized interest as well as a price of $103. The fund still holds Series A subordinated debt and received a consent fee for allowing the Series B payoff. The facility continues to perform as expected.

Private energy infrastructure

No deals were completed in the Private Energy Infrastructure portfolio during the period. We continue to have conviction behind greenfield liquefied natural gas (LNG) development projects in North America given the geopolitical landscape for natural gas and favorable pricing spread between domestic supply and the global markets. The fund also remains invested in MPL, a 15 million metric tonnes per annum (mmtpa) LNG development project focused on bringing Permian sourced gas to the west coast of Mexico and alleviating the additional transportation costs and time it takes to bring LNG to Asian markets while avoiding Panama Canal congestion.

(unaudited)

24Tortoise
 

2023 Annual Report | November 30, 2023

Private sustainable infrastructure

TEAF completed one direct investment in the Private Sustainable Infrastructure portfolio during the period. In April, the team completed a debt investment in One Energy, based in Findlay, Ohio who develops, builds, owns, and operates capital-intensive, on-site power solutions for large industrial power users. This investment will enable the company to commence the land and equipment purchase required for recently signed NetZero projects which will represent the largest industrial microgrid in the U.S. The preferred equity investment is in One Energy Enterprises, Inc.

TEAF’s investment in EF WWW Holdings, LLC, the debt funding of World Water Works Holdings, Inc., continues to pay its annualized interest rate of 10.5% and report strong credit covenants. The company has exceeded its operating budget in every year since the investment, driven by strong backlog and revenue growth.

For TEAFs solar asset, Saturn Solar Bermuda 1, Ltd., the construction note continues to pay its annualized interest rate of 10.0% on time. The payments are supported by cash flow of the now operational solar project since the project completed construction and began full operations in November 2021. The note has remained in place as the owner of the solar facility is seeking to sell the solar project to a new long-term owner/operator. Energy production at various operating distributed generation (“DG”) solar assets in the Renewable Holdco I, LLC portfolio have underperformed expectations, primarily caused by inverter issues, certain communications equipment failures (inherent in the age of the assets) and have required corrective maintenance attention. Five small rooftop projects in Puerto Rico within this portfolio are expected to be reenergized in Q1 2024 after experiencing downtime related to required corrective maintenance. Various third-party inspections and off taker approval are required for these to be reenergized. As such, the internal asset management team is taking an active role in monitoring efforts to restore full energy production and returning the portfolio to stable cash flow generation. Energy production at the operating DG solar assets in the Renewable Holdco II, LLC portfolio continue to generate stable cash flow as expected. The final solar project under construction, held in Renewable Holdco, LLC, continues to experience delays due to interconnection redesign, additional permitting and road construction caused by the utility and is expected to be ready for commissioning and commercial operation in H1 2024.

2023 fiscal year summary  
Monthly distributions paid per share $0.0900
Distribution rate (as of 11/30/2023) 9.0%
Year-over-year distribution increase (decrease) 0.0%
Cumulative distribution to stockholders since inception in July 2009 $4.8905
Market-based total return (5.48)%
NAV-based total return (1.22)%
Premium (discount) to NAV (as of 11/30/2023) (19.1)%

Performance data quoted represent past performance; past performance does not guarantee future results. Like any other stock, total return and market value will fluctuate so that an investment, when sold, may be worth more or less than its original cost. Portfolio composition is subject to change due to ongoing management of the fund. References to specific securities or sectors should not be construed as a recommendation by the fund or its adviser. See Schedule of Investments for portfolio weighting at the end of the fiscal quarter.

Tortoise 25
 

Ecofin

Sustainable and Social Impact Term Fund (TEAF) (continued)

 

Value of $10,000 vs. Ecofin Sustainable and Social Impact Term Fund – Market (unaudited)
Since inception on March 29, 2019 through November 30, 2023

 

The chart assumes an initial investment of $10,000. Performance reflects waivers of fee and operating expenses in effect. In the absence of such waivers, total return would be reduced. Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 866-362-9331. Performance assumes the reinvestment of capital gains and income distributions. The performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Annualized Rates of Return as of November 30, 2023
  1-Year 3-Year Since Inception(1)
Ecofin Sustainable and Social Impact Term Fund – NAV -1.22% 5.17% 1.20%
Ecofin Sustainable and Social Impact Term Fund – Market -5.48% 4.74% -3.27%
S&P Global Infrastructure Index 0.19% 5.62% 3.98%

(1) Inception date of the Fund was March 29, 2019.

Fund structure and distribution policy

The fund is structured to qualify as a Regulated Investment Company (RIC) allowing it to pass-through to shareholders income and capital gains earned, thus avoiding double-taxation. To qualify as a RIC, the fund must meet specific income, diversification and distribution requirements. Regarding income, at least 90 percent of the fund gross income must be from dividends, interest and capital gains. The fund must meet quarterly diversification requirements including the requirement that at least 50 percent of the assets be in cash, cash equivalents or other securities with each single issuer of other securities not greater than 5 percent of total assets. No more than 25 percent of total assets can be invested in any one issuer other than government securities or other RIC’s. The fund must also distribute at least 90 percent of its investment company income. RIC’s are also subject to excise tax rules which require RIC’s to distribute approximately 98 percent of net income and net capital gains to avoid a 4 percent excise tax.

The fund has adopted a distribution policy which is included on the inside front cover of this report. To summarize, the fund has adopted a managed distribution policy (“MDP”). Annual distribution amounts are expected to fall in the range of 6% to 8% of the average week-ending net asset value (“NAV”) per share for the prior fiscal semi-annual period. Distribution amounts will be reset both up and down to provide a consistent return on trailing NAV. Under the MDP, distribution amounts will normally be reset in February and August, with no changes in distribution amounts in May and November. The fund may designate a portion of its distributions as capital gains and may also distribute additional capital gains in the last quarter of the year to meet annual excise distribution requirements. Distribution amounts are subject to change from time to time at the discretion of the Board.

Leverage

The fund’s leverage utilization decreased $5.5 million during the six months ended Q4 2023, as compared to the six months ended Q2 2023. The fund utilizes all floating rate leverage that had an interest rate of 6.46% and represented 10.7% of total assets at year-end. During the period, the fund maintained compliance with its applicable coverage ratios. The interest rate on the fund’s leverage will vary in the future along with changing floating rates.

Please see the Financial Statements and Notes to Financial Statements for additional detail regarding critical accounting policies, results of operations, leverage and other important fund information.

For further information regarding the fund’s leverage and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseecofin.com.

(unaudited)

26Tortoise
 

2023 Annual Report | November 30, 2023

TEAF Key Financial Data (supplemental unaudited information)
(dollar amounts in thousands unless otherwise indicated)

 

The information presented below is supplemental non-GAAP financial information, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

   2022   2023 
   Q3(1)   Q4(1)   Q1(1)   Q2(1)   Q3(1)   Q4(1) 
Selected Financial Information                              
Distributions paid on common stock  $3,643   $3,643   $3,642   $3,643   $3,643   $3,643 
Distributions paid on common stock per share   0.2700    0.2700    0.2700    0.2700    0.2700    0.2700 
Total assets, end of period   254,726    251,239    246,004    240,640    239,671    225,072 
Average total assets during period(2)   256,749    246,494    248,950    246,215    241,187    231,121 
Leverage(3)   28,800    29,500    30,800    29,500    30,600    24,000 
Leverage as a percent of total assets   11.3%   11.7%   12.5%   12.3%   12.8%   10.7%
Operating expenses before leverage costs as a percent of total assets   1.56%   1.85%   1.61%   1.63%   1.60%   1.58%
Net unrealized appreciation (depreciation), end of period   993    824    (912)   (1,269)   (1,168)   (6,150)
Net assets, end of period   225,064    220,798    214,163    210,062    208,057    200,258 
Average net assets during period(4)   225,251    214,321    218,352    214,413    210,656    201,953 
Net asset value per common share   16.68    16.38    15.87    15.57    15.42    14.84 
Market value per common share   14.74    13.85    12.97    12.28    12.62    12.01 
Shares outstanding (000’s)   13,491    13,491    13,491    13,491    13,491    13,491 
(1)Q1 represents the period from December through February. Q2 represents the period from March through May. Q3 represents the period from June through August. Q4 represents the period from September through November.
(2)Computed by averaging month-end values within each period.
(3)Leverage consists of outstanding borrowings under the margin loan facility.
(4)Computed by averaging daily net assets within each period.
Tortoise 27
 

TYG Consolidated Schedule of Investments

November 30, 2023

   Shares/Units   Fair Value 
 
Common Stock — 101.1%(1)          
United States Crude Oil Pipelines — 2.5%(1)          
Plains GP Holdings LP   581,526   $9,397,460 
United States Natural Gas Gathering/Processing — 5.1%(1)
EnLink Midstream LLC   520,687    7,117,791 
Hess Midstream Partners LP   321,257    10,453,703 
Kinetik Holdings, Inc.   54,924    1,997,037 
         19,568,531 
United States Natural Gas/Natural Gas Liquids Pipelines — 47.7%(1)
Cheniere Energy, Inc.   134,722    24,539,612 
Excelerate Energy, Inc.   57,737    965,363 
Kinder Morgan, Inc.   1,236,603    21,727,115 
New Fortress Energy, Inc.   176,000    6,772,480 
NextDecade Corp.(2)   443,864    2,214,881 
ONEOK, Inc.   537,611    37,014,517 
Targa Resources Corp.   476,974    43,142,298 
The Williams Companies, Inc.   1,224,511    45,049,760 
         181,426,026 
United States Renewables and Power Infrastructure — 45.8%(1)
AES Corp.   708,155    12,187,348 
Ameren Corp.   188,059    14,591,498 
American Electric Power Co., Inc.   190,815    15,179,333 
Atlantica Sustainable Infrastructure Plc   473,463    9,005,266 
Clearway Energy, Inc.   827,649    20,666,396 
Constellation Energy Corp.   69,230    8,379,599 
DTE Energy Co.   174,848    18,203,425 
NextEra Energy Partners LP   512,107    12,054,999 
NextEra Energy, Inc.   254,977    14,918,704 
Sempra Energy   429,511    31,298,467 
Xcel Energy, Inc.   292,105    17,771,668 
         174,256,703 
Total Common Stock          
(Cost $441,085,503)        384,648,720 
Master Limited Partnerships — 22.9%(1)          
United States Natural Gas Gathering/Processing — 4.6%(1)
Western Midstream Partners LP   583,326    17,394,781 
United States Natural Gas/Natural Gas Liquids Pipelines — 12.0%(1)
Energy Transfer LP   1,879,085    26,100,491 
Enterprise Products Partners LP   729,194    19,527,815 
         45,628,306 
United States Refined Product Pipelines — 6.3%(1)          
MPLX LP   662,040    24,137,979 
Total Master Limited Partnerships          
(Cost $53,131,230)        87,161,066 
           
Private Investment — 3.8%(1)          
United States Renewables — 3.8%(1)          
TK NYS Solar Holdco LLC(3)(4)(5)          
(Cost $50,141,470)   N/A   $14,550,615 
Preferred Stock — 1.2%(1)          
United States Natural Gas Gathering/Processing — 1.2%(1)
EnLink Midstream Partners          
(Cost $5,100,000)   5,100    4,588,448 
Money Market Fund — 0.1%(1)          
United States Investment Company — 0.1%(1)          
Invesco Government & Agency Portfolio — Institutional Class,
5.282%(6) (Cost $408,099)   408,099    408,099 
           
Total Investments — 129.1%(1)          
(Cost $549,866,302)        491,356,948 
Liabilities in Excess of Other Assets — (0.8%)(1)        (3,046,493)
Line of Credit — (1.9)%(1)        (7,300,000)
Senior Notes — (17.0)%(1)        (64,853,333)
Mandatory Redeemable Preferred Stock at Liquidation Value — (9.4)%(1)          (35,660,610)
Total Net Assets Applicable to Common Stockholders — 100.0%(1)       $380,496,512 
(1)Calculated as a percentage of net assets.
(2)Non-income producing security.
(3)Restricted securities have a total fair value of $14,550,615 which represents 3.8% of net assets. See Note 6 to financial statements for further disclosure.
(4)Securities have been valued by using significant unobservable inputs in accordance with fair value procedures and are categorized as level 3 investments.
(5)Deemed to be an affiliate of the fund. See Note 7 to financial statements for further disclosure.
(6)Rate indicated is the current yield as of November 30, 2023.

See accompanying Notes to Financial Statements.

28Tortoise
 

2023 Annual Report | November 30, 2023

NTG Schedule of Investments

November 30, 2023

   Shares  Fair Value
       

Common Stock — 100.5%(1)

          
           
Canada Crude Oil Pipelines — 10.2%(1)          
Enbridge, Inc.   294,443   $10,267,228 
Pembina Pipeline Corp.   357,431    11,948,918 
         22,216,146 
           
Canada Natural Gas/Natural Gas Liquids Pipelines — 3.0%(1)          
TC Energy Corp.   171,139    6,421,135 
United States Crude Oil Pipelines — 9.8%(1)          
Plains GP Holdings LP   1,315,066    21,251,466 
           
United States Natural Gas Gathering/Processing — 8.0%(1)          
EnLink Midstream LLC   640,292    8,752,792 
Hess Midstream Partners LP   234,934    7,644,752 
Kinetik Holdings, Inc.   27,692    1,006,881 
         17,404,425 
           
United States Natural Gas/Natural Gas Liquids Pipelines — 59.5%(1)          
Cheniere Energy, Inc.   71,192    12,967,623 
DT Midstream, Inc.   220,700    12,643,903 
Excelerate Energy, Inc.   70,562    1,179,796 
Kinder Morgan, Inc.   1,095,982    19,256,404 
New Fortress Energy, Inc.   109,719    4,221,987 
NextDecade Corp.(2)   228,576    1,140,594 
ONEOK, Inc.   327,155    22,524,622 
Targa Resources Corp.   305,475    27,630,214 
The Williams Companies, Inc.   748,768    27,547,175 
         129,112,318 
           
United States Renewables and Power Infrastructure — 10.0%(1)          
Atlantica Sustainable Infrastructure Plc   236,182    4,492,182 
Clearway Energy, Inc.   378,968    9,462,831 
NextEra Energy Partners LP   258,632    6,088,197 
NextEra Energy, Inc.   26,725    1,563,680 
         21,606,890 
Total Common Stock
(Cost $229,908,440)
        218,012,380 

 

   Shares/Units  Fair Value
       
Master Limited Partnerships — 21.6%(1)          
           
United States Natural Gas Gathering/Processing — 4.2%(1)          
Western Midstream Partners LP   307,481  $ 9,169,083 
           
United States Natural Gas/Natural Gas Liquids Pipelines — 12.2%(1)          
Energy Transfer LP   962,003    13,362,222 
Enterprise Products Partners LP   489,300    13,103,454 
         26,465,676 
           
United States Refined Product Pipelines — 5.2%(1)          
MPLX LP   310,766    11,330,528 
Total Master Limited Partnerships          
(Cost $29,715,799)        46,965,287 
           
Preferred Stock — 1.4%(1)          
           
United States Natural Gas Gathering/Processing — 1.4%(1)          
EnLink Midstream Partners          
(Cost $3,400,000)   34,000    3,058,966 
           
Money Market Fund — 1.8%(1)          
           
United States Investment Company — 1.8%(1)          
First American Government Obligations Fund, Class X,
5.285%(3) (Cost $3,898,807)
   3,898,807    3,898,807 
           
Total Investments — 125.3%(1)          
(Cost $266,923,046)        271,935,440 
Liabilities in Excess of Other Assets — (0.6)%(1)   (1,344,656)     
Credit Facility Borrowings — (4.9)%(1)        (10,600,000)
Senior Notes — (13.5)%(1)        (29,170,677)
Mandatory Redeemable Preferred Stock at Liquidation Value — (6.3)%(1)        (13,753,775)
           
Total Net Assets Applicable to Common Stockholders — 100.0%(1)       $217,066,332 

 

(1)Calculated as a percentage of net assets.
(2)Non-income producing security.
(3)Rate indicated is the current yield as of November 30, 2023.

See accompanying Notes to Financial Statements.

 

Tortoise 29
 

 

TTP Schedule of Investments

November 30, 2023

 

   Shares  Fair Value
       
Common Stock — 100.1%(1)          
           
Canada Crude Oil Pipelines — 15.8%(1)          
Enbridge, Inc.   172,836   $6,026,791 
Gibson Energy, Inc.   50,815    766,934 
Pembina Pipeline Corp.   124,957    4,179,814 
         10,973,539 
           
Canada Natural Gas/Natural Gas Liquids Pipelines — 8.1%(1)          
Keyera Corp.   78,735    1,982,663 
TC Energy Corp.   98,117    3,681,350 
         5,664,013 
           
United States Crude Oil Pipelines — 11.8%(1)          
Plains GP Holdings LP   508,250    8,213,320 
           
United States Natural Gas Gathering/Processing — 11.6%(1)          
Antero Midstream Corp.   141,044    1,878,706 
Equitrans Midstream Corp.   307,343    2,882,878 
Hess Midstream Partners LP   91,698    2,983,853 
Kinetik Holdings, Inc.   8,934    324,840 
         8,070,277 
           
United States Natural Gas/Natural Gas Liquids Pipelines — 47.6%(1)          
Cheniere Energy, Inc.   22,822    4,157,027 
DT Midstream, Inc.   15,694    899,109 
Excelerate Energy, Inc.   8,917    149,092 
Kinder Morgan, Inc.   389,508    6,843,656 
NextDecade Corp.(2)   70,953    354,056 
ONEOK, Inc.   116,871    8,046,568 
Targa Resources Corp.   46,463    4,202,578 
The Williams Companies, Inc.   230,187    8,468,580 
         33,120,666 
           
United States Renewables and Power Infrastructure — 5.2%(1)          
Clearway Energy, Inc.   22,000    549,340 
NextEra Energy Partners LP   29,030    683,366 
Sempra Energy   32,242    2,349,475 
         3,582,181 
Total Common Stock
(Cost $59,433,168)
        69,623,996

 

 

    Shares/Units   Fair Value
         
Master Limited Partnerships — 22.4%(1)                
                 
United States Crude Oil Pipelines — 1.3%(1)                
NuStar Energy LP     48,386     921,270  
                 
United States Natural Gas Gathering/Processing — 3.5%(1)                
Western Midstream Partners LP     82,032       2,446,194  
                 
United States Natural Gas/Natural Gas Liquids Pipelines — 11.6%(1)                
Energy Transfer LP     292,468       4,062,381  
Enterprise Products Partners LP     148,325       3,972,143  
              8,034,524  
                 
United States Other — 0.2%(1)                
Westlake Chemical Partners LP     4,940       111,891  
                 
United States Refined Product Pipelines — 5.8%(1)                
MPLX LP     111,185       4,053,805  
Total Master Limited Partnerships
(Cost $7,979,237)
            15,567,684  
                 
Money Market Fund — 0.7%(1)                
                 
United States Investment Company — 0.7%(1)                
Invesco Government & Agency Portfolio — Institutional Class,
5.282%(3) (Cost $457,549)
    457,549       457,549  
                 
Total Investments — 123.2%(1)
             
    (Cost $67,869,954)             85,649,229  
Liabilities in Excess of Other Assets — (0.2)%(1)             (181,672 )
Credit Facility Borrowings — (8.5)%(1)             (5,900,000 )
Senior Notes — (5.7)%(1)             (3,942,857 )
Mandatory Redeemable Preferred Stock at Liquidation Value — (8.8)%(1)             (6,100,000 )
                 
Total Net Assets Applicable to Common Stockholders — 100.0%(1)           $ 69,524,700  
(1)Calculated as a percentage of net assets.
(2)Non-income producing security.
(3)Rate indicated is the current yield as of November 30, 2023.

See accompanying Notes to Financial Statements.

30Tortoise
 

2023 Annual Report | November 30, 2023

NDP Schedule of Investments

November 30, 2023

   Shares  Fair Value
       
Common Stock — 93.4%(1)          
           
Canada Crude Oil Pipelines — 1.4%(1)          
Enbridge, Inc.   23,865   $832,173 
           
Canada Natural Gas/Natural Gas Liquids Pipelines — 1.3%(1)          
TC Energy Corp.   19,745    740,832 
           
Canada Oil and Gas Production — 2.3%(1)          
Suncor Energy, Inc.   40,528    1,337,019 
           
United States Natural Gas Gathering/Processing — 2.7%(1)          
Kinetik Holdings, Inc.   5,678    206,452 
Kodiak Gas Services, Inc.   79,293    1,397,936 
         1,604,388 
           
United States Natural Gas/Natural Gas Liquids Pipelines — 22.9%(1)          
Cheniere Energy, Inc.   37,456    6,822,610 
Excelerate Energy, Inc.   6,209    103,815 
Kinder Morgan, Inc.   56,165    986,819 
NextDecade Corp.(2)   55,204    275,468 
ONEOK, Inc.   8,500    585,225 
Targa Resources Corp.   37,880    3,426,246 
The Williams Companies, Inc.   36,175    1,330,878 
         13,531,061 
           
United States Oil and Gas Production — 58.4%(1)          
Chevron Corp.   18,828    2,703,701 
ConocoPhillips   21,747    2,513,301 
Coterra Energy, Inc.   50,396    1,322,895 
Devon Energy Corp.   90,404    4,065,468 
Diamondback Energy, Inc.   37,179    5,740,809 
EOG Resources, Inc.   23,070    2,839,225 
EQT Corp.   117,402    4,691,384 
Exxon Mobil Corp.   43,043    4,422,238 
Marathon Oil Corp.   81,694    2,077,478 
Occidental Petroleum Corp.   43,302    2,561,313 
Pioneer Natural Resources Co.   6,795    1,573,994 
         34,511,806 
           
United States Other — 2.4%(1)          
Baker Hughes Co.   38,763    1,308,251 
Darling Ingredients, Inc.(2)   1,957    85,854 
         1,394,105 
           
United States Renewables and Power Infrastructure — 2.0%(1)          
American Electric Power Co., Inc.   2,921    232,365 
Constellation Energy Corp.   8,071    976,914 
         1,209,279 
Total Common Stock
(Cost $33,372,368)
        55,160,663 
       
   Shares/Units  Fair Value
       
Master Limited Partnerships — 21.0%(1)          
           
United States Natural Gas Gathering/Processing — 3.7%(1)          
Western Midstream Partners LP   72,535   $2,162,993 
           
United States Natural Gas/Natural Gas Liquids Pipelines — 10.9%(1)          
Energy Transfer LP   293,256    4,073,326 
Enterprise Products Partners LP   89,274    2,390,758 
         6,464,084 
           
United States Oil and Gas Production — 2.3%(1)          
Mach Natural Resources LP(2)   26,315    466,302 
TXO Partners LP   50,000    913,000 
         1,379,302 
           
United States Refined Product Pipelines — 4.1%(1)          
MPLX LP   66,440    2,422,402 
Total Master Limited Partnerships
(Cost $9,605,884)
        12,428,781 
           
Money Market Fund — 0.6%(1)          
           
United States Investment Company — 0.6%(1)          
Invesco Government & Agency Portfolio — Institutional Class,
5.282%(3) (Cost $336,952)
   336,952    336,952 
           
Total Investments — 115.0%(1)
(Cost $43,315,204)
        67,926,396 
Liabilities in Excess of Other Assets — (0.1)%(1)        (73,287)
Credit Facility Borrowings — (14.9)%(1)        (8,800,000)
           
Total Net Assets Applicable to Common Stockholders — 100.0%(1)       $59,053,109 
(1)Calculated as a percentage of net assets.
(2)Non-income producing security.
(3)Rate indicated is the current yield as of November 30, 2023.

See accompanying Notes to Financial Statements.

Tortoise 31
 

TPZ Schedule of Investments

November 30, 2023

 

   Principal Amount  Fair Value
       
Corporate Bonds — 61.8%(1)          
           
Canada Crude Oil Pipelines — 6.5%(1)          
Enbridge, Inc.
5.500%, 07/15/2077
  $7,042,000  $6,190,669 
United States Natural Gas Gathering/Processing — 21.4%(1)          
Antero Midstream Partners LP
5.750%, 03/01/2027(2)
   3,800,000    3,715,144 
Blue Racer Midstream LLC
6.625%, 07/15/2026(2)
   5,900,000    5,808,848 
EnLink Midstream LLC
5.375%, 06/01/2029
   4,000,000    3,859,876 
Hess Corp.
5.625%, 02/15/2026(2)
   4,160,000    4,108,000 
The Williams Companies, Inc.
4.550%, 06/24/2024
   3,000,000    2,977,887 
         20,469,755 
           
United States Natural Gas/Natural Gas Liquids Pipelines — 23.4%(1)          
Cheniere Corp.
5.875%, 03/31/2025
   2,000,000    2,000,278 
Cheniere Energy, Inc.
4.625%, 10/15/2028
   3,100,000    2,958,074 
DT Midstream, Inc.
4.375%, 06/15/2031(2)
   2,000,000    1,756,175 
NGPL PipeCo LLC
3.250%, 07/15/2031(2)
   3,500,000    2,889,469 
ONEOK, Inc.
6.350%, 01/15/2031
   3,000,000    3,090,447 
Rockies Express Pipeline LLC
4.950%, 07/15/2029(2)
   3,000,000    2,767,489 
Tallgrass Energy LP
5.500%, 01/15/2028(2)
   3,250,000    2,998,275 
Targa Resources Corp.
5.200%, 07/01/2027
   4,000,000    3,967,039 
         22,427,246 
           
United States Other — 4.9%(1)          
New Fortress Energy, Inc.
6.500%, 09/30/2026(2)
   5,000,000    4,751,877 
United States Refined Product Pipelines — 1.6%(1)          
Buckeye Partners LP
5.850%, 11/15/2043
   2,000,000    1,511,290 
United States Renewables and Power Infrastructure — 4.0%(1)          
NextEra Energy, Inc.
4.800%, 12/01/2077
   4,500,000    3,829,940 
Total Corporate Bonds
(Cost $62,538,121)
        59,180,777 
   Shares  Fair Value
       
Common Stock — 39.1%(1)          
           
Canada Crude Oil Pipelines — 1.4%(1)          
Enbridge, Inc.   39,056   $1,361,883 
           
Canada Natural Gas/Natural Gas Liquids Pipelines — 1.9%(1)          
TC Energy Corp.   48,667    1,825,986 
           
United States Crude Oil Pipelines — 6.1%(1)          
Plains GP Holdings LP   358,745    5,797,319 
           
United States Natural Gas Gathering/Processing — 5.1%(1)          
EnLink Midstream LLC   90,965    1,243,492 
Equitrans Midstream Corp.   108,596    1,018,630 
Hess Midstream Partners LP   66,901    2,176,959 
Kinetik Holdings, Inc.   11,954    434,647 
         4,873,728 
           
United States Natural Gas/Natural Gas Liquids Pipelines — 21.1%(1)          
DT Midstream, Inc.   24,885    1,425,662 
Excelerate Energy, Inc.   11,787    197,079 
Kinder Morgan, Inc.   160,775    2,824,817 
NextDecade Corp.(3)   98,612    492,074 
ONEOK, Inc.   73,551    5,063,986 
Targa Resources Corp.   63,653    5,757,414 
The Williams Companies, Inc.   121,546    4,471,677 
         20,232,709 
           
United States Refining — 0.4%(1)          
PBF Energy, Inc.   8,275    367,410 
           
United States Renewables and Power Infrastructure — 3.1%(1)          
Atlantica Sustainable Infrastructure Plc   16,523    314,267 
NextEra Energy Partners LP   8,013    188,626 
Sempra Energy   33,854    2,466,941 
         2,969,834 
          
Total Common Stock
(Cost $29,186,696)
        37,428,869 

See accompanying Notes to Financial Statements.

32Tortoise
 

2023 Annual Report | November 30, 2023

TPZ Schedule of Investments (continued)

November 30, 2023

   Shares/Units  Fair Value
       

Master Limited Partnerships — 23.6%(1)

          
           
United States Crude Oil Pipelines — 1.8%(1)          
NuStar Energy LP   90,687  $1,726,680 
United States Natural Gas Gathering/Processing — 4.2%(1)          
Western Midstream Partners LP   135,715    4,047,021 
United States Natural Gas/Natural Gas Liquids Pipelines — 10.5%(1)          
Energy Transfer LP   370,881    5,151,537 
Enterprise Products Partners LP   184,023    4,928,136 
         10,079,673 
United States Refined Product Pipelines — 7.1%(1)          
Holly Energy Partners LP   30,993    633,807 
MPLX LP   167,813    6,118,462 
         6,752,269 
Total Master Limited Partnerships
(Cost $12,627,406)
        22,605,643 
   Shares  Fair Value
       
Money Market Fund — 0.4%(1)          
           
United States Investment Company — 0.4%(1)          
Invesco Government & Agency Portfolio — Institutional Class,
5.282%(4) (Cost $340,564)
   340,564   $340,564 
           
Total Investments — 124.9%(1)
(Cost $104,692,787)
        119,555,853 
Other Assets in Excess of Liabilities — 0.8%(1)        768,550 
Credit Facility Borrowings — (25.7)%(1)        (24,600,000)
           
Total Net Assets Applicable to Common Stockholders — 100.0%(1)       $95,724,403 

 

(1)Calculated as a percentage of net assets.
(2)Restricted securities have a total fair value of $28,795,277, which represents 30.1% of total net assets. See Note 6 to financial statements for further disclosure.
(3)Non-income producing security.
(4)Rate indicated is the current yield as of November 30, 2023.

See accompanying Notes to Financial Statements.

Tortoise 33
 

 

TEAF Consolidated Schedule of Investments

November 30, 2023

   Shares  Fair Value
       
Common Stock — 45.0%(1)          
           
Australia Natural Gas/Natural Gas Liquids Pipelines — 1.3%(1)          
APA Group   442,606  $2,494,618 
Australila Other — 1.9%(1)          
Atlas Arteria Ltd.   992,726    3,804,478 
Canada Renewables — 1.0%(1)          
Innergex Renewable Energy, Inc.(2)   294,405    2,084,993 
France Other — 0.9%(1)          
Vinci SA   13,906    1,699,841 
France Power — 0.6%(1)          
Engie SA   70,301    1,218,081 
Germany Power — 1.5%(1)          
RWE AG(2)   68,204    2,922,816 
Hong Kong Solar — 0.4%(1)          
Xinyi Energy Holdings Ltd.   4,755,664    797,552 
Hong Kong Transportation/Storage — 0.6%(1)          
China Suntien Green Energy Corp. Ltd.   3,704,242    1,232,961 
Italy Power — 6.1%(1)          
ENAV SpA(2)   649,850    2,317,306 
Enel SpA   512,946    3,621,386 
Iren SpA   1,215,003    2,695,304 
Terna SpA   447,937    3,606,120 
         12,240,116 
Portugal Power — 2.9%(1)          
EDP — Energias de Portugal SA(2)   1,209,999    5,778,018 
Spain Other — 1.6%(1)          
Ferrovial SE(2)   93,777    3,241,926 
Spain Power — 2.3%(1)          
Iberdrola SA(2)   371,053    4,582,123 
United Kingdom Power — 5.5%(1)          
National Grid Plc   300,253    3,894,787 
SSE Plc(2)   309,113    7,151,148 
         11,045,935 
United Kingdom Renewable Infrastructure — 0.9%(1)          
Greencoat UK Wind Plc(2)   1,005,074    1,825,885 
   Shares  Fair Value
       
United States Natural Gas/Natural Gas Liquids Pipelines — 8.1%(1)          
           
Cheniere Energy, Inc.(2)   30,700   $5,592,005 
NextDecade Corp.(3)   75,000    374,250 
Targa Resources Corp.(2)   61,158    5,531,741 
The Williams Companies, Inc.(2)   125,859    4,630,353 
         16,128,349 
           
United States Power — 5.3%(1)          
Ameren Corp.(2)   20,040    1,554,904 
American Electric Power Co, Inc.(2)   63,582    5,057,948 
Atlantica Sustainable Infrastructure Plc(2)   75,263    1,431,502 
Edison International   22,360    1,497,896 
Exelon Corp.   28,739    1,106,739 
         10,648,989 
           
United States Renewables — 3.0%(1)          
Dominion Energy, Inc.(2)   48,224    2,186,476 
NextEra Energy, Inc.(2)   47,543    1,119,162 
NextEra Energy Partners LP(2)   45,491    2,661,679 
         5,967,317 
           
United States Solar — 0.1%(1)          
Sunnova Energy International, Inc.(2)(3)   20,692    240,027 
           
United States Utilities — 1.0%(1)          
Essential Utilities, Inc.(2)   58,349    2,077,808 
Total Common Stock
(Cost $95,716,602)
        90,031,833 
           
Private Investment — 25.2%(1)          
           
United States Natural Gas/Natural Gas Liquids Pipelines — 1.5%(1)          
Mexico Pacific Limited LLC (MLP)
Series A(4)(5)
   135,180    2,966,390 
           
United States Power — 5.0%(1)          
One Energy(4)(5)   20,685    9,934,799 
United States Renewables — 18.7%(1)          
Renewable Holdco, LLC(4)(5)(6)   N/A    6,907,194 
Renewable Holdco I, LLC(4)(5)(6)   N/A    17,995,373 
Renewable Holdco II, LLC(4)(5)(6)   N/A    12,599,702 
         37,502,269 
Total Private Investment
(Cost $51,841,735)
        50,403,458 

See accompanying Notes to Financial Statements.

34Tortoise
 

2023 Annual Report | November 30, 2023

TEAF Consolidated Schedule of Investments (continued)

November 30, 2023

   Principal Amount  Fair Value
       
Corporate Bonds — 15.7%(1)          
           
United States Healthcare — 1.7%(1)          
315/333 West Dawson Associates SUB 144A NT
11.000%, 01/31/2026(5)
  $3,770,000    $3,497,541 
United States Project Finance — 6.2%(1)          
C2NC HLDGS LLC
14.500%, 05/01/2027
   2,110,000    2,146,657 
C2NC Holdings
13.000%, 05/01/2027
   10,445,000    10,178,353 
         12,325,010 
           
United States Senior Living — 7.8%(1)          
Ativo Albuquerque LLC
12.000%, 01/01/2028(5)
   2,032,000    2,054,962 
          
Contour Propco 1735 S MISSION SUB 144A NT
11.000%, 10/01/2025(4)(5)(8)
   5,715,000    3,976,106 
Dove Mountain Residences LLC
11.000%, 02/01/2026(5)
   1,050,000    975,064 
Dove Mountain Residences LLC
16.000%, 02/01/2026(5)
   1,033,748    950,676 
Drumlin Reserve Property LLC
10.000%, 10/02/2025(5)